product development counter

With this calculator you can calculate how cost-effective product development is and what is it's refund time.

You may change the value in the white boxes according to your needs.

The graph compares the old and the new product in a ten year period.

The red box is the cumulative sales margin of the old product, which declines as time goes by, eventually resulting in losses.

The blue box is the cumulative sales margin of the new product, which at the beginning shows losses if product development costs have been entered. After the product development phase is finished, the product is implemented and it starts to build up the sales margin according to the numbers entered. In reality, the product development is financed with the sales margin of the old product, thus It seldom shows losses even in the beginning.

The intersection of the curves shows the refund time in months for the product development. In other words, if no action is taken, the markets will outpace You in both revenues and costs.

Overall expenses of product development: Duration of product development in months:

Current position INSTRUCTIONS

First enter the sales price of Your current product. Then enter production costs or supply price and the annual sales volume.

Then enter estimated annual change percentages.

• First box is for the negative percentage consisting of how You estimate the sales price will fall annually if no action is taken (price erosion)

• Second box is for the percentage of how You estimate the material costs will rise annually (inflation)

• Third box is for the percentage of how You estimate the labor costs will rise annually (rise in wages)

• The fourth box is for the percentage of how You estimate additional costs will change annually.

Enter Euros and the annual change percentage (+/-)

Sales price

Materials

Labor

Additional costs: 0.00 €

Quantity /Year

Cost price 0.00 €

Sales margin € 0.00 €

Sales margin % 0.00 %

Overall margin /year 0.00 €

New position INSTRUCTIONS

Enter the estimated corresponding values for the new product.

• Sales price may stay the same or decrease if You wish to increase the volume. The price may even go up if the product becomes better (quicker, more efficient , more versatile)

• Second box is for new material costs (typically 30-70% less when compared with the old product)

• Third box is for new labor costs (typically 20-50% less when compared with the old product)

• Fourth box is for new additional costs including subcontracting, packaging, shipping and assembly (typically 20-50% less when compared with the old product)

• Fifth box is for sales volume, which can be the same as before for direct savings, or it can be increased in order to build up market share with a better product or lower sales price.

The box on the right displays the difference between the old and the new product.

Revenues and costs, annual changes

Sales price 0.00%

Materials 0.00%

Labor 0.00%

Additional costs 0.00%

Quantity /year

Cost price 0.00 €

Sales margin € 0.00 €

Sales margin % 0.00%

Overall margin /year 0.00 €

Difference

Revenues and
costs

- €

- €

- €

- €

- pcs

- €

- €

- %

- €

Months

Cumulative OLD annual margin Cumulative NEW annual margin