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How to Calculate the Cost of Being Late to Market
 

How to Calculate the Cost of Being Late to Market

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Most people know that shipping your product late costs you money but few know how to calculate how much money is really lost. A live calculator is available at http://www.initialstate.com/LateCalc

Most people know that shipping your product late costs you money but few know how to calculate how much money is really lost. A live calculator is available at http://www.initialstate.com/LateCalc

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  • Hi, could you pls tell me which font has been used for the title 'Late to Market' on the first slide?
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    How to Calculate the Cost of Being Late to Market How to Calculate the Cost of Being Late to Market Presentation Transcript

    • How to Calculate the Cost of Being Late to Market
    • $ Most people realize it costs money when your new product ships late
    • ? Few know how to calculate how much money is actually lost
    • y-axis is your cash flow coming in or going out x-axis is Cash Flow Over Time $ time
    • During development, you spend money R&D Spend $ time Total development spend = the # of months until your launch date * dev costs per month
    • Once you launch your product, revenue starts to ramp up and you start making $$ Market Intro $ time The slope of this curve is dictated by the time it takes to ramp up to max revenue (supply chain, marketing, sales)
    • At some point, your product matures to max revenue Market Maturity $ time At maturity, your market share and revenue are maxed out
    • Revenue ramps down as the product lifecycle nears its end Market Exit $ time The revenue lifecycle starts at launch date and ends at market exit
    • This chunk of $ minus this expense minus other overhead Profit = $ time
    • What Happens When You Are Late-To-Market? You can’t fix all of the bugs in time. You can’t get all of the features built in time. You need to add a feature. You have a supplier problem.
    • The time and money spent on development increases You Are Late $ time You delay the point when you start making money and extend the spend on dev
    • Your max revenue per month is 2% to 6% less for each month you are late!! Uh-oh $ time You get a max revenue penalty for being late. You lost market share, customers lost interest, customers went to your competitors, etc.
    • This penalty % is industry and timing dependent Uh-oh $ time An optimistic approximation is a 2% penalty per month late. If you miss a key date (like Nintendo missing Xmas), the penalty can be much higher.
    • The market exit date does not change much or at all Compacted Lifecycle $ time Your competition and market conditions force the end of life date for your product to remain virtually unchanged (you have to refresh your product line).
    • Total revenue decreases Compacted Profits $ time Total expense increases
    • Example – 3 Month Delay 26.9% Decrease in Profit! $1.29M Lost 18 Months – Target Launch Date 3 Months – Ramp to Capture Max Revenue 24 Months – Revenue Life Cycle $10M – Max Revenue Per Year $2M – Development Costs Per Year 33% – Operating Margins 2% – Revenue Penalty for Being Late 3 Month Launch Delay
    • Example – 6 Month Delay 51.7% Decrease in Profit! $2.48M Lost 18 Months – Target Launch Date 3 Months – Ramp to Capture Max Revenue 24 Months – Revenue Life Cycle $10M – Max Revenue Per Year $2M – Development Costs Per Year 33% – Operating Margins 2% – Revenue Penalty for Being Late 6 Month Launch Delay
    • Put Your Numbers In, Create a Slide Like This https://www.initialstate.com/LateCalc Show the true cost of a layoff Justify a new hire Calculate the cost of a schedule slip Is that new feature worth a delay?