posts tagged with the keyword ‘business’

2012.05.25

Maker Business - The Real Costs

You know me, I’ve always got more to say… I just wanted to touch on the real costs of making a thing.

In the olden days, when I primarily worked with software, there was an old saying “Linux is only free if your time has no value” and while it’s a slightly amusing phrase, there maybe some truth to it. Maybe. If you’re a Linux fan, the saying may come across as an insult. Sure, sometimes working with Linux feels a lot like yak shaving. When you need to install this library to install that library to install some other library to install the software you really wanted to install… you get the idea. (Linux has gotten much better at this in the last few years though, so much of these issues have gone away.)

With software, it’s (almost) all about the time you spend on it. If you’ve got a computer, you can develop software. Most of the tools are free, or low-cost (depending on the platform) and if you got access to the Internet, or a library, you can learn, learn, learn and become a software developer. (I’ll answer the question of if you should in another post!)

So you’ve got a computer, you’ve got time, you’ve got a desire to learn… those can be the basic building blocks to make software. Go for it. Now, keep in mind that many developers (especially in the open source world) are doing what they do because they want to solve their own problems. I really wanted DokuWiki to be able to present a random page, and when I found a plugin that didn’t work, it was worth a few hours to fix it. I didn’t go as far as adopting the plugin, since it appears to have been orphaned, but I did drop it on GitHub so if someone really wants my work, they can have it. The sharing and collaboration is part of what I love about open source.

So let’s talk about hardware…

Hardware consists of real bits, not just zeros and ones, but actual physical things that are created. When I turned one of my projects into a product I did my best to make sure the final price was such that I would actually make money. Making money is important. Note that I didn’t say making LOTS and LOTS of money is important. I mean, it is to some people, but… whatever.

So you’ve got your maker business, and you want to treat customers (and potential customers) right, and this will cause you to make certain decisions. I remember talking to someone 9 months ago who ran a successful Kickstarter campaign, and he pointed out to me that the first thing you need to do once you think you determine your costs, is to pad it. Remember that Kickstarter and Amazon each take a cut. The campaigner also said that he got one backer who had some terrible thing happen in his personal life, and asked if he could be refunded his pledge. If you do refund someone’s pledge, do you do the full amount or do you withhold what Kickstarter and Amazon take out of it?

Once you’re shipping actual products, if you’re not charging enough, how many returns does it take to make you start losing money? Things break during shipping, or get lost, or stolen, or just plain don’t work. It’s your job to determine how far you’ll go (and how much you’ll spend) to have satisfied customers.

And yeah, as I mentioned, physical things cost money, and when you are not big (as in, a small company, or someone just starting out) you probably have zero leverage to get any sort of discounts. This is where a lot of Kickstarter campaigns come in, as they involve raising enough money to do bulk purchases to drive down costs. It’s a good idea in some cases, but not all.

Even after you have all the physical things you need to assemble a product, there are at least two more thing you may need. Time (just like with software) and tools (which compare to a computer in the software example above.) In my case, to build my products I had some of the tools I needed, but I also had to buy some of them. If you don’t want to buy your own tools you can consider a makerspace or something like TechShop if you have one near you. As you continue to create your product you may end up spending more on tools, to do things better, faster, etc. This is another cost you may not think about. There’s also repairing and replacing tools, and consumables like blades, bits, paint, shipping materials, etc. and each one of those also takes some time. If you’re driving to a store, or even just ordering online, that’s time, and if your time is worth anything, you need to be compensated in some way.

I’m all about DIY, when it makes sense, and sometimes even when it doesn’t make sense, and that’s the key here. Sure, time is money, and yak shaving isn’t always the best thing to do, but sometimes you do it anyway. The good thing is, everyone has a different scale of what they are willing to do (or what they can do) and what they are willing to pay someone else to do.

I’ve gone off the rails a bit, and I guess I’ll need to do a 12.5 post to continue this. If it’s a bit rambling, forgive me, I’m still thinking through a lot of this.

(See all the posts in this series: Begin, Stock, Buy Smart, Basic Rules, No Leeway, Be Open, Community, Manufacturability, Marketing, Shipping, Lessons Learned.)

2012.05.18

Business Cat

The other day I was playing working with our IR thermometer which just happens to have a laser built into it, and the cat decided it was some sort of toy. Obviously there are laser pointers sold as “cat toys” but dammit, the IR thermometer is a serious tool for science!

Anyway, I told my daughter that on the Internet there is a picture of a cat and the cat is wearing a tie, and behind the cat is this multicolor background, and the cat looks really serious, and he is a business cat, and the caption says “I need you to stay late tonight, we really have to catch that red dot.”

I thought it summed up the current situation nicely, but somehow I don’t think the words had the same impact as just seeing the image.

And then I felt bad for people who are sight-impaired and can’t enjoy these goofy photo memes.

And then I felt envious of people who are sight-impaired, because maybe they aren’t wasting precious minutes of their lives seeing these stupid pictures of cats/animals/people/Willy Wonka with captions.

