## April 02, 2019

### Now We Have Downstream Value

We take our annual totals, and then we (via the red numbers in this table) fill in estimates to get all new items to represent a four-year downstream value metric.

The bottom row represents four-year value, by year, for a typical new item.
• Year 1 = \$1,210 per item.
• Year 2 = \$1,850 per item.
• Year 3 = \$2,296 per item.
• Year 4 = \$2,656 per item.
Those are cumulative figures. Incrementally, we observe the following:
• Year 1 = \$1,210 per item.
• Year 2 =    \$640 per item.
• Year 3 =    \$446 per item.
• Year 4 =    \$360 per item.
Over four years, new items quickly lose steam, don't they?

At an approximate 9,000 new items per year, the brand will generate ...
• Year 1 = \$10.9 million.
• Year 2 =   \$5.8 million.
• Year 3 =   \$4.0 million.
• Year 4 =   \$3.2 million.
Let's say that your brand generates \$20.0 million from existing merchandise ... and your CFO says you need to hit \$35.0 million in total annual demand. You have evidence that the best you can hope for is \$20.0 + \$10.9 = \$30.9 million in annual demand. You're not going to hit your goals. And not hitting your goals is going to become your fault!!! That's how business works.

From here, you can calculate how many new customers you need to make up the difference ... and/or you can calculate how many new items you need to make up the difference.

You do this stuff, right?

Right???