The financial side of things: from engineer to entrepreneur

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Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions!
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a. square
 
Posts: 41
Joined: Mon Dec 17, 2007 12:51 pm

The financial side of things: from engineer to entrepreneur

Post by a. square »

One of my big concerns as someone with no business experience (and a graduate student salary as my only venture capital) are the costs involved in moving from being a hobbyist to a kit-seller, and later, the cost of developing a new product. Furthermore, I'm not exactly sure what the best way is to factor these costs into product pricing, the planning involved in this sort of thing, and, I'm sure, all sorts of things I haven't even though of. Then there are questions like what quantities are reasonable to order, and about how quickly one can reasonably expect to recoup initial investment.

I know that there's risk involved, and that there are no definitive answers to these questions, but I am curious about people's experiences. I guess the general question I'm asking is, how does an "engineering" personality learn about the entrepreneurial aspects of running a business?

On the more specific side of things, I'm trying to figure out what the costs of starting up are. I've thought of things like a website ($10/mo), upgrading Eagle from the "not-for-profit" version (~$500 or $1000, depending on version); and ordering the boards and parts for the kits ($ hundreds to thousands, depending on complexity quantities). There's prototyping costs (around $100-200, depending on how much you screw up), too. What else am I not thinking of?

Thanks!

Jonathan

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darus67
 
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Post by darus67 »

Advertising!

People have to know you exist before they can beat a path to your website.

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a. square
 
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Joined: Mon Dec 17, 2007 12:51 pm

Post by a. square »

I appreciate the reply, but I think you misunderstood my question: I'm not asking how to get people to buy your product, I'm asking about what costs one should anticipate before selling a product, and, more generally, about how someone with an engineering background should go about learning the financial aspects of running a small business.

davidnin
 
Posts: 20
Joined: Tue Jun 19, 2007 9:37 pm

Nolo

Post by davidnin »

Speaking from personal experience as an engineer starting a business, you're going to need to be doing a lot of reading. The good news is that there are some really good books out there that can help you get started.

I can't recommend highly enough the experience I've had with Nolo Press (nolo.com) for things like how to start an LLC, taxes, etc. They will help you get through the paperwork, make sure the t's are crossed and the i's are dotted, etc.

Without knowing more about how you intend to organize your company (there are books to help you figure that out too) and what you intend to sell, etc, I can't make a specific recommendation. Check out the site.

I also really liked this site I came across a while back, although I've yet to really dig deep into their suggestions:

http://personalmba.com/manifesto/

That may be way beyond the depth you're looking for in terms of understanding, but some of the materials they suggest will probably be just about right.

Good luck!

David

adafruit
 
Posts: 12151
Joined: Thu Apr 06, 2006 4:21 pm

Re: The financial side of things: from engineer to entrepren

Post by adafruit »

A. Square wrote:One of my big concerns as someone with no business experience (and a graduate student salary as my only venture capital) are the costs involved in moving from being a hobbyist to a kit-seller, and later, the cost of developing a new product. Furthermore, I'm not exactly sure what the best way is to factor these costs into product pricing, the planning involved in this sort of thing, and, I'm sure, all sorts of things I haven't even though of. Then there are questions like what quantities are reasonable to order, and about how quickly one can reasonably expect to recoup initial investment.

I know that there's risk involved, and that there are no definitive answers to these questions, but I am curious about people's experiences. I guess the general question I'm asking is, how does an "engineering" personality learn about the entrepreneurial aspects of running a business?
goto library
read_all(books->publisher("nolo")
hooray!
On the more specific side of things, I'm trying to figure out what the costs of starting up are. I've thought of things like a website ($10/mo), upgrading Eagle from the "not-for-profit" version (~$500 or $1000, depending on version); and ordering the boards and parts for the kits ($ hundreds to thousands, depending on complexity quantities). There's prototyping costs (around $100-200, depending on how much you screw up), too. What else am I not thinking of?
if you dont have $ and nobody you know has $ to lend you, you'll have to grow organically from very little. (which is why i often suggest a $20 kit to get started :)
rent, equiptment, credit card fees, postage & shipping (to and from), office supplies taxes (!) are all relevant.
there is no magic number, other than the well-worn "retail is 40% margin on top of wholesale" so take your parts cost for what you're willing to spend per run, & double it (at least).

adafruit
 
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Joined: Thu Apr 06, 2006 4:21 pm

Re: Nolo

Post by adafruit »

davidnin wrote: http://personalmba.com/manifesto/

That may be way beyond the depth you're looking for in terms of understanding, but some of the materials they suggest will probably be just about right.
so, i've read a lot of these books and all ive determined is that other than like the 2 or 3 -really- good ones ("7 habits", "how to make friends and influence people", etc) they are complete nonsense and can be summed up in the following 3 points

1) do not be an asshole (try to be a good person to employees & customers)
3) be honest (dont lie to employees/customers)
2) make quality products that are worth owning

but thats just me :)

davidnin
 
Posts: 20
Joined: Tue Jun 19, 2007 9:37 pm

accounting

Post by davidnin »

One that I just picked up from Amazon that is of particular interest to me is called something like, "Introduction to Accounting."

