How can I best predict the potential return of launching a new software for sell?

Posted on 2011-10-13
Last Modified: 2012-05-12
How can I best predict the potential return of launching a new software for sell? I'm about to enter in a "joint-venture" with a software company: They have already sold their software for a time and now they are interested to incorporate some of my ideas, which would require them to change their software substantially. So before they want to begin with this whole project, they would like to see some proof of that they will get more money back than invested to develop my idea.

How can I best do that? Isn't it just for me to, as detailed as possible and as realistic as possible, explain the whole concept and that because of X quality of this developed product there are many users who would like to purchase it?
Question by:hermesalpha
    LVL 4

    Expert Comment

    If the existing product is in stand alone product , you may think to develop web application. which can be used anywhere without installing client and centrally managed. Think about enduser benefit and easy to access. Also consider cloud based development, everything(ie.SW,HW,Storage,NW,Security) comes as Service.
    LVL 10

    Accepted Solution

    "Proof" is in the numbers, that is, it is shown by illustrating realistic financial statements that would result after production through to ultimate sales.


    Income Statement before production ($ thousands)

    Revenue $20

    Production labour $0
    Production materials $0
    office expenses $2
    other expenses $1

    Total income $17

    Income Statement AFTER production ($ thousands)

    Revenue $30

    Production labour $5
    Production materials $2
    office expenses $2
    other expenses $1

    Total income $20

    In this illustrated case, there is a $3 gain found by producing the product.

    "Realistic" is found by doing market research. This is a compilation of primary (interviews, surveys, etc) and secondary (published evidence in industry periodicals, journals, etc) research and presenting your results. This will show that there is a demand for the product, and how much of a demand there is.


    Author Comment

    Thanks sravi2208 and cityqat, your answers clarified some things for me. Just wonder what would be a fiasco (the minimum) I could expect to sell of my product and the maximum number of products I could expect to be able to sell during the first 6 months? If my product will be priced at USD 50.

    For example, it's a language product that I am certain I will be able to reach out to exactly the right potential buyers, so I'm confident that the marketing will succeed (the potential buyers who are most likely to buy this product will also get to know this product's existence, where to buy it).

    Are we talking about 1,000 products the first 6 months? Or would it be possible to sell 10,000 products the first 6 months if I succeed with the marketing to 100 %?
    LVL 10

    Assisted Solution

    by:Nancy McCullough
    It sounds like you are looking to find information around what is known as the 'cost volume profit analysis'.

    This link will show you the formulas that you would use to answer your questions about how much do you need to sell, produce, etc.

    The minimum you can expect to sell is 1. The maximum is the total number of items available for sale in your inventory. Apple sells their entire inventory of "iPhone 4S" at stores in the first few hours at reseller locations, but has more on hand to ship from their warehouse to locations and pre-order and backorder customers. Anything is possible when you have a good product with a strong demand that is selling at the right price point.


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