Product Pricing Sanity Check - Page 1
Forum section: electronics / projects

author: Bootalito
author_rank: Unknown
timestamp: November 27, 2017, 02:28:12 pm
content: I designed a stepper controlled clock using off the shelf parts(ESP8266 dev board, stepper dev board, custom PCB, AliExpress box/parts). Original project herehttps://www.eevblog.com/forum/projects/wifi-stepper-controlled-clock/msg1335090/#msg1335090. Using Dave's video about cost of hardware (), I came up with a price of $185 retail (2.5*COGS), $115 (1.25 COGS) wholesale. I've sold a couple of these through the artist who makes the clocks and commissioned me. I need a sanity check because I feel like I'm practically giving this damn thing away.COGS calculation highlights. Note that numbers are rounded for purposes of this post, and full spreadsheet linked from my dropbox below:BOM:$29Assembly/Testing/Programming Time:1.5h @ $10/hrPacking/Shipping Time:$0.25h @ $10/hrOverruns/Real Run outs/Extra parts left over/Accidentally breaking parts during build:$13Defective Units:$3Lost in shipping:$1Support:$6Total (COGS):$70Multiply by2.5, then add$12for packing and shipping material and shipping costs.Final retail price:$185A couple of things to note:1. I have good, full time, salaried, engineering day job (Control Systems Engineer) that pays the bills. My company charges $135/hr+ for my time. Charging anywhere near that for assembly/build/packing/shipping would be ridiculous, so I figured one could theoretically pay a non-engineer to do the build, programming, testing, shipping, so that's why I settled on $20/hr for my time. Then when the price still seemed to high I lowered it to $10/hr2. Very low volume. I've sold 3 of these so far, and I expect to sell maybe another 10 within 2-3 years. The artist who makes the clocks has a full time job as well, so maybe he sells a few a year. I knew this from the start3. The artist is not making a dime from selling these boxes to his customers. He is having his customers pay me directly, which is very generous. I also think he's doing this because $185 for a box is "really expensive", even though he hasn't come out and said so. He has hinted at it by saying things like "make sure to use all off the shelf parts". I think he got his previous design practically for free. His previous design was an arduino uno with a stepper shield, some cheap pushbuttons bodged directly to the pin headers, with about 300 lines of code that I think a friend did as a favor.4. I have a "wholesale" price because the art gallery that he sometimes sells his clocks through will probably want to make a profit (basically a re seller).5. I have put about 400hours of my time into the development. However, I don't think its reasonable to expect to be fully compensated for my engineering time for a few reasons:a. I used this project to learn PCB design. At least 100h was spent learning (Thanks Youtube!) and maybe only 40h spent on actual PCB design.b. The artist told me right at the start he didn't expect to sell many. Making clocks is a hobby for him, so if he sells 5 clocks a year that would be a lot. So I never expected to sell hundreds or even tens of these things.c. The original user requirement was to produce a cheap box that was similar to his previous design. Previously he made the physical box from aluminum billet with his CNC mill while a friend would provide the electronics guts. He doesn't have time for that anymore (due to his day job), so he wanted to find a supplier that he could just buy the whole thing from. I met those requirements with a $29 BOM, but I went above and beyond with the firmware. The firmware has a full web interface and serial interface to allow the stepper to be fully configured (and saved to flash) instead of hard coding all parameters in the firmware. It automatically adjusts for daylight savings time, and some other thing that were nice, but the artist didn't require. The artist LOVES all of these things, but again, he did not ask for them. And when you give a customer above and beyond what they originally ask for they are eternally grateful (this is how you win customers for life!), but they also rightly do not expect to pay for that, and they expect you to support it. That's fine, I accepted that.6. If I truely wanted to get paid for all of my time I'd have to sell these for ~$1000ea (400h @ $20/hr divided by 10 total units = ~$800ea, added to retail price = ~$1000ea), and I don't think buyers would pay that much.I think its going to come down to what it probably always comes down to: Is this worth my time, and that's only something I can answer. But I welcome your feedback.So a couple questions:1. Should I be charging more for my assembly/build/packing/shipping time? I originally wanted $20/hr for my time.2. Is my estimate for overruns/extra parts/etc too high? Should this be included after COGS? I was thinking that this number is dependant on volume (i.e. I bought 100 caps, and will only ever use 20 of them)3. Should I even include defective units, lost in shipping due to my low volume? I mean, if anything it should be like 10Xs as much due to my low volume, right?Full spreadsheet:https://www.dropbox.com/s/hqi1xvaixun1rx7/ClockDesign.xlsx?dl=0

author: Tomorokoshi
author_rank: Super Contributor
timestamp: November 27, 2017, 06:03:52 pm
content: In Dave's interview of Mr. John Kenny from Keysight:https://www.eevblog.com/forum/blog/eevblog-1032-john-kenny-keysight-interview/He talked a little about project estimation, where for a typical product they would take the COGS and multiply bypi, while for a thin-margin product they would multiply bye.The 1.25 to 2.5 COGS multiplier puts it in the labor-of-love / testing-the-waters range.Watch out for your "Support" number. A problem customer could easily burn up 3 hours and a couple shipping rounds to deal with some problem.

