I recently wrote an article for Barbara Carey's Newsletter for inventors and entrepreneurs about how to obtain accurate cost estimates for the manufacturing of your product. What do you need to begin this process? I get this question all the time from clients new to the game, so I thought I would post the article here.
At an early point in the product development process, inventors and product developers need to address the manufacturing issues surrounding their product. Can I make my product for a cost that is feasible within my business plan? This is one of the burning questions you will want to address early on, before you invest too heavily in taking your product to market.
Your production estimates might be fuzzy in the beginning. You will probably create some form of ‘back-of-the-napkin’ analysis, and look at similar products on the shelf to get an idea of where your product should come in. A very generic rule of thumb is that a product is marked up four or five times from manufacturer to retail. If you see a widget selling for $4 on the shelf, you can assume that the hard cost to produce it was about $1.
As your product progresses through the development cycle, you’ll continue to refine the assumptions that you’ve madeAccurate numbers become much more important at the later stages of the development process. When you believe you are close to finalizing your design specifications package, it’s a good idea to add some concrete cost information to this analysis by contacting manufacturers to get quotes on your project.
To do this overseas, you need to realize that effective communication is critical to accuracy and success. Thus, anything that can help you overcome the barriers of language, culture, and distance will help. Engineering drawings – such as professional, CAD (Computer Aided Design) drawings - are excellent for this. They convey information in the international language of math, instead of variables such as “very long,” or “deep shade of red.” If you don’t have access to the services of a professional industrial designer, hand drawings may suffice for initial quotation purposes, particularly if the product is simple and you include basic dimensions.
Another great method for conveying information about your product is sharing, under a confidentiality agreement, an actual prototype or sample with the manufacturer. An incredible amount of information can be deduced from a physical representation in one’s hand. Color, finish, materials, parts, mechanics, etc., can all be quickly ascertained via a sample of your product.
Finally, if you don’t have these things in your quiver just yet, pictures and descriptions can be helpful. A picture can convey numerous qualities in similar fashion to samples. And descriptions of how the product functions, what conditions it will need to withstand, and such, can help an engineer understand what is going to be needed to manufacture your product correctly.