by Arthur E. Nathan, CPA
Adding a new product line to your offerings can be rewarding or a disaster of monumental proportions. Planning done in the beginning is the best predictor of the outcome.
While an additional product will hopefully work for your business, you must work at making it a success. This includes exercising due diligence - research and evaluation - to be sure that you’re adding the right product.
When we wanted to accelerate our firm’s growth, we considered a variety of options: increasing market share with our existing product offerings; increasing consultant utilization; or offering additional products and services. Our management team decided to add another product to our mix.
Before rushing headfirst, we developed a plan to guide us in making the right decision and determining the potential return from our investment in another product line.
We’ve seen too many products and publishers come and go over the last two decades. The current economy does not forgive errors in judgment or not doing all your homework.
We started by defining the vision for an additional product and the criteria for taking it on. We recognized that we did not want to just dabble in the new line, but instead wanted to become recognized experts.
We identified five key areas to research: marketing, selling, implementation, support and client management.
Many questions arose in each: Are existing clients asking for this product? Would it add value to our existing clients? Are our competitors offering this product?
We also asked: Is this product an opportunity within our core competency? Can we take this to volume? Can we become the recognized leader in a reasonable amount of time? Would it contribute to our value and capitalize on our expertise? What do our existing clients in this industry think of the market place?
As often happens, these questions raised more questions. What would be our anticipated profitability? What do we charge these clients? Could we “value bill” them for services? What is the potential in our geographic market in terms of number of businesses in this area? What are the sizes of these businesses? What barriers and risks might we run into? Who would be our competition and what are their strengths and weaknesses?
About the prospective products and their vendors, we asked: Does the product have name recognition in the industry? Are they profitable? Do they sell direct? What are the competitors saying about them? What is their geographic strategy? Are they willing to give us any exclusivity?
Our due diligence led to discussions about our own resources. Could we create the “best practice” tools to standardize this product easily? Could we develop the necessary expertise or would we need to go outside to acquire it? How many consultants would be needed to properly handle this product? What additional responsibility could our existing staff take on? Would we need a salesperson specifically dedicated to this product? What marketing resources do we have? What is the financial commitment necessary in terms of publisher product fees, training, marketing materials and other related expenses? What is the appropriate and realistic time frame that this should happen in?
Once we answered these questions, we developed a contingency plan for the key elements, like personnel turnover and failure to acquire a sufficient number of clients. Only then did we make the decision to take on a new product line.
We selected a nonprofit industry line from the Micro Information Products organization within Best Software’s Nonprofit and Government Division. MIP’s products complemented our existing offerings, our firm’s philosophy, and our marketing strategy.
Other key factors included Best’s ownership of MIP. My company already handles other Best products, so adding MIP allowed us to continue to work with one publisher. It also made sense to use our 16-year relationship with Best as leverage.
Next, our team felt strongly about adding a product that served a specific niche market, as opposed to picking up an additional horizontal product. MIP products gave us the market opportunity we were looking for.
We have an office in New York City, where a large percentage of the nation’s nonprofits are located. Our initial research also indicated that there were a limited number of competitors.
Because of the unique approach that our firm has taken, in that we primarily market to CPA firms, we also had to insure that we could pursue this strategy with the new product, as well. We felt very comfortable that MIP’s nonprofit software was a perfect fit.
Another important area we considered was the current skills of our team. We needed a minimum of two consultants trained to properly service clients. We sent two consultants to training, both principals of our firm. We had to be sure that it was the right product and company for us, and attending the course would give us the missing information and confirmation that we needed.
After returning from training, we decided to incorporate MIP into our offerings. The next step was to formalize our business plan for this line.
We knew from experience as implementers that preparation and planning would significantly reduce the risk, if not totally eliminate the chance of failure. And our plan provided for additional consultants to be trained and for the necessary commitment to marketing that we intended to make.
Finally, we were ready to implement the plan. This, of course, is the most difficult part. Many businesses plan, but it is the determination to stick to the plan that makes the difference.
I would like to give special thanks to Stuart Tholen, technology director at Schmitt Griffiths Smith & Co., in Ogden, Utah. His methodologies have been invaluable.
