Apologies for what may be a boring post, but as my target launch date (November 2019) approaches, I'm starting to think more seriously about the financial side of my project.
I'm currently planning to make small batches of DrumKids myself, perhaps 5 or 10 at a time. If there were to be a really big demand for DrumKid in the future, it would certainly be possible to redesign it in a way that would be more suited to mass production. There are surface-mount versions of all the components I use, and the case is not a particularly complicated shape, so it would be possible to design a version for injection moulding.
However, this post will focus on the economics of manufacturing on a much smaller scale. The current design uses only through-hole components, partly so that I can make DrumKid without a reflow oven, partly so that I can sell DrumKid as a kit, and partly to make each one easier to repair or hack. I'm also using a laser-cut enclosure for the same reasons.
This is my first time making anything that will be sold to the public, so it's entirely possible that I'm leaving out some major part of the calculation. With that caveat in mind, though, here are the various costs involved in making a single DrumKid unit (including both time and money as costs, since I obviously want to be paid for my time working on each unit!):
- Materials (total £19)
- Circuit board (£3 from China)
- Laser-cut parts (£2 each from local maker)
- Electrical components (£12, from three different suppliers)
- Structural components (£2, from one supplier)
- Assembly time (total 60 minutes)
- Soldering (40 mins)
- Uploading firmware (5 mins)
- Testing (5 mins)
- Screws etc (5 mins)
- Bug-fixing (5 mins?)
- Miscellaneous (total 30 mins?)
- Postage and packing cost (can be passed on to customer)
- Time spent packaging each unit
- Time spent going to the post office
- Time spent ordering parts
- Time spent organising parts
- Repairs (at my expense if within X years?)
- Development costs
- Time spent developing DrumKid (maybe 200 hours?)
- Cost of components etc used in prototypes (approx £200)
I have given actual values for the materials (because I can look up the prices I paid for them) and assembly time (because I kept a log of how much time each process took when I built a test batch of three units). I have only given values to the nearest GBP, since these costs will fluctuate quite a bit anyway.
My ballpark (rounded-up) figure at the moment is £20 (or $25 USD) of materials per unit, with roughly an hour of assembly time. The other time costs are a bit harder to estimate right now, since they will depend on factors (partly) beyond my control, such as how many units I sell. My rough estimate is that ordering parts, shipping, and general organisational tasks will add perhaps 30 minutes, on average, to each unit. This means each DrumKid unit will require £20 plus 90 minutes of my time.
This sounds pretty good so far, but I haven't yet taken the development process into account. I've spent countless hours developing DrumKid, trying out different circuits, playing with the code, soldering prototypes, researching components, etc. If I were to start the project again, perhaps I would have documented all the time I spent on development, in the same way that I fastidiously document my time when working as a freelance web developer. However, it's not as simple as adding up all the time I spent working on this project and trying to make sure I'm paid for it - a lot of my time working on DrumKid has involved learning new skills which will help enormously on future projects. Before DrumKid, I knew barely anything about PCB design, filter circuits, decoupling capacitors, or PWM audio, so I'm not sure I can strictly add the time learning those things into the "development time" column.
Since I didn't record how much time I spent on each task, this is all moot anyway - it's just an interesting point to consider. I'm going to have a wild guess that I spent 200 hours developing DrumKid, including the time I spent on the original web app version. I also spent around £200 on materials while developing the various prototypes.
Using these estimates, I can start to calculate how much I need to sell each unit for. My priority is not to "see what price the market can stand" (I'm not much of a capitalist), but rather to make DrumKid available to as many people as possible at a fair price, while earning a fair wage for my time working on it.
Since the development time/cost is already fixed (at least until I start working on the next version), the amount I end up earning per hour for making DrumKid units will vary depending on how many I sell. I've had some positive indications that there will be good demand for it, so I'm going to make a wild initial assumption that I will sell at least 50 units. I've also had several conversations with friends and musicians about how much to charge for DrumKid, and £80 seems to be a reasonable figure, so let's look at the numbers based on selling 50 DrumKids for £80 each...
£80 multiplied by 50 is £4000, which would then be my gross income from the DrumKid project. Each unit costs around £20 in materials, and I spent £200 during prototyping, so that's actually £2800 net. I've estimated that I would have to do 90 minutes of work for each unit sold, which would be 75 hours in total, plus the (roughly) 200 hours I spent developing DrumKid. This means that, if I ended up selling 50 units, I would earn £2800 over 275 hours, which works out at £10 per hour.
£10 per hour is the "living wage" where I live in Oxford, England, meaning that I ought to be able to subsist while earning this, but I would definitely prefer to earn more than this.
Of course, it's possible that some of my numbers are way off. If I sell 100 units, and it turns out I actually only spent 100 hours developing DrumKid, I could earn £23 per hour, which would be great. Then again, I might only sell 10 DrumKids - it's impossible to predict.
My conclusion from all of this conjecture is that £80 ($100) is a reasonable price to start selling DrumKid for, although I reserve the right to change my mind before release! Working through these numbers has also made me realise the importance of accounting for my time, even on a "fun" project like this, so I will endeavour to do this from the beginning of my next project. I'm sure I will find hidden costs that I hadn't considered as I near DrumKid's release, but for now I'm happy that I've got an overview of the financial side of the project.