Quick Nickels and Slow Dimes

Fast Nickels and Slow Dimes

How to pick the right products for your new business

and not go broke by choosing the wrong ones.

My friend Kurt was the person who introduced me to this phrase. What he said that it meant was that in business its much easier to earn small amounts of money quickly than large ones.
This can be understood better if one looks at the quadrant plot of figure I. The y axis is Speed, that is how  FAST

can the money be earned. The X-axis is revenue. How MUCH money is at stake. The two axis intersecting form 4 quadrants. 

 
Along with the Quick Nickels and Slow Dimes we also have what I call the “Get Rich Quick” quadrant. There are many people who try to earn their living this way, but by in large the piles of money to be made in this quadrant is  an illusion.

The chances of winning that 200 Million dollar lottery prize may be 600 Million to 1. An the lure of quick money through crime often  ends up in prison or even an early death.

Similarly, the lower left quadrant is to be avoided. Making a little money , slowly will soon put you in the poorhouse as your expenses greatly outpace your income. For a startup business this is a common place to be when you don’t correctly identify your fast nickels and slow dimes , or attack the opportunities they symbolize in the right order. Unless you have a great pot of money to invest, you should chase the quick nickels first and use the revenue from them to fund the slow dimes.

 

 

Step1: Identify and Quantify the Nickels and Dimes

 The first step in making use of this information is to identify the Quick Nickels and Slow Dimes. Which of the products and/or services that you might offer can be brought to market quickly and which will take the investment of significant amounts of time and usually money. Next how big is the opportunity likely to be. 

One company that I am familiar with had a clear need for increased capacity to produce a particular product. There was no uncertainty about the demand for the product , which the company had been selling for years, but the product was made in on a very expensive machine which required its own building and took a very large investment to build. 

In order to capture these additional orders the company would have to bet that the demand would still be there when its new building was completed , and would last long enough to payback the investment. This uncertainty amounted to a significant risk the company was unwilling to take.

 

Step 2: Decide in what Order to Deliver the Nickels and Dimes

 Once you have identified the Nickels and the Dimes the next question to ask is the order in which you will develop them. Generally speaking the Nickels come first to build revenue to pay for the dimes, but that is not always the case. There may be reasons that launch of a “Dime” should be accelerated. Attaching an order to the launch date of Nickels and Dimes creates a Market Attack Plan. Once you have a preliminary schedule for launching these products, review it and see if it makes sense viewed as a whole. For example will those early nickels really add up to enough revenue to launch a “Dime” or must you tap other sources of funding.

 

Step 3: To be Continued

There’s lots more that could be said on this topic. I think I will wait for feedback before I post some more. Look under Financing for the next installment