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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?
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### How to Calculate the Cost of Being Late to Market

1. How to Calculate the Cost of Being Late to Market
2. \$ Most people realize it costs money when your new product ships late
3. ? Few know how to calculate how much money is actually lost
4. y-axis is your cash flow coming in or going out x-axis is Cash Flow Over Time \$ time
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. 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. At some point, your product matures to max revenue Market Maturity \$ time At maturity, your market share and revenue are maxed out
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. This chunk of \$ minus this expense minus other overhead Profit = \$ time
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. 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. 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. 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. 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. Total revenue decreases Compacted Profits \$ time Total expense increases
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. 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. 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?