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Pricing Pandemic Products

  • 03/29/2020 12:33 PM
    Message # 8865530
    Anonymous

    Since the U.S. Small Business Administration announced on March 12 the SBA Disaster Assistance Loan program, I have been working on developing Guides to help small businesses   borrow up to $2 million at 3.75% interest for up to 30 years.  https://disasterloan.sba.gov/ela

    I am recommending to all my small businesses that they apply for a loan.  I did file online myself before the SBA portal shut down on Thursday which has not yet reopened.  It is still possible to file by email or mail.

    On Friday, using my own experience and talking with several small businesses, I completed creation of four Guides (http://www.capitalinnovation.institute/pandemic):

    • ·        Quick Guide for Single Owner Businesses
    • ·        Full Guide for Single Owner Businesses
    • ·        Quick Guide for Multiple Owner Businesses
    • ·        Full Guide for Multiple Owner Businesses

    With completion of the Guides, I am now working on promotion, distribution and pricing.

    Initially, I started giving away the Quick Guides for free (which I will continue to do) and charging a fee of $50 each for each of the full Guides.

    Like any new Pandemic product or service offering, I am concerned about the public perception of profiteering and taking advantage of the Coronavirus (COVID-19) Pandemic.  I am less concerned about this claim by someone sitting at home drawing a salary while under quarantine than by that of a freelancer or Gig worker watching days go by with no revenue and dwindling money to buy a Guide.

    In picking the initial price of $50, I first considered the total direct cost of production and distribution with associated overhead.  I projected that my cost could run as high as $25,000.  However, I just completed my personal ‘economic impact statement’ for my SBA Disaster Assistance Loan application that reflects my monthly costs of operations.  Ordinarily, I would allocate the cost of operations (overhead) for no more than the two weeks in production and projected two months in distribution.  However, if I have no significant revenue through the end of the year, then these products must carry this overhead resulting in a significantly higher cost per unit.

    I then considered how many of the Guides I may sell.  The simple answer is I don’t know.  Having worked extensively with crowdfunding campaigns, I recognize that my network of a few thousand people does not reach any significant percentage of the 30 million small businesses or 60 million freelancers (I cannot reconcile these two statistics or guess how much overlap exists).  If I can set up freelancer, Gig worker, self-employed, small business, industry and economic development organizations to promote and/or retail the Guides, the potential exists to sell a much larger number.  If, in a very limited time, I can spread my costs over a large number of sales, I can set a much, much lower price.

    While trying to project a potential sales number, the clock is ticking.  These Guides have a limited shelf value like fresh fruit. Every day spent in promotion and distribution is one less day that a small business may apply for an SBA loan.  The longer it takes for a small business to get money now, the higher the probability that the small business will not survive.  This means that the beneficial value of the Guides is declining.  Every two weeks spent in promotion and distribution may see the potential small business market decrease by half so that in four months there is no more market.

    My initial goal was to recover all my costs including my own time – a for profit, breakeven business model.  However, as I was developing these Guides, the Federal government passed legislation for more disaster relief that may create four to eight or more programs.  At the same time, each State will have its own small business disaster relief programs.  All will benefit from Guides that can help small businesses obtain money and maximize the amount of that money.  So, now my goal is increased to generate a minimum of net revenues of $200,000 to expedite the production of as many additional Guides as possible by rolling over net earnings from the first Guides.

    As I see it, these are my options:

    1.       Sell the guides at my original price point of $50 each that reflects their beneficial value
    2.      Striking a deal with large organizations for lump sum pricing (unlimited seat license) so that they can supply a copy to each of their members
    3.      Setting up freelancer, Gig worker, self-employed, small business, industry and economic development organizations of all sizes to retail the Guides – paying a wholesale price (30%-50% discount from retail) who would then resell them at my price to them or marking up the price on the Guides to generate some much needed revenue for their own organizatio
    4.       Obtaining a grant from one or more government organizations for all costs
    5.       Adopting a creative pricing strategy:
    a.     Free till the end of the week (April 3rd)

    b.      $10 thereafter till the end of the next week (April 10th)

    c.      $20 thereafter till the end of the next week (April 17th)

    d.      $30 thereafter till the end of the next week (April 24th)

    e.      $40 thereafter till the end of the next week (May 1)

    f.       $50 thereafter

    6.      All of the above

    7.      Some combination of the above

    8.      Something else

    I welcome all suggestions for how to set pricing on these and future Guides.  As an incentive, I will make a set of the current Guides and any future Guides that may be produced available for free to every person who submits a suggestion.  Send them to me at kdakin@capitalinnovation.institute

    Thanks in advance for your help!

    Karl Dakin, Executive Director

    Capital Innovation & Technology Institute LLC

    kdakin@capitalinnovation.institute

    http://www.capitalinnovation.institute

    First published in LinkedIn on 3 29 2020: https://www.linkedin.com/pulse/pricing-pandemic-products-karl-dakin


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