TRY YOUR BEST TO TAKE NO RISKS
This three-times markup is a general rule, but it doesnt always apply. Its a safety net kind of concept where if you follow it you wont get into financial trouble. The reason its a safety net is because there are a lot of costs associated with selling and you need to be able to cover those as you grow.
Rule #2 - Does it require low upfront investment or cost-of-goods-sold, (COGS)?
The reason its important to ask this question is because a lot of businesses can get in crazy financial trouble by spending tons of money on an unproven product. Its incredibly risky to do that. Big companies can make multi-million dollar bets, but as a small business, you can’t take that kind of risk. Try your best to take no risks. Do your best to find out if you can test your product idea for a very low cost. If you cant then you probably want to skip that product idea.
Rule #3 – Is the product concept scalable?
Wikipedia explains the concept of scalability this way:
Scalability is the ability of a system, network, or process to handle a growing amount of work in a capable manner or its ability to be enlarged to accommodate that growth. For example, it can refer to the capability of a system to increase its total output under an increased load when resources (typically hardware) are added. An analogous meaning is implied when the word is used in an economic context, where scalability of a company implies that the underlying business model offers the potential for economic growth within the company.
