It is relatively common for tech entrepreneurs to underestimate the costs of the production of electronic devices. This neglect contributes profoundly to the downfall of most startups in that industry. Cost estimation helps you know the amount to invest and how much profit the product will earn.
In the design and manufacture of electronic devices, you must embrace product simplification. The simpler the product, the lesser the costs. Here are some costs involved in the design, scaling, and manufacture of electronic products.
1. Development Costs
There are three categories of development costs which include:
Electronics cost. The electronics are the most complicated and expensive parts of a hardware product. Electronics consist of Printed Circuit Boards (PCB) and programming. The PCB is the backbone of an electronic device, basically the board that delivers the service to other components. PCB production and assembly holds and connects each individual components. The development costs involved in electronics depend on the complexity of either the hardware or software. For a startup, it is recommended to begin with 3-5 boards and progressively increase over time.
Enclosure cost. The plastic and mechanical parts are what hold the product together. Most electronic products require some form of an enclosure, which is often plastic. Undeniably, some products may need additional mechanical components. These components may include moving parts or stamped metal parts. The incorporation of such features translates to increased costs. 3D printing technology is the most common technique of structuring plastic prototypes. This technology helps in reducing the development cost by a long shot. For startups, investing in a 3D printer would be a cost-effective strategy.
Retail package cost. The retail packaging is what protects and sells your product. Therefore, it is crucial to have retail packaging that quickly sells the product. The retail packages can either be clamshells or boxes, depending on the size of the product. Larger products are often packed in boxes, whereas the clamshells tend to favor smaller products.
2. Scaling Costs
Scaling costs are the costs incurred when producing large volumes of a product. These costs include:
Certification cost. The certification of products varies with the design and make of a product. Thus, there are different certifications for various products, and this determines the certification costs.
Manufacturing set-up cost. The injection molding of the enclosure and retail package make up most of the manufacturing costs. For a startup, it is advisable to reduce these costs by first sourcing materials needed for production locally.
Landed Production Cost
Landed production costs are expenses incurred from the inception of a product to when it gets to the warehouse. This cost is the summation of production costs and transportation costs. The landed production cost helps you estimate the selling price, inventory costs, and profits. Minimizing the landed production cost for a product means more profit for you.
The cost of manufacturing and launching new electronic products can be tasking more so to startups. Development costs will be the first step in mastering financial expertise. Scaling costs will be the highest costs to be incurred. However, the most critical expense will be the landed production costs.
