Invest in a new product line

Who this is for

Founder led lower-middle market companies with 5 to 50 million in annual revenue that see an adjacent opportunity and want to de risk the bet.

The quick answer

Invest when a clear customer problem aligns with your strengths and when the path to gross margin is visible. Validate with paid interest, not surveys. Confirm delivery capacity and the effect on cash. Start with a small beachhead and a simple offer. Stop if margin or demand thresholds are not met by a set date.

The method in eight steps

Write the thesis
Customer, painful problem, and the outcome they will pay for. Name the capability that gives you an edge.
Prove demand with money
Collect letters of intent, deposits, pre orders, or paid pilots. Avoid surveys and soft interest alone.
Model unit economics
Price, bill of materials or cost to serve, expected volume, warranty or support cost, and target gross margin by quarter.
Check capacity and partners
Confirm supply, skills, and tools. Identify partners where they reduce risk or speed the path.
Build the beachhead offer
One use case, one configuration, one service plan. Keep options off the table until the core works.
Set stage gates
Write demand and margin thresholds and the dates to assess. Include a stop rule if thresholds are not met.
Plan cash
Map build costs, deposits, inventory cycles, and credit needs. Align with your banking facility or alternative finance.
Decide scale or stop
Run a simple review at each gate and choose scale, improve, or exit. Capture lessons either way.

Example

A twenty five million services company tested a monitoring add on. Ten customers paid for pilots and three pre paid for the first year. Unit economics hit target margin and the firm scaled with a narrow offer for one segment.

Pitfalls and fixes

Building for many use cases at once. Focus the first offer.
Trusting stated interest. Get deposits or paid pilots.
Ignoring cash. Model working capital and covenant impact.

Checklist

Written thesis with clear edge
Paid signals of demand
Unit economics and gross margin path
Capacity and partner plan
Stage gates with thresholds and dates
Cash plan validated with finance