Front Loading

Front loading is a term used in business to describe strategically putting all the important parts of something at the front before anything else.

The term’s application is wide and can be used in almost all aspects of running a business… not just for washing machines.

So the context of when the term in used would determine what it is being referred to.

Front loading in various aspects of business operations

For example, a trading company might choose to stock up with high levels of inventory at the start of the financial year in preparation for the sales that would occur for the next 6 months.

This can be described as front-loading inventory.

A company paying for a subscription service of marketing software might choose to purchase a 5-year subscription instead of going with a monthly payment to save some money.

This can also be described as a front loading of marketing expenses so that the company would not have to think about keeping up with the payments of the subscription service and face service disruption when a payment is forgotten.

A startup can also decide to front load venture funding by raising more cash that it needs to reach the next milestone so that it does not have to face the prospect of having to undertake fund-raising activities again.

This has it’s own pros and cons.

While this might ensure that the startup would have enough funding to achieve it’s next two or three milestones, it also means that the investor would be paying a low price of the shares since share prices usually rise with each following phase of series funding.

When an innovative startup is putting it’s product on the market for the first time, frontloading all the marketing and advertising budget on the launch.

This is done in the hope that it generates enough buzz, and allows the firm a great chance to build on a strong foundation of prospects and customers from the start.

It also helps them test the market and shape their business strategies going forward.

In business presentations, a presenter might choose to frontload all the most important details at the start of the speech when everyone is still energetic and attentive before losing their interest some time later.

When selling a service to another, the seller would usually prefer the client to front load most of the payment instead of paying based in stages and targets reached. This can be the case when a developer of new condominiums needs payment up front for working capital.

In pricing strategies, many industries have products that tend to sell at a higher price and slowly decease. The first customers pay premium as they see value in being first.

The music industry is one good example as new albums generally sell for top prices and generally decrease over time.

The same can be said of high-tech smart phones with thousands of fan willing to pay well over the odds just to be the first ones to get their hands on a new cell phone.

The highest prices would be set from the beginning and gradually decrease.

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