Semi OT: making money

Sounds like you're getting more advice here than particular situation will need, Bitrex :-)

I recommend incorporating too, if the hobbyist/entrepreneur's liabilities w ill exceed what he/she can comfortably cover 'out of pocket' or personal ch eck; if he/she is selling outside circle of friends; if he/she is taking on risk...

If you subcontact out any assembly, make sure you & your sub(s) have a prop er NDA's - have a business lawyer look them over if you have slightest dou bt about the content. The laws in other countries complicate matters, too.

Hiring people is a BIG step. Avoid it unless absolutely necessary. Doing pa yroll, etc. is a big hassle. The IRS takes a big cut. (with long time to he al, in my case...).

If you do hire, you'll could be tempted to use friends, relatives, spouses. Be careful, don't let relationships alter hiring practices. Qualifications always matter.

Personally, I also love keyboards & synths, modules, etc. I say what most d esigners overlook are (1) good ergonomics. And (2) your customers will be ' artistic types' (not engineers) so the great functionality has to be 'given ' - what's needed is artistic packaging: its case, the name, the ads, etc.! (e.g. steampunk designs as someone else mentioned).

Getting a table at NAMM or AES might be worth it (at least once, during a s trong economy; choose the time well!), once you've made some money. To save on the fee, if you have good friend who's exhibiting, they might let you s how your stuff at their booth.

- Rich S.

- Rich S.

We run 3x to, occasionally, 8x "direct cost" where DC = unburdened parts and labor. Overall, our parts cost is roughly 15% of sales price. In the niche instrumentation biz, where volumes are low, you're selling intellectual property, not really hardware. Microsoft doesn't base their software prices on the cost of CDs.

Google has revolutionized the ability of a small company, even a single-person part-time company, to design and sell a product. You don't need magazine ads or trade show booths any more.

Agreed. And social media has transformed marketing. Once you get your product in the hands of a (semi-) 'well respected' user ("celebrity"), the buzz can feed off of that.

But in lieu of that, artsy types do like touching an actual product before spending big $ (re: P(art) = 1/P(money)). Audio is a tough business, in my experience.

-Rich S.

I think it's possible for an initial run of hundreds that assembly could be done "in house" i.e. by myself and techie friends paid in beer (only to be consumed after the fact!) The main two products I'm thinking of launching have nothing really exotic from SMT-land, aside from likey an ARM Cortex in one of them. I could likely use a flat pack version for that and slap it in a hand-solderable carrier.

I notice that many "modern" pieces of guitar effects, etc. still use through hole, though I don't know if the expense of a somewhat larger board will be a better value than SMT and getting them manufacturered at an assembly house. The enclosure has to be sized to fit the controls, so I don't think compactness will be an issue.

Pay in beer

Nepotism and hiring unqualified drinking buddies/cute girls to do jobs they're not qualified for has been the downfall of many an enterprise...;)

Years ago, manufacturers started cutting out knobs and sliders from their instruments in an effort to cut costs. They tried to instead use "softkeys" and a single knob with page buttons, so you had to scroll through 100 different parameters to get to the ones you wanted. These instruments didn't sell as well, and are still unpopular on the used market.

Fortunately, these days touchscreens are cheap. And why even put the screen itself into your product? Put the hardware in a 1 rack unit case or something, and then put the interface on an iPad app. A Bluetooth data transfer module is like 4 bucks. Plenty of bandwidth for parameter control. And then you encrypt the Bluetooth connection and make it so the app only talks to processors which have serial numbers verified to have come from your factory, so if someone wants to make a clone of your product they'll have to crack/reverse engineer the software as well, and they won't ever be able to make it available through the app stores.

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ill need, Bitrex :-)

es will exceed what he/she can comfortably cover 'out of pocket' or persona l check; if he/she is selling outside circle of friends; if he/she is takin g on risk...

proper NDA's - have a business lawyer look them over if you have slightest doubt about the content. The laws in other countries complicate matters, t oo.

g payroll, etc. is a big hassle. The IRS takes a big cut. (with long time t o heal, in my case...).

ses. Be careful, don't let relationships alter hiring practices. Qualificat ions always matter.

st designers overlook are (1) good ergonomics. And (2) your customers will be 'artistic types' (not engineers) so the great functionality has to be 'g iven' - what's needed is artistic packaging: its case, the name, the ads, e tc.! (e.g. steampunk designs as someone else mentioned).

