[sdiy] Pitfalls of the synth 'small business'

[James Patchell]

Paul is real brave...I would have never said any of that for fear of being 
called a "nay-sayer"....but it is all true.

The 6x parts cost for a selling prices is a rule of thumb I have known for 
a long time.  When you tell people that...however...they become really 
upset and seem to think you are some kind of a highway robber...but that is 
one of the first things I do...and I look at the resulting price and ask 
.... "would anybody in their right mind pay that much?"....generally, the 
answer I come up with is NO!.

It doesn't stop me from trying...

Also, several years ago, I was wondering if I could supplement my income 
selling bare PC boards...I figured $50,000/yr would make it worth 
while...then I did the math...I figured a PC board would cost me about $3 
each in quantity....and if I sold them for $15 each, that would be 
$12/board....that is 4200 boards per year...about...my market research 
showed me that even at $15/ board, it was going to be close to impossible 
to move 4200 boards per year....I suspect that even if every single person 
on SDIY was buying boards from me...I still would not be able to move that 
many boards....and I would say that in all likely hood...the market is 
close to saturation anyway...

So....I just continue to do it as a hobby...if I make something people are 
interested in, I make it available...I keep hoping, however...maybe 
someday...I will come up with a better DIY mousetrap...

Also...even though many of you may think that hey.....$50,000/yr is a lot 
of money...don't forget...a large portion of that will go to my Uncle 
Sam....30% in income taxes...and another huge chunk for "self employment 
taxes"....

At 09:27 AM 11/5/2005 -0600, Paul Schreiber wrote:
>Rule #1: you must value your time at either $0.00/hr or $75/hr. There is 
>*nothing* in-between that makes sense.
>
>$0.00/hr is if you have no children, and your wife/girlfriend has a job, 
>or you live alone.
>$75/hr if married with kids. If you have a 'day job', the rate is $100/hr.
>
>Point: if married, you have to very carefully balance the time factor. 
>Expect to do the *majority* of the work late at night (say 9PM-1AM, like 
>me!). Time is what you have the least of: you have to *plan in advance* 
>exactly what you will do every day to generate $$$. You can't afford to 
>dwadle on the internet. You have to go-go-go with a purpose.
>
>Rule #2: Electronics is NOT A CHEAP HOBBY/BUSINESS.
>
>In order to do it "right", you have to have decent stuff, a large 
>workspace (seems to be difficult in EU) and inventory. You need bench test 
>equipment that HP or Tek made, not you :) You need parts storage, record 
>storage, book-keeping. You need boxes, tape, puffy folders, stamps, labels 
>and customs forms.
>
>For pcb: this issue is minimum buys. I have to buy 50pcs at a time or 
>more. There is a big price drop over 150pcs (not *total*, for each module) 
>but then that's more total $$$. You can panelize so that 1 large panel has 
>6 *different* pc boards, but then you have no control over inventory 
>levels if 1 is a big seller and 2 are not.
>
>Rule #3: Cash flow is *KING*.
>
>Cash flow is what kills off most "hobby-to-business" ventures. Your 
>suppliers want to be paid *before you can ship*. If you then try to get 
>money up front (like "pay me 1/2 now"), expect many hostile emails because 
>human nature is that once you have *some* money, you are under more 
>pressure (and all of it negative) to ship. Even though you've been in 
>business 8 years (cough), people act *COMPLETELY DIFFERENTLY* if you have 
>more than $10 of their $$$ versus just a order in hand. The attitude is: 
>You have MY money, I want MY STUFF!!! Ask Brice about PSIM and Cynthia at 
>Cyndustries about this. Personally, I'll never do this again.
>
>If you have no money to begin with, *DON'T EVEN TRY*. You are better off 
>*saving up for 6 months first*, get a few $1000 in the bank, THEN start. 
>NEVER use credit cards to buy stuff unless you pay 100% of the bill when due.
>
>Rule #4: do not be afraid to charge what is needed.
>
>Don't try to offer Moog 960 clone pc boards for $10/set. Charge at LEAST 
>3X what stuff costs you. I remember talking to Dave Rossum of EMu in 1977 
>about this thing: he said they charged 6X the parts cost and made just 
>enough money to support 2 full-time people.
>
>Rule #5: the market is big, but not THAT big.
>
>Understand that selling 100 of *anything* in this market is A LOT. Focus 
>on doing a good job selling 25 at a time.
>
>Paul S.
>

         -Jim
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http://www.oldcrows.net/~patchell

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