* This article was originally posted on Linkedin.com *
There’s something uniquely exciting about launching a new product. As an entrepreneur, there is nothing quite like the experience of seeing an idea that was once just a spark of thought in your mind become a tangible thing you can hold in your hand.
These days, brands both established and upstart are flocking en masse to crowdfunding sites for not just funding for their products, but also validation that a market exists for them. As amazing as it is to have these sorts of channels to get new products to market, there are serious pitfalls to heed.
Don’t Tip Your Hand
Lately, brands seem to be more secretive about their products in these funding campaigns. They’re keeping their cards closer to their chests. And for good reason.
Industry contacts tell me that if they don’t lock down their ideas early on, they’ll find themselves under water. They’ll launch a crowdfunding campaign on Indiegogo or Kickstarter, and a week later someone is pretending they’ve built the product already and is accepting sales through another website!
One company I worked with found this out the hard way: They went to pitch their new product to a major retailer and were told the retailer had already purchased 40,000 units. When the company informed the retailer they hadn’t even manufactured the product yet, everyone was left feeling confused.
A few months later when the order didn’t show, the retailer reached out to them again. They were frustrated and insisting that this mystery company they had wired money to must be connected to them in some way. This left the real product manufacturers at the mercy of a distributor in order to get their item on the store’s shelves. This cut into their margins, as the distributor was the only one who had the clout necessary to roll out intellectual property protections and enforce patents.
In the end, the company spent a lot more money than they had to—not to mention starting off on the wrong foot with a major retailer. They learned a hard lesson from that first launch and paid a hefty price for it.
For their next product launch, they knew it was vital that they get out in front of those big retailers first, understand who they should be dealing with, and know who was actually representing the product. What wouldn’t they give to be able to go back and do it right the first time, though?
The Devil’s in the Details
As a product creator, you have some core strengths: You’re an innovator, designer, marketer, and brand builder. But there are likely areas where you’re weaker, such as supply chain fulfillment, manufacturing, and finance.
It’s easy for new brands to focus only on their big idea. They think they don’t need to worry about those other things—the areas outside their wheelhouse—yet.
But the cost of not thinking about them is a situation like the one above. You may have to fight to enforce intellectual property instead of claiming that territory from day one. Someone else could claim it, forcing you to go to war for it.
This is not the only way you can trip yourself up by refusing to see the forest for the trees.
I recently heard a story about a company that created a board game, and after planning their shipping, they determined the total cost to them would be five dollars per game. They decided to charge customers nine dollars for shipping and handling.
Then, during product development, the designers got so excited about the product that it became more complex—more layers, more cards, and more pieces. The game expanded so much in scope that they ended up needing a bigger box than they had originally anticipated.
The product went from weighing less than one pound and costing five dollars to ship to weighing slightly over one pound and losing that carrier option completely. Shipping costs grew to nearly three times what they had planned, but they’d already sold all of these games through their crowdsourcing campaign at the lower shipping price. They ate the loss because they didn’t plan effectively.
I’ve seen firsthand what happens when entrepreneurs don’t have the experience or insight to see all elements of a product launch and how they work together. If it’s your first time launching a crowdfunding project or product, don’t look past the little things. They can make or break your business.
A Real Scare
We’ve all heard tales of crowdsourcing campaigns gone awry. Coolest Cooler raised over $10 million through crowdfunding, and in the end, they couldn’t follow through on their product. The vast majority of the nearly 63,000 people who chose to back the campaign still haven’t received their product. It has been confirmed that Ryan Grepper used the backers’ funds for lavish trips and hired family members to work for the company at exorbitant salaries. There have even been rumors that he used some of the cash to purchase himself a Porsche.
There are a few of these horror stories out there, but most of them revolve around fraud. The real scary stories, to me, are the ones where someone made a small “oops” that cost them 2.5 to three times their expected costs, and they never launched another product. Instead of making $10,000, they lost $10,000 and they were never able to take that risk again.
Some first-time entrepreneurs claim they don’t have to worry about these little things, or they’ll get to them later. After all, they’re the idea man. And the idea is everything, right?
But experienced product launchers know that they have to act like a business, not a product. You need to have a plan, and you need to act like you’ve been there.
When considering launching a new product, ask yourself these questions as if you’re seasoned. Give all aspects of your launch due diligence. Otherwise, your idea can be amazing, but the execution will fall flat.
Perhaps you don’t have the money to hire a huge team with a ton of experience around product launches. But if you make the right connections—and offer value in those relationships—you may find a mentor who has walked this road. This mentor can give you the insight you need to properly execute things like shipping, logistics, and manufacturing—all the boring things you don’t think about when you’re wrapped up in how you’ve invented something cool.