- What payment terms have you negotiated with your contract
manufacturers or suppliers? Can you increase payment terms to
optimize your cash conversion cycle?
- Do any key technologies have cost reductions over time that you
can leverage? Did you know that you can usually order components
from your CM and cut your distribution free, saving you 20% of your
costs?
- How much margin is each of your suppliers or contract
manufacturers making? It's important to under- stand how much of
your supplier margin is passed through to your customers, and
ensure the value is dis- tributed appropriately.
- What liability will you have if you over-produce and your
supply exceeds your demand? Do you know when will you start to
recover the capital through sales?
- Stop here and remember your vision for this product. Quality is
everything: Get samples often, test them completely, keep a log of
change requests and hold your manufacturing partner accountable to
deliver the best quality product. There are no shortcuts here, only
painful product returns.
- One last tip I got from a local hardware entrepreneur - visit
your CM's warehouse, storage area. Is it clean? Is it dry? Is it
climate controlled? Mold, dust, dirt, bugs, these are things that
will ruin your packaging and that can kill the dream. Funny how the
smallest things that we often overlook can come back to bite us.