Does the launch still pay after it eats the flagship?
Every launch model gets the new product's economics right and quietly assumes the old product keeps every sale. Picture an appliance maker adding a $260 compact version of its flagship machine: some buyers are genuinely new, but every fourth one was going to buy the flagship anyway, taking $180 of contribution with them. The question is not whether cannibalization happens, it is how much of it the launch can survive.
Words on this sheet
- Contribution: What is left of the income after the costs that come with it, before the fixed costs are paid.
Finance Intermediate Data Table free
After you install, this is the model to open.
Launch With Cannibalization
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
The answer
One click fills the table: launch NPV and annual incremental net income at every cannibalization rate from 0% to 50%.
- NPV at 25% cannibalization
- $1.29M base-case answer
- Breakeven cannibalization
- 28.9% NPV crosses zero
- Standalone NPV
- $9.49M if 0% of sales were stolen
- Value lost to cannibalization
- $8.2M 86% of standalone NPV, at base case
At the base 25% cannibalization rate the launch still clears the bar with a $1.29M NPV, but the margin for error is thin: NPV hits zero at 28.9% cannibalization, four points above the estimate. Reported earnings stay positive all the way to 33.3%, so an income-statement view keeps saying yes while value is already being destroyed. And cannibalization at 25% erases $8.2M of the $9.49M the launch would be worth standalone, which is why ignoring it makes almost any launch look brilliant.
The model
A four-year incremental model of a lower-priced sibling to an existing flagship. The data table sweeps one cell, the cannibalization rate, and recomputes NPV and incremental earnings at each step.
| New product volume | 80,000 units per year |
| New product price and unit cost | $260 / $150 |
| Flagship contribution lost per cannibalized sale | $180 |
| Cannibalization rate | 25% base case, tested 0% to 50% |
| Incremental SG&A | $2.5M per year |
| New equipment | $6.0M, straight-line over 4 years |
| Tax rate and discount rate | 25% and 12% |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- What are the odds your product launch actually makes money?Product Launch Go/No-Go NPV
- How big could this product's revenue be by year three?Market Size to Revenue Forecast
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- How many rentals until an item pays for itself?Rental Break-Even Turns
- What pre-money valuation can your startup actually justify?What Is the Startup Worth to an Investor?
- When the company sells, what do you take home?Exit Payout Reality Check
Every model like this one, and the method behind them: What-if analysis in Google Sheets.