Agreed. 'Live-performance' gear, especially, needs fast/easy access to knob s/switches. 'Hard' is better than 'soft' -- unless maybe you include haptic feedback?

I see some have taken that route: make the iPad/iPhone the interface. Has i ssues of its own, like some you stated. Of course, this is venturing away f rom "analog heaven" mystique in audio. But technically quite worthy!

a strong economy; choose the time well!), once you've made some money. To save on the fee, if you have good friend who's exhibiting, they might let y ou show your stuff at their booth.

Cheers,

Selling hardware onesies to end-users, which social media is about, is tough. I like OEM buisiness, where you work with a customer to provide a subassembly and then get regular POs for more. Support and returns are minimal. If it performs some fairly difficult measurement or control function, and adds a lot of value to their product, they don't mind paying for the capability. No Chinese business is going to take that away, and no distributor gets 40% off the top.

There are some overhead costs involved in wireless products:

--sp

Yes, 6-7:1 on parts is my ball park.

Of course parts costs in even smallish production volume will be much less than Digikey prices for a handful of parts. Sometimes that gets shockingly high (order a few spares and the cost to make a prototype or two can easily be well over the selling price).

--sp

I don't have any current knowledge on that subject. My input is to encourage you to think about your motivation and decide whether to have a hobby or a business. There's considerable overlap, but the mindsets are different.

If you have an income stream that leaves you time to stroke your ego by shipping a product, you have a hobby. Donald Trump is in that category. His hobby is running for president. Doesn't matter whether he wins or loses, he gets satisfaction from being in the spotlight. Failure won't change his lifestyle.

It's easy to get the cart before the horse. Pricing is a marketing/sales decision. The correct price is one that sells the quantity you want given the sales channel available to you and competition (present and future, once the world learns of your innovation). It matters not one bit what it costs to make. You package and position the product to make the purchase an emotional decision at the highest price possible. Remember the "Pet Rock"? I'm sure nobody ever considered the manufacturing cost of the rock when setting the price.

Your job as engineer is to design a product that can be manufactured and sold, at a net profit, within that target price. It's a slippery slope. If you can build it cheap and sell it at a high price at decent volume, some copycat will take your market away. Remember the "Pet Rock"?

If you set the target price and your best efforts can't eek out a profit at that price, you need a new hobby. One simple test is the McDonalds test. Say you spend x hours and y dollars in fixed costs producing the product. If Z is the dollars you could make working at McDonalds working x hours, Z + y is the minimum amount of profit you'd need to proceed with the project...ignoring the cost of distribution, credit card fees etc. The minimum price would be (Z + y)/volume + unit manufacturing cost. It's amazing how many projects fail this test.

The same rough analysis works for a real business, but the expectations would be more in line with executive salaries, not burger flippers. Remember, you will be doing multiple jobs and need to allocate salaries for all those jobs if you intend to grow past what you can accomplish as a one-man show. The time to consider the future is NOW. Don't start it if you can't project a way to make it sustainable. Wishing won't make it so. It requires planning. If you look at failure rates for small businesses, it's easy to conclude that most of them should never have been started.

My hobby is garage sales. I derive great satisfaction from digging thru other people's junk, buying it for 1-cent on the dollar, fixing it up, using some of it, but putting most of it in the attic until it needs to go to scrap. My hobby FAILS the McDonalds test. If I put all those hours into flipping burgers and added the cost of garage sale transportation, I could easily buy all new stuff at retail prices...and still have enough left over to buy a few burgers. But, I wouldn't have any fun doing it.

Even at the hobby level, will you enjoy what you're doing? Designing the product is the fun part. Will you have as much fun when you're time is being spent negotiating with vendors, handling angry customers when they have a failure, or just buyer's remorse, or warranty fixing, or driving to the post office or filling out forms for regulators.

Don't forget that there are many people who will be all up in your business. You are gonna get UL approval (or whatever organization governs your jurisdiction and the jurisdictions of your customers)? What about FCC certifications (or whatever organization governs your jurisdiction and the jurisdictions of your customers)? Is your product liability insurance going to pay out if you can't show that you did proper safety testing? If there's a fire or injury anywhere near your product, you may be named in the lawsuit. You may not be at fault, but the lawyers will bankrupt you. Make sure you have the constitution for the minefield you'll be entering.

