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Making a Physical Product

b.jonw.com

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Re: Making a Physical Product

#121

Post by jeremyjh »

dcx wrote: post #116
yajoe wrote: post #47

Really cool to see the numbers and congrats on making the product! One nit to emphasize the value in basic accounting knowledge for others when going down the manufacturing route: it's $11.37 _gross_ margin (aka gross profit, see http://en.wikipedia.org/wiki/Gross_margin ), not _net_ profit ( http://en.wikipedia.org/wiki/Profit_Margin ). While this may sound silly and academic, net confers a sense of finality -- it i…

I really like this analysis as well - can I ask where the "standard advice" comes from? And if it's from an MBA, what school? I haven't seen this kind of quantified strategizing taught before; I've been winging it and would love to pick up some formal knowledge if it exists.

I'm not sure which part you are calling advice, but the terms are all accounting 101. The approach to scaling a new product is also very basic. If you are three years into an undergraduate business degree in any University you should know most of this.

Re: Making a Physical Product

#122

Post by dplusavidg »

This really resonates with me. I am currently working on a physical product of my own. In a world where digital goods are the norm, I'm thinking of publishing a bi-weekly magazine.

I'm still really in the planning stages, as I haven't got any experience on this front at all. But I do have some of the digital backbone in place already. And I have my ideas stirring in a pot now. All that's needed is for me to start cooking.

Anyway, I would just like to say that I am inspired by what I'm seeing here. I'll work as hard as I possibly can. Wish me luck!

Re: Making a Physical Product

#123

Post by robomartin »

dcx wrote: post #116
yajoe wrote: post #47

Really cool to see the numbers and congrats on making the product! One nit to emphasize the value in basic accounting knowledge for others when going down the manufacturing route: it's $11.37 _gross_ margin (aka gross profit, see http://en.wikipedia.org/wiki/Gross_margin ), not _net_ profit ( http://en.wikipedia.org/wiki/Profit_Margin ). While this may sound silly and academic, net confers a sense of finality -- it i…

I really like this analysis as well - can I ask where the "standard advice" comes from? And if it's from an MBA, what school? I haven't seen this kind of quantified strategizing taught before; I've been winging it and would love to pick up some formal knowledge if it exists.

Every industry has a financial fingerprint, if you will. If you are the manufacturer of a consumer product you look at your supply chain for your cost structure and your channels of distribution for your profit structure. Both affect your business dynamically and managing them is one of the toughest things an entrepreneur has to do.

In consumer goods it is not too uncommon to have multiple layers in the distribution channel between you and the ultimate consumer of your product? This is part of the "fingerprint" I spoke about. For example, you might have a representative take 7%, distributor take 35% and retailer 25% off list. So, yes, the manufacturer never sees list price pouring into its bank account.

Financial folks outhouse with lots of business experience are familiar with the supply chain and distribution channel fingerprints across a number of business types. Armed with this data you can certainly do some quick back-of-the-napkin calculations to understand the basics of a proposed venture.

Re: Making a Physical Product

#124

Post by Colliwinks »

muratmutlu wrote: post #37

Loved this post, great that he wrote a rails app and nice to get the costs at the end too. I tried to make a wi-fi kettle with a wifi module in that had a API, the prototype alone was a huge expense (£25k+) and to get it into production was around £200k (CE certified etc). In the end I just wrote up the blog post (here http://www.mobileinc.co.uk/2010/03/introducing-the-twettle-p... ) Props to anyone who makes somethi…

Did it implement RFC 2324?

Re: Making a Physical Product

#125

Post by mythobit »

gcheong wrote: post #20

Why make an iPhone app to keep track of planets owned when you could just make a simple paper based scorecard? Or am I missing something about the complexity of the game? An app might be useful but you want the game to be playable by the largest number of peopl possible and there could be some opportunity for recurring revenue from selling the scorecards.

You don't even need a paper score card. The Munchkin card game suggests using pennies to keep track of your hp. You could just suggest that, everyone should have something they can use as "counters" and you don't need to sink the costs into a score pad.

Re: Making a Physical Product

#126

Post by greedo »

samstave wrote: post #109
chad_oliver wrote: post #108

Earlier quoted context omitted.

On the contrary, I think this dynamic (combined with strong human rights) is a great blessing to humanity. In a market economy, 'as expensively as possible' tends to mean 'not very expensively', and 'make things as cheap as possible' means 'make your processes more efficient'. And efficiency is the reason why we can have nice things.

While I dont take issue with your optimism and logic, I think it is flawed and naive, even if only due to the following: Go to a grocery store; Safeway or whole foods. Note the prices for items based on their qty/weight/etc. Now go to a restaurant wholesale style place (not a costco, which is an illusion of savings). A place like "cash and carry" (there is one in oakland) where the small scale restaurateurs purchase…

Price overhangs like you describe exist for a reason. Either the competition has some advantage that lets them price cheaper than Safeway, or they're subsidizing prices temporarily to gain market share. I'd be curious as to which industries you think are ripe for revolution due to price gouging.

Re: Making a Physical Product

#127

Post by FigBug »

iamwil wrote: post #72
FigBug wrote: post #42

Earlier quoted context omitted.

I'll have to check at work tomorrow, but fairly low, maybe 1000 - 2000. It was a plastic case with one bottom and two tops. The company we used has these jigs that can make molds out of a combination of custom parts and generic parts to keep machining to a minimum. The molds only work in their machines, so you don't end up owning the tooling, but I still think it's worth it. Also did a plastic clip with a live hinge,…

I'm also interested in the company that you used for the injection mold. Looking forward to your answer.

Star Prototype http://www.star-prototype.com/services/rapid-plastic-injecti...

Re: Making a Physical Product

#129

Post by johnrgrace »

robomartin wrote: post #123
dcx wrote: post #116

Earlier quoted context omitted.

I really like this analysis as well - can I ask where the "standard advice" comes from? And if it's from an MBA, what school? I haven't seen this kind of quantified strategizing taught before; I've been winging it and would love to pick up some formal knowledge if it exists.

Every industry has a financial fingerprint, if you will. If you are the manufacturer of a consumer product you look at your supply chain for your cost structure and your channels of distribution for your profit structure. Both affect your business dynamically and managing them is one of the toughest things an entrepreneur has to do. In consumer goods it is not too uncommon to have multiple layers in the distribution…

Bankers for decades have put together private companies financials from loan applications and generated "standard" financial ratios which function as "fingerprints" for an industry. Part of getting a commercial loan is having your companies financials compared to others from your industry, if your numbers are out of step from the industry when you ask for a loan questions will be asked.

http://www.ventureline.com/industry-ratios-analysis/

Re: Making a Physical Product

#130

Post by johnrgrace »

b1daly wrote: post #106
gregpilling wrote: post #99

Earlier quoted context omitted.

Most retail outlets in my experience would want to purchase the $20 retail item for $8, giving them a 60% margin. Source - 20 years of doing this.

I'm making a product, and selling mostly online. I was shocked (in the newbies do) to find out about the sort of gross margins retailers want. From where we are now, it seems like the only way we could reach that is through economies of scale that we are uncertain would pay off. Chicken meets egg once again? In the market we're in (musical instruments/audio) the retailers with stores are going away, sales have moved…

Look at how much money online retailers make, after their costs their profit margins are mostly single digit meaning they don't have a lot of room to cut costs. Also if retailers can wring profits out of you they will, online or offline.
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