How evaluate electronic project cost and rentability - Page 1
Forum section: electronics / general

author: hamdi.tn
author_rank: Frequent Contributor
timestamp: July 19, 2014, 02:47:29 pm
content: hi everyone,I think everyone think about this question in initial phases of a project " how it will cost to the end consumer ", well here i only need to talk about design and prototyping phase witch to cost will definitely impact the end product selling price.So once solution is defined It's easy to estimate how much part and PCB will cost for prototype and engineering time.So now when we knew how much this solution will truly cost how to evaluate profit and give reasonable price to the client.I talked to some people working in developing firm and i as i see there two main philosophy :-first one they literally sell the prototype and the engineering hour with an additional profit and a security coefficient (in case something go wrong) . so if the prototype cost 100$ they sell it 120$ and that's it.-Second one they sell "intellectual effort" so they don't really sell the prototype they don't care about how it cost they give a number according to the final use of the product ( personnel electronic , medical application , Military, airspace ...) and the estimated production quantity , so they kind of sharing the benefit with there client . and usually those ppl give insanely high price for design.so according to your experience what is the best way to evaluate engineering effort when placing a product in the market, and how to be fair with client without underrate your work

author: KJDS
author_rank: Super Contributor
timestamp: July 19, 2014, 04:12:58 pm
content: A large company, and any good company, before doing any design work looks at the finances of the project. Estimates of design spend, production tooling, market size and sales price are all made. If the design is all going to the same customer, eg for a military or satellite project then when there is considerable design effort the customer usually makes stage payments throughout the design phase. These are often tied into milestones and design reviews being met.In the commercial world then if the design is all for one customer, eg an ECU for a car then the development cost is usually made part of the volume sales price which is either agreed up front or is done with open book costing. Sometimes the initial products are sold to the customer at a few times the volume price as a minor contribution, which does at least make them think about how many they want.If the product is being sold on the open market then the development cost is added into the product cost.Every good company I know has very clear ideas and understanding of all costs and the market. Every bad one has a very poor idea, particularly of how long it will take to get leading edge technology to market.

author: Alexei.Polkhanov
author_rank: Frequent Contributor
timestamp: July 20, 2014, 02:20:22 am
content: Check out this blog from Bunnie Studios (http://www.bunniestudios.com/- under "The Factory Floor" section. They are full of practical examples of bringing product from idea to the market.He suggests to estimate your project following simple rule - you take all your costs from design to manufacturing and then multiply that number by 3. This will be the price on retailer's shelves. If you think that "cost x 3" price sounds reasonable then it is a go. You can work in reverse - if you think you can sell something at retail price of $30/unit then you should design and manufacture it at under $10.

author: hamdi.tn
author_rank: Frequent Contributor
timestamp: July 20, 2014, 03:22:18 pm
content: well , thank you both for those reply total agree on both commenthowever it's easy to fix a retail price and a maximum production and design cost from the beginning when all the job is done by the same company design production selling. but when outsourcing the development phase to another company many client refuse to pay 3k$ to develop a simple circuit and for most commercial application it's around 5k$ to 8k$ industrial application rise to 10k$ to 15k$. i found it hard to convince client that the development cost is included in the production cost per unit and it will be close to nothing.Quote from: KJDS on July 19, 2014, 04:12:58 pmI recently start my own business, and am willing to do things right but am often forced to follow some procedure to satisfy a particular client, so usually when doing business with other development firm no problem at all , but when dealing with industrial people they try to get things really cheap and with almost prototype production cost with benefit as i explained, ( some ppl actually do it this way ) , i tried to put a procedure for large project that start with a ROM than continue to more detailed cost estimation well client refuse to even talk about that , they just need a number and they need it low ... drive me insane. Since my experience is mostly technical as a designer , i have a little experience in commercial stuff. so i try to collect all point of view from experienced ppl, thankfully eev is the right place to look for such ppl