If you're gonna quit your day job and run a manufacturing business, the same issues apply, but the numbers are bigger, the risk higher and the personal satisfaction level may be much lower.

Amazon can help, too.

I also tried to fix that problem in various 2way radio designs. My plan was two knobs. The left knob selected the function. The right knob selected the value or parameter. Push the right button to select. It was simple, fast, easy to explain, and easy to learn. It died on the drawing board and in initial customer tests.

So, what went wrong? The problem was that at the same time, radio manufacturers were trying to design smaller radios, smaller front panels, and more functions. This tended to reduce the clutter on the front panel, but also reduce the number of buttons, knobs, switches, lights, and connectors. The customers and tester would compare the current cluttered front panel, with my new and improved uncluttered version, and declare that because the current design was full of those unfathomable buttons, knobs, etc, it must be a better radio. Whether a new design is easier to use is not even a question if the customer doesn't buy the radio.

Hints:

1. The perception of the electronics is based on the look (and feel) of the front panel, which is what sells the product.
2. First impressions are vital. If it looks wrong, it's dead.
3. Customers have expectations. If you fail to meet those expectations, or give them something they're not expecting, it won't sell.
4. "Customers don't know what they want until we've shown them" (Steve Jobs). That's true for small changes in what they expect, but very rare for massive paradigm shifts. A synthesizer should look like a synthesizer. If you deliver something weird, only the weird will buy it.

Of course, it only gets worse. I posted this previously, but methinks it's worth repeating. As the technology in a given market becomes routine and mundane, most of the products start looking very much the same. It's possible to compete on price, but the "race to the bottom" is not a good place to be. The radio company I was working for hired a very well expert to advise us on how to increase sales. One of his suggestions was to INCREASE the weight of the radio. Initially, we added a block of lead (later steel) to add a few pounds to the box. I thought the idea was insane, but played along. Eventually, we found that adding weight worked and sales increased. Customers would look at a collection of nearly identical radios and could not decide which one to purchase. When faced with such an insurmountable decision, we tend to revert back to older and simpler methods of evaluation. In this case, it's the supermarket mentality, where anything that weights more, must have more inside, and therefore is better. If your synthesizer is going to fit on a tiny board, but a brick inside the box or the customers are going to think that they're buying an empty box.

Have you seen many laptops or PC's with LCD keyboards? They're available (e.g. Acer Iconia Touchbook), but not particularly popular. Higher cost is one reason, but difficulties in setup and operation are more relevant. Like the buggy whip socket in automobiles, it takes a while for conservative expectations to fade away.

Everything above BlueGoof 2.1 is already encrypted. BT 4.0 added AES encryption. Security is a good thing, until it fails and you have to deal with an irate customer. I suggest you think carefully about using 2.4GHz. The typical auditorium is crammed full of Wi-Fi access points for the benefit of the audience. I don't think you will be able to compete in such an interference infested RF environment.

That is pretty much my hobby too. Is addition to garage sales and thrift stores, I also cruise through one of the scrap yards and order a few things from China.

Dan

I think you're too hard on your target market. I'm not about to use an oscilloscope that works as you describe. I don't see a lot of difference.

For good reason. If the UI isn't useful, neither is the widget.

I don't see anything wrong with the above, from the user's perspective. It's the designer's job to conform to the user. Not the other way around. There is a reason Apple is the largest company on the planet.

I liked the MOTO MAXX over the Samsung S(whatever) because it felt better in the hand, probably because it was somewhat heavier. The display and battery life were better, too, which sealed the deal.

Both of our PCs have touchscreens. Amazingly, our tablets (using one now, though with a keyboard) do too. ;-)

How small is small? I booked over half a million in sales and I don't have much of a workshop and have little test equipment, just a few very basic tools.

Isn't money always real?

Making real money means leveraging resources, not necessarily money. Use a contract assembler rather than building yourself. It's not hard to get 30 or even 60 days credit. Get paid by your customer and pay your bills.

Employees are not the only way to leverage labor.

Rather than getting paid for what you do, get paid for what you created for others to "do".

Right, if you want to become the next Apple, this path won't get you there in one lifetime. But, there are LOTS of guys out there that found a niche, and pretty much do it all themselves. Most of them are REALLY creative guys, way better than me. I know a couple guys who make world-famous fly fishing rods with CNC tools, and a guy who makes unbelievable artwork in wood with CNC. Another one makes concetinas with CNC. (Yes, I make boards for CNC systems, so that is the connection.)