And then I thought about building a text-only web site that just explained these pictures in great details…

And then I thought about building some sort of phone service using Twilio to explain memes to people verbally.

And then I probably ate a cookie or something and forgot all about it.

You’re welcome.

2012.05.11

Kickstarter

I’m just dropping this post here to document my current thoughts on Kickstarter campaigns that are based on bringing a new product to market. For a bit of background, see this Google+ post as well as this one.

There’s nothing wrong with using Kickstarter to fund an idea for a product, but as more and more people do it, we may see people who have no experience bringing a product to market, and when we combine that with more and more people thinking of Kickstarter as a marketplace for products where you pre-order them, well… I see some problems.

I’m going to toss out a few examples, but I don’t want to come off as negative to any project, so with that said, here we go!

I’ve been following the Trigger Trap project and while I didn’t back it at the level to get a final product, I do watch the updates, including the most recent one. There’s some talk of a scam, and no legal recourse with foreign manufacturers, and tolerances and what not. There’s also a lot of not entirely happy people. On the side of the campaigners, they may have done a few things wrong, especially with the math, not just for the manufacturing of their cases, but with shipping calculations, how much they’d need to not lose money, and quality assurance. From the point of the backers, some are frustrated. They’ve been waiting for a final working product, and it’s almost there, but now there are more delays. Urgh.

Delays can be common even if you know what you’re doing. I backed the Sensu Brush and I saw delays, and I just shrugged it off because I know how a lot of these things work. Artist Hardware, the folks behind the campaign, describe themselves as “a design consultancy focused on creating consumer products for artists and crafters. We build it all from concept to shelf.” So they aren’t just some guys in a garage with an idea for a product, they’re professionals, and they still hit a bunch of problems! It happens. It happens every day in business, and with personal projects, and with Kickstarter campaigns. The key is planning for it.

Kickstarter campaigns can limit the number of backers at specific levels, right? so maybe more people should use that feature. Sure, you want to be successful, but that doesn’t always equate to having a giant pile of money, especially if you don’t know what you’re doing. (That’s not an insult, we all didn’t know what we were doing at some point, and there are still a ton of people who do not know how to bring a product to market.) Let’s say you limit the number of backers you need to just over what you think you might need for an initial run of a product. If things go pear-shaped, and you somehow make nothing (or even worse, lose money) you’re not out quite as much. And, you probably have less people pissed off at you.

But I think the problem is that everyone wants more money because people equate money with success. Of course Kickstarter and Amazon (the payment processor) want more money because that means more profits for them. If you’re the campaigner having more money may seem appealing: Volume discounts! More sales! And so on… but that may not be the case.

About a month about I wrote about beam systems, and one of them I mentioned was OpenBeam, by Terence Tam, who was kind enough to leave a comment on the post. Go listen to Episode 40 of Engineer vs. Designer right now, and then head over to blog.openbeamusa.com. This guy knows what he’s doing.

If you’ve read any of my Maker Business posts (here’s the more recent) you followed along with some of the things I learned in bringing a product to market. I’m glad I went self-funded and small scale, as it allows for learning and (not very costly) mistakes to happen. If you are doing a big project, don’t do it alone! Determine your weaknesses, and then find people you trust to supplement the skills you are lacking.

And Good Luck! I can’t wait to see your final product! :)

2012.04.26

Maker Business - Lessons Learned

This one goes to 11! While there are Ten Rules for Maker Businesses, and I covered them all, what I didn’t do was a full-on follow-up post. So here it is.

Just as a reference, my first post was on February 20th, 2012, and today is April 26th, 2012. So that’s just about two months.

And here are the 10 rules, which I’ll address individually below. (Each one links to the original post on the subject.)

1. Make a profit.
I’m happy to say I did this. It took about a month and a half to sell 10 units, and after all was said and done, I believe I hit the 2.3x rule. There were some miscellaneous costs in there, but even with those, I did alright. This is important because if you don’t make a profit, it’s difficult to consider continuing. As far as how much my time was worth, I think I did OK. Not great, but OK. I’m convinced that with increased efficiencies things will improve.

2. It takes lots of cash to stay in stock.
I kept my stock low, which kept costs down, and helped ensure I didn’t have overstock just sitting there. Sales were slow at first, and when that happens you get a bit worried. You start to think about sales, or discounts, or something. I stuck with it and didn’t do any of those things, which turned out fine. Actually, I got lucky in that I had 4 orders in a two day period, right after I wondered if I’d ever sell another unit.

3. Buy smart.
I bought just the right amount of components to build 10 units with no real leftover. This worked out well, except in the case where I got really picky about quality. Buying larger quantities can help lower the shipping costs, but that doesn’t always work, and sometimes buying in bulk is just too costly.

4. Basic business rules still apply.
No problem here… I felt confident on this one, and there were only very minor things I had to deal with business-wise.

5. You get no leeway for being a maker.
I’ve not needed any leeway yet (fingers crossed) as all of the customers have been awesome, and I’ve done my best to be awesome to them. You know, there’s only been 10 customers so far, but it’s been close to 100% pleasant. The only issue I had was with people who are interested in the product, exchange a number of emails with me, and then I never hear from them or receive an order. It’s not extremely disappointing or anything, but just a little bothersome.

