CONSIDER THE COSTS
How Much Will Manufacturing Cost for Your New Product? Looking at the Numbers Isn't Necessarily Fun, But It's Absolutely Necessary.
By Ken Tarlow
Figuring out what your product will cost to manufacture and determining all other costs to arrive at a final retail price is crucial to the success of your new product. In this and future articles, we'll look at these costs and help you write a simple business plan.
Before you or anyone spends thousands of dollars to get your product ready for production, you need to know that the final retail price is consistent with what consumers are willing to pay for your product.
The initial steps of product development are least expensive in the overall production of a consumer product, yet they are the most critical. The success of a product depends on precise and innovative thinking at the early stages. By spending the relatively small amount to develop a product to a "showable" point ($1,000 to $50,000), you earn a percentage in the finished product which could return many times your initial investment.
In addition to those costs, consider the cost of producing the product in quantity. Making products in high volume at a low price requires expensive tooling. Following is a list of ballpark tooling costs for a variety of products:
* Tooling for an electric coffee maker costs about $70,000* Tooling for an electric knife sharpener is about $40,000
* Plastic injection molded tooling costs around $300 per square inch
* Tooling for stamped metal parts is about $200 per square inch
* Custom electronic chips cost $50,000-$100,000 to develop
* Semi-custom chips cost $20,000 to $50,000
* Programming for micro-processors costs from $5,000 to $25,000
* Tooling for extruded parts (lengths of tube or channel) costs $500 to $3,000
* Preparation charges for color printing, including color separations and die cutting, range from $1,000 to $3,000
Consider both early-stage costs and ultimate tooling/manufacturing costs when planning a business around your new product. A realistic plan will help you recoup these costs in the future. Best of luck.
Ken Tarlow is president of Tarlow Design, a full-service product development company that helps independent inventors design, prototype, patent and license consumer product ideas. He has developed more than 300 consumer products worth over one billion dollars in retail sales. Tarlow's office is in San Rafael, CA. He may be reached at (415) 457-6428.
The above article was excerpted from Tarlow's MIND TO MONEY, a cassette tape/workbook package that can help you develop a new product from the idea stage to the marketplace. MIND TO MONEY may be ordered from Dream Merchant at $59.95 plus $4.95 CA sales tax and$5 shipping and handling ($69.90 total). Send orders to Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501.
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