Two guys in town make a really neat 3D printer, and sell kits all over the world. They do build classes at various meetings and herd a dozen guys through building a printer in a 2 day class. Seems like they are doing quite well with it.

Ive sold 186 orders in my own little business this year, and sales not counting shipping was over $30K. How much was net? Well, I won't have any idea until I do the taxes, and then I come up with several numbers. There's "pure net", ie. sales-components, and the number that goes to the IRS, which has all the deductions for utilities, fixed expenses and home office taken out. That IRS number looks horribly disappointing, but I'd be paying most of those expenses just for living here, without the business. (I really need to raise my prices, inflation has been going on and I haven't kept pace.)

Jon

Look up "makerspaces" such as Tech Shop, they often have similar arrangements. You get access to a wide range of tools, and many of them offer secure space for personal tools and materials.

TxRx labs in Houston is the most awesome outfit, several guys have totally amazing personal electronic shops there. They also have a great machine shop, welding, wood shop, bicycle shop, ceramics kilns, fabric/sewing and art shops, etc.

These could be QUITE a bit cheaper than the business incubator setups. Your hundres of bucks a month sounds like a small maker space, the business incubators usually charge a LOT meore!

Jon

$500K gross is nice, but it's the net that's important.

SBA table of business sizes: Depending on the industry classification, it can depend on the gross revenue, or the number of employees. According to my tax return, I'm in NAICS Code 811211 (Consumer Electronics Repair and Maintenance) where anything under $7.5 million/year is a small business. It's more complex under section 334xxx (Computer and Electronic Product Manufacturing) but basically anything with less than 500-1000 employees is a small business. This doesn't answer your question, but I thought it might be interesting.

My definition of "staying small" means not taking on a partner or trading equity for capital. That's NOT the standard definition. There are few businesses that can fund growth with excess profits. Usually, growth means bringing in partners, vulture capitalists, borrowing money, or selling stock.

Nope. Money can be encumbered by taxes, interest payments, delayed payments, IOU's, bond issues, etc. It can also take many forms, such as cash, credit, stock, bonds, loans, equity, etc. Every time money moves in or out of a business, there's a cost involved. For example, if your product is discovered and sells well, your business will move into a higher tax bracket, and could end up with a larger tax liability. The money from the increased income will cost more than the smaller amounts of money received before your product was discovered.

Sure, that works. When I tried it, the vendors were willing to give me credit but only if I would sign a long term contract, typically one years production. I could buy a few hundred IC's at 100K piece prices, but only by committing to a much larger volume. That works for a product currently in production, but is pure hell for getting started. In effect, you have to bet the company and your bank account before you can borrow from your suppliers or give your customers extended credit.

Do you mean like companies that outsource everything or assemble a virtual company? I was involved in 4 virtual companies over the years. Since these were mostly design projects, they're not relevant to Bitrex's manufacturing ideas.

I've know of a few virtual manufacturing companies that have outsourced literally everything. They're difficult to track because they're so widely dispersed. Just finding the company seems to be a problem. I have no feel for whether they're profitable or sustainable. That's also a rather extreme example.

Sounds good, but this is not about me. It's about Bitrex. Convince him that he should go that route. I've tried selling my ideas to other companies in the past, with generally miserable results. Most often, the prospective customer will try to steal the idea.

That's true, but that is pretty hefty too.

Then small sounds like the way to go unless you want the business to own you. I work about 80 to 120 hours a year.

You have a strange view of money. It's all real, very real. More money is more money. Money is not one of those things where less is more.

I've never had that problem. I have no contracts and get a few thou credit from virtually any disti or contract assembler just by asking. Everyone gives 30 days and often 60 if you ask nicely.

That's me, a virtual company. I do any design work needed and everything else it outsourced. I even have the contract assembler doing all the test and shipping. I do my own invoicing, the fun part. :)

There is some irony in that my customer is a Fortune 1000 company who outsources all their manufacturing, so technically I sell to a mufti-billion dollar contract assembly house, lol.

There is more irony in the fact that I target "niche" markets and my contract assembler is "Niche Electronics". If you product sales is not so large, you get a decent markup (or even a high markup) and no one wants to steal it because the total dollars aren't big. I build my product locally with a company a trust. I might even make a deal where we go the royalty route and I don't even have to do the invoicing. Then I do have to trust them.