6. Be as open as you can.
I’ve been pretty open, maybe not as open as I could have been, but since this whole adventure was based on a pretty open blog post, I think we’re good with this one. I did re-write the code a little bit mainly to make debugging a little easier, and I should probably push that code out, but honestly that’s probably not a huge deal as there’s code out there that works fine right now. I’ve also been sure not to bet the farm on this one product, which is why I’m keeping the production run small. If the opportunity disappears, it won’t affect the business much.

7. Create a community to support and enhance your products.
With a small user base and a simple product, there hasn’t been much need for a community. If one magically appeared I’d support it, but I probably don’t need to run out and force one into existence.

8. Design for manufacturability.
As mentioned in my post, I didn’t design for manufacturability, but now that I’ve done some “manufacturing” I’ve come up with ways to make things easier. This is really just applying better manufacturing techniques next time. I managed to get a properly sized hole saw, which means no more filing, which will speed things up. Win-win!

9. Marketing is your job.
Doing the marketing was fairly easy and I didn’t need to get too aggressive. I’ve got a lot of experience with branding, marketing, writing, photography, and building web sites… and that’s what I did. I first built the store, and then shortly after that I got my Etsy store. The Etsy store was definitely a good idea, as it accounted for almost half of the sales.

10. Your second most important relationship is with your package carrier.
While I learned a lot about shipping, not all of it was fun, but hey, I’ve got shipping down pretty well now. I’m sure there are ways I could improve things, but so far I’ve not been annoyed enough to investigate them. I was disappointed to discover Etsy doesn’t allow you to require a phone number for orders, since FedEx seems to require a phone number for shipping. (Yes, I could enter my own number, but I’d prefer to have the customer notified if there are delivery issues.)

Branching out.
I did make a modification to the product… I decided to offer The (Bare) Button for sale, based on a number of people asking for it. I ended up getting an email from a guy who wanted the bare button, we agreed on a price, I got one ready to ship, added the order page… and never heard from him again. Luckily I didn’t really invest much (besides a little bit of time) into this diversion, because I’ve yet to make a sale of The (Bare) Button. Still, it’s an easy thing to offer in the store, as it’s just the button without the case, so I can easily keep it in there for the DIY folks.

In conclusion, the experiment went well, I learned quite a bit, and I made a profit! I’ll keep this going in small manageable quantities and see how far it goes. I’m trying to be realistic in this endeavor and I know that it’ll probably not be any sort of huge money-maker, but if it keeps going as it has been, I’ll be pleased.

Oh, and if you know anyone who needs a button… :)

2012.03.09

Your second most important relationship is with your package carrier

Rule #10: Your second most important relationship is with your package carrier.

Dealing with shipping has been the most un-fun part of this whole process. That said, it has been very interesting being on the other end of the shipping world.

I’ve got a PO Box at the Post Office a few blocks from my house, and I gave some consideration to using the USPS (and while I certainly want to save the USPS, I can’t do it at the expense of my business.) Ultimately a combination of poor service and a lack of being open late ruled them out for now.

So on a recent Saturday I had plans to go to the UPS store near my house and talk with them about shipping options. I’d already set up a UPS account, and linked it to PayPal (yeah, I’ll get into payment stuff in a future post) but wanted to talk to a real person about the process. Sadly, the UPS store closed about 20 minutes before I got there, so I ended up going across the street to FedEx. The FedEx employee was extremely helpful, and explained how it all worked. The only bothersome thing was that I won’t know the actual shipping price until I have an address. Even if I ship 10 packages all the same size, weight, etc. they may all be different prices. I asked them to run a sample based on a size and weight I had, and when they needed an address, I gave them NYC Resistor‘s since it was easy to find with a quick search on my phone.

The FedEx employee also talked about shipping boxes, and I bought an 8x8x8″ box to take home and see if it was the right size. It was $1.75, and I’m glad I only bought one, because I can get about 6 of them from Uline for that price.

So now I’ve got an account with the USPS, UPS, and FedEx. I’ve also sold one unit, which I’ve shipped out. The shipping I charged was pretty close to what it actually cost to ship it. I’m not an expert on PayPal, but it looks like you can set things up to calculate shipping costs during purchase if you use UPSP or UPS, both of which can be integrated into PayPal. As I mentioned, I’m using FedEx right now. Oh, and FedEx needs a phone number to ship things (?) which I did not have on the PayPal order page, so I had to add that. So yeah, shipping is a pain in the ass.

OK, well, that’s all I want to say about shipping right now. I mentioned PayPal a bit, so I’ll dig into that in a future post. I’m also sure I’ll have more posts on the subject, even though we’ve covered all of the Ten Rules.

(See all the posts in this series: Begin, Stock, Buy Smart, Basic Rules, No Leeway, Be Open, Community, Manufacturability, Marketing, Shipping, Lessons Learned, The Real Costs.)

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