Latest / Pitch to Product / The Goldilocks Method: How to Budget for Launching a Business
Transcript
- Venture Program Intro: Look at I will tell you, nobody starts a business understanding the other side of the business model to that to that degree. Like you can have all the business plans. I've never seen a business plan that gets executed to what it says, right? here's your here's the growth in one year, five years, three years throw that out. let's break it down. So the finance questions in two parts, right? The number one part is if you're a business owner, you understand you have to make an investment. That's a tier one client. The conversation should be really focused on hey, what's this gonna what you know, what's my total? What do I have to have in my budget? When is it all gonna be due? normal question would also be like, how do other people do that? And those are all questions we can answer, you know. it's when you start getting into the other side. What am I gonna make? How is this gonna work? You know, what are the guarantees? Look at I will tell you, nobody starts a business understanding the other side of the business model to that to that degree. Like you can have all the business plans. I've never seen a business plan that gets executed to what it says, right? here's your here's the growth in one year, five years, three years throw that out. Okay. The reality is blueprints don't go exactly to plans. Look at and and and you're spending money with an engineer and a lot of money to make sure the blueprints are exactly that. But there's also a thing called change order. Right. A change order is when someone emotionally says, I thought I like the sink there, but I think I want the sink over here. That changes everything. Right. Right. That that means okay, someone now in the field has to go and make that change. It's a pivot in business, but it's a reality. So, you know, what you have to look at is the fundamentals. It's keep it simple. It it's the core successful product and it's moat. That is our guiding principles. And with you understand that, you know, what I what you can do is understand. Hey, this is the guidelines that we need to make this product in. This is the budget that we need to talk about. and that budget has two different bell curves or two different ends to it. Number one is what can I afford versus what should be made? And I think both conversations are relevant. It just means that where I have to start might not be all the things that I thought I was gonna start with. and look, I'm gonna give you some free advice. Anyone that's an entrepreneur right now does not have money. Pick the category that your product's gonna be in and go sell something. Go build your audience in that first. So this way at least you have the audience built. If you have the money, let's go build the product because you know the adage of if you build it, they will come is the most successful way to launch a product. I try to make it easier for people when they all satisfy pricing. I said, look, what's your product gonna sell for? If it's a hundred bucks, you know wholesale is fifty bucks. It means manufacturing is twenty five bucks. So if you're gonna make a thousand of them, so twenty five dollars so a thousand. That's where you at least you know you have to start with that much there. That's just simple because you have to know how much you're gonna start with to get to that point. Now how you get there and everything else. We could discuss that, but you have to know budgets. That's simply that. You know? And Steve, I'll I'll add another one that you didn't have on the list. It's called the Goldilocks conversation. everyone's heard the story of Goldilocks, right? She goes in, she tries this bed, it's so she actually tries the porridge is too cold. The other one's too hot. The middle one is just right. When you do what Bobby just said and you say, Okay, I understand that my product's a hundred dollars at retail, fifty dollars is wholesale. Which means I have to figure out how to manufacture it twenty-five dollars. Well, you know what? You can still figure out the Goldilocks conversation. What do I get for twenty-five dollars? Is that porridge too cold? Is it too hot? Or is it just right? Because we haven't made it yet. We still have the ability to go back and say, Well, if I want to make this hotter, this is what I would need to do. And my cost goes to $30. That means will the margin now, if I again work backwards, that means $60 wholesale. $120 is the retail price. Can a consumer, would a consumer pay $120 for this product that I'm envisioning right now? The answer is yes, then that's a that's an option. Then you look at it from a financial standpoint. Wait a minute, can I afford $30 per unit of a thousand units? And let's be honest, on a thousand units, I'm probably gonna add there's probably like a twenty to twenty-five percent in in increase of cost just because we're not at scale or volume, but we're still in a decent margin conversation. With that said, now it's affordability. If you can't afford that, well, maybe we should go back and start at the $15 product. What does that look like? Right. This is the porridge that is is too small or too cold. If that means that $30 is wholesale and $60 is retail, but it doesn't have all the bells and whistles that I dreamed of, but it still services a core successful product, then these are the choices that we're going to discuss together. You're going to be the CEO to make that final choice. It is budgetary. It is business and it's the way everybody operates. And if you're not having that conversation with anybody that's another vendor in this space, then you're in a danger zone. And I would highly caution you, but that's the business conversation that you need to have to meet the criteria that you're looking for. I call it the Goldilocks method, and it's pretty simple to understand.