My logical engineering instincts tend to hurt more than help on topics like that.

chaostic
 
Posts: 85
Joined: Mon Mar 14, 2005 2:16 pm

Re: The financial side of things: from engineer to entrepren

Post by chaostic »

First part of cost figuring is.... Developing the product. Since this is your first product and company, don't even figure in development costs until you have a verson 1.0 of your product. Once you finally have something working, even just breadboarded, then you can get part costs (Figure parts for 50 final products at first), and prototyping/beta costs (getting sample boards made, making sure it works on the board, etc). If it costs you 20 per final board, sell for 30 or 40, depending on what you actually made. But nothing of selling price can be figured without having a working schematic and parts list.
ladyada wrote:
goto library
read_all(books->publisher("nolo")
hooray!
How is reading books on how to beat a ticket going to help? :P

adafruit
 
Posts: 12151
Joined: Thu Apr 06, 2006 4:21 pm

Re: The financial side of things: from engineer to entrepren

Post by adafruit »

chaostic wrote:
ladyada wrote:
goto library
read_all(books->publisher("nolo")
hooray!
How is reading books on how to beat a ticket going to help? :P
i spend lots of time on the phone with salespeeps and part of that is getting them to lower their price :)

multisync
 
Posts: 11
Joined: Fri Jun 01, 2007 11:59 am

not a kit, but similar...

Post by multisync »

Okay, I didn't design a kit, but I built my own MIDI controller. Everyone who touched it loved it, so I continued developing the product. I ended up learning about everything from CAD to outsourcing and private contracting people to build things that I could not (I'm good with DC, bad with carpentry and microcontrollers). Then I filed a provisional patent, which felt like a ticking time bomb as I ended up taking a job logging to make some jack to pay my lawyer to complete my patent application. I sold one to a rich guy somewhere, and one to a poor student.... and the guy I paid to do my web design let me down big time so I'm looking for a second web guy..

In retrospect I don't know what I would have done with that product since I wanted the patent and still believe the patent was a good idea. My next project is a quasi clone of some old analogue circuitry from Buchla's music easel, built into a nice little voice module for a modular. We'll see how it does.

I've still spent less on all this than I did on one year of my college education and I feel what I've gleaned is more practical. Business is an art form itself, and one I feel is worth learning.

:-/

magician13134
 
Posts: 1119
Joined: Wed Jun 13, 2007 9:17 am

Re: The financial side of things: from engineer to entrepren

Post by magician13134 »

ladyada wrote:goto library
read_all(books->publisher("nolo")
hooray!

Code: Select all

Syntax error! Line 2 - Unexpected line end
read_all(books->publisher("nolo")
.................................^
Abort goto library
Resume start_digg.com

mngrif
 
Posts: 47
Joined: Sat Jun 07, 2008 6:36 am

Post by mngrif »

Hey all, I've been lurking here for the past month or so...

I just started my company, dnydeNetworks, and I'm running in to similar problems despite not being a kit vendor (I do system administration, among PLENTY of other stuff). So far, intuition has done me very well. My first client is very satisfied with my product (the servers are still breathing, 20x more than before I got ahold of them), but with the prospect of more clients on the horizon I'm not sure how to handle staffing, or if I even want to.

Lucky me, they've been kind enough to help me build a site that will sell, as well as guide me on general business sense. Perhaps you should talk to your initial clients, and see what they have to say. Put up a poll asking how much $ is reasonable for a given product, or take the product to a bar on a busy night and see what happens (if it's that kind of product). When asked how much does it cost, shrug and ask how much they'd be willing to pay. Honesty will help more than anything at these stages -- you have nothing to lose.

Your clients are your bread and butter, it pays to pay attention to them. Which reminds me, thankyouverymuch, ladyada, for being active on your forums and engaging your customers. We appreciate it!

If you're still looking for a site (I hate to solicit... but...), I can do that for a very reasonable price. From one small business to another :D

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