0
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 * de...
Once you launch your
product, revenue
starts to ramp up and
you start making $$
Market Intro
$
time
The slope of this curv...
At some point, your
product matures to
max revenue
Market Maturity
$
time
At maturity, your market share and
revenue are m...
Revenue ramps
down as the
product
lifecycle nears
its end
Market Exit
$
time
The revenue lifecycle starts at launch
date a...
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 i...
The time and
money spent on
development
increases
You Are Late
$
time
You delay the point when you start making money
and ...
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 b...
This penalty %
is industry and
timing
dependent
Uh-oh
$
time
An optimistic approximation is a 2% penalty per
month late. I...
The market exit date
does not change
much or at all
Compacted Lifecycle
$
time
Your competition and market conditions forc...
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 Ma...
Example – 6 Month Delay
51.7% Decrease in Profit!
$2.48M Lost
18 Months – Target Launch Date
3 Months – Ramp to Capture Ma...
Put Your Numbers In,
Create a Slide Like This
https://www.initialstate.com/LateCalc
Show the true cost of a layoff
Justify...
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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

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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?
    thank you! :-)
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Transcript of "How to Calculate the Cost of Being Late to Market"

  1. 1. How to Calculate the Cost of Being Late to Market
  2. 2. $ Most people realize it costs money when your new product ships late
  3. 3. ? Few know how to calculate how much money is actually lost
  4. 4. y-axis is your cash flow coming in or going out x-axis is Cash Flow Over Time $ time
  5. 5. During development, you spend money R&D Spend $ time Total development spend = the # of months until your launch date * dev costs per month
  6. 6. 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)
  7. 7. At some point, your product matures to max revenue Market Maturity $ time At maturity, your market share and revenue are maxed out
  8. 8. 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
  9. 9. This chunk of $ minus this expense minus other overhead Profit = $ time
  10. 10. 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.
  11. 11. 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
  12. 12. 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.
  13. 13. 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.
  14. 14. 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).
  15. 15. Total revenue decreases Compacted Profits $ time Total expense increases
  16. 16. 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
  17. 17. 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
  18. 18. 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?
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