author: wnorcott
author_rank: Regular Contributor
timestamp: November 27, 2017, 09:13:01 pm
content: I can't help you with the estimation part but looked at your Excel spreadsheet and had a few questions about the startup expenses for parts.I don't get why you were buying both the genuine Wemos D1 Mini and also the knockoffs? And then throwing in some of the Lolin Lite which is an ESP32 module? So the BOM spreadsheet looked funny. And what's with the 5" Nextion display $80. That's a high ticket item. By the way you mentioned pots, Tayda Electronics sells center detent pots for 60 cents each unit 1 and they have 15% off coupons twice a month for your purchase. It seemed out balance you bought 15 D1 Minis but only 5 DS3231 RTC boards?And why buy more than $800 worth of aluminum cases? Especially the customized ones that $27 each at quantity 20? That seems like a lot especially if you are only paying your $10 and hour for assembly.

author: Bootalito
author_rank: Unknown
timestamp: November 27, 2017, 10:00:52 pm
content: Quote from: wnorcott on November 27, 2017, 09:13:01 pmI'll respond more in depth later. However, I think you might have been looking at the wrong tab in the spreadsheet. I might have saved the spreadsheet with the v0.3 tab open. It's the v0.2 tab that one should be looking at. The v0.3 is the next version that I'm working on it has a whole bunch of options, including the next day on screen, that probably won't even be used, because as you mention of the high cost

author: tablatronix
author_rank: Regular Contributor
timestamp: November 27, 2017, 10:37:14 pm
content: If you plan on making more or profitng get rid of the dev boards.

author: tszaboo
author_rank: Super Contributor
timestamp: November 27, 2017, 11:07:16 pm
content: QuoteThis is a crazy high number for 29USD BOM.QuoteThis should be included in the above number.QuoteIf you sell few pieces, send it with mail that will arrive. You cannot lose 0.1 PCS in shipping, right?QuoteYes, and they use 2.5*COGs, and they include taxes and building maintenance and cleaning lady's salary, when coming up with this number.Also, the PCB design (this complex) is a ~5h job for the people who do this on a daily basis, so charging 140 hours for that, is just not ethical.

author: Bootalito
author_rank: Unknown
timestamp: November 28, 2017, 02:14:04 am
content: Quote from: wnorcott on November 27, 2017, 09:13:01 pmSo I did have the v0.3 tab saved as the default tab, whereas it was the v0.2 (my first production version) in question. I corrected this. For the next version (if any) we wanted to price out adding a touch panel and some extra proximity sensors and the ESP8266 was out of IO pins, so I'm probably going to switch to the LoLin just to get some more pins. Buying different quantities of things that need a 1:1 ratio in a build was simply because I had some parts in my bins from personal projects, naming a bunch of DS3231s. And I typed in the exact purchase price and quantity from my AliExpress order to keep track of everything. As far as the cases, I have not spent any money on customized cases yet. The V0.2 used $5 aluminum boxes with "crappy" labels. I got a quote for laser engraving and holes drilled, etc from Enclosure World (http://bit.ly/2BhGjdX) for ~15ea, which I'm going to use for the next version to make the product look 10X more professional. I'm paying "myself" $10/hr...if I can cut my assembly time from 1.5h to 30min because I don't have to dick around with drilling and knibbling, I'll happily pay $10 for that ($12 customized box vs $5 non-customized)Also thanks for the tip about Tayda center detent pots. It's been a bear sourcing them.

author: Bootalito
author_rank: Unknown
timestamp: November 28, 2017, 02:23:33 am
content: Quote from: NANDBlog on November 27, 2017, 11:07:16 pmThanks for the feedback! The large number of "waste" I figured was because of my low volume. I've had to buy almost double the amount of everything especially because the initial production run was only 5 boxes. e.g. I sourced good UL rated power adapters from Amazon with a nice long cord, but I had to buy 10 of them, pots, knobcs, passives have all been double what I'll probably end of using (having to buy quantities of 10 or 20+). I had to buy the boxes in lots of 4, so I bought two lots...I think I'll delete the lost in shipping and defective units because it doesn't really apply here.And of course I wouldn't charge my day job price for doing smd soldering, programming, and drilling/nibbling holes in boxes. The box would be an extra $300. I'm "paying" myself $10/hr for assembly because I figure that's what I could pay someone else to do this. But I think I should raise that to $20/hr.To simplify perhaps I'll just Zero the "Overruns/Real Run outs/Extra parts left over/Accidentally breaking parts " line item, and just increase the multiplier to a pi (or like 3.00 or something instead of 2.5), like Tomorokoshi suggested above.