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Maker Business – The Real Costs

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.)

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Maker Business – Lessons Learned

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… :)

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The Tool at Hand Challenge

One Tool
Mark Lindquist, Dowel Bowl, Hardwood Dowels, Glue, 5 1/2″ H x 36″ D, 2011. Copyright © 2011 Lindquist Studios – All Rights Reserved

If I haven’t bugged you about it yet, I’ll be at The Tool at Hand Milwaukee Challenge with a piece I created using just one tool.

There’s a little background on it here, and a post about it here, and you can RSVP on Facebook.

But besides all that, it’s at Sweet Water Organics, 2151 S. Robinson Avenue in Milwaukee, from 1pm to 5pm on March 17th, 2012. I hope to see you there.

And here’s a sneak peek at my piece:

...

Update: Enough waiting… you can see it here: rasterweb.net/raster/projects/plasticsun/

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Maker Business – Shipping

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. Update! Uline sucks. They helped fund an insurrection. I stopped using them years ago. See Also: refuseuline.com

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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Maker Business – Marketing

Marketing is your job

Rule #9: Marketing is your job.

Marketing you say? Hell yeah, I got this one…

I mean, marketing is all about making things look good, right? Check this out:

The Button

OK, I’m only slightly kidding. I know marketing is more than just pretty pictures, and making things look good, but I do believe that’s definitely a part of it. Just look at the stuff that Evil Mad Science or Adafruit does. They both do their best to provide good, clear photos of their products. Check out the Make Flickr Pool. Some photos are really terrible, and others are really well done. I’m much more likely to view a photo and read about a project if the photo is awesome. (Awesome photos can also help you get in the roundup.)

I may have a bit of an edge, because I’m sort of a photographer, but even if you aren’t, there are some great tutorials online to improve your photography no matter what you shoot with (even an iPhone!) and if it’s really important, find someone to take good photos! If you can find a maker who would take some great photos in exchange for a free widget, send them the widget. A good set of photos go a long way.

OK, enough about photos… on to the other parts of marketing.

You should be blogging about your progress, and tweeting, too. Take pictures and videos of every milestone, and post those. Use every opportunity to talk about your work in progress and get people excited about it, which will not only start to form a community around it but will also build demand for it.

That’s all marketing. Community management is marketing. Tutorial posts are marketing. Facebook updates are marketing. Emailing other Makers in related fields is marketing. I suppose what I’m doing right now, writing this list, is marketing.

You can have the greatest product in the world, but if no one knows about it, you may never sell one. Marketing is sharing, it’s telling your story. It’s also hit-n-miss, and there’s no formula to make sure your marketing is effective, but you need to do it anyway.

I’ll also add in this little update: I created a store, and have already sold one unit. Starting slow, right? I’ve not opened it to the general public yet, but invited a few interested people to order. I’ll ramp up a bit and see how it goes. As for the rules, the next one is not fun…

(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.)