#6 Cost
You make money while you’re buying things not when you sell them
“You make money while you’re buying things not when you sell them.”
This is an idiom we have in Turkish.
Cost calculations are very critical in hardware projects. Expensive components can take you out of the market and leave you no financials to grow or take some maneuvers in business. Also, life taught me that you can’t buy quality at a cheap price.
But you can always negotiate.
Let’s define what quality means for a hardware component. I check these 3 factors.
Is product documentation extensive enough? (Datasheet, Application Note, Example codes, etc.)
Do datasheet values correspond to your product requirements? (Power consumption, dimensions, communication, response time, etc.)
Are their sales/support departments responsive enough? Can you find them if you face any issues later?
I’d add also if there is any off-the-shelf product using those components. It gives somehow ideas about long-term use.
If we’ve found a good quality component then let’s talk about the price.
3 factors matter a lot for distributors:
quantity
timeline
your target price.
Quantity is about budget, timeline is about deadlines. The funny part is none of them is predictable in startups 🤷♂️
Although distributors know this situation, your plan still matters to them. If you don’t have a target quantity and date, you don’t have a proper go-to-market strategy which is a red flag.🚩
Aaand the target price…
You need to have a BOM list that contains components and processes that bring major costs to the table. Then, you need to have a target price according to your product’s competitiveness and other products in the market. Your target retail price for the product should cover the cost items below.
Product cost
Marketing expenses
Team payrolls
Tax
Some financials for growth
Combine them and compare them with your potential earnings (target quantity x target price)
If your potential earnings cover potential costs. Then you’re good to go. If not then go back to cost items and squeeze the budgets. Consider that each component cost will be multiplied by thousands when you go mass manufacturing. So setting a target price for major components is crucial. The calculations above will help you get somewhere.
Now you’re a buyer with knowledge about how much you can spend for each cost item and ready for negotiation.
Updates from Mountain Labs 🗞️🏔
Last month was busy with onboarding a new project and teammates. 3 new teammates joined our team. 🥳 We became 5 people in the core team. We have also teammates joining the team on demand. In total, we can say 8 people in our Slack (We’re using Pumble actually)
On the product side, we’re positioning the product not just as an air quality monitor but actually as a life companion device that you won't want to leave your side. We want to provide some add-on features without breaking the simplicity. Stay tuned for the updates!
We’re looking up to manufacturing Air Quality Monitors and sending them to e-commerce platforms asap. We have a GTM roadmap and taking it step by step. Meanwhile, I will focus on investor relations and governmental support intensively in the upcoming months.
I guess that’s all for now. Wish us luck! and don’t forget to preorder on mountainlabs.io :)
Greetings from Mountain Labs
Ömer