In the previous article in this series on making a personal electronic project into a saleable kit, we looked at the broader picture of the kit market for a new entrant, the importance of gauging whether or not your proposed kit has a viable niche and ensuring that it has a good combination of buildability, instructions, and quality. In this article we will look at specifying and pricing the hardware side of a kit, illustrating in detail with an example project. The project we’ve chosen is a simple NE555 LED flasher which we haven’t built and have no intention of assembling into a kit for real, however it provides a handy reference project without the circuit itself having any special considerations which might distract from the job at hand.
Having made the decision that you have a potential product on your hands your next step is to turn it from a project into something a customer would be satisfied with. If you have not done so already, you should try to produce a prototype which will represent the product exactly as you will sell it. Given that you’ve already got it working as a project this might seem an odd thing to start with an an unnecessary repetition of effort, however the key point here is that you should use the exact components you would sell.
You should design a PCB and have a prototype run manufactured, and you should compile a detailed bill of materials complete with manufacturer or supplier part numbers which you should then order just as you would if you were assembling a batch of kits. It is true that for example a 10 K resistor from your junk box is likely to be just as good as a new one fresh from the supplier, but the point here is to replicate exactly what your customer will receive. You should pay attention to working voltages, power dissipation figures for resistors, and though you are unlikely to encounter many components containing lead these days, the RoHS status of anything you specify.
If you can build a couple of prototypes using these components and you are happy that you have made a working and repeatable kit, you should pack an example kit in the way you would send it to the customer. Include any sundries, for example folded sheets of paper to represent kit instructions, and a sticky label for the kit packaging. Make any packaging choices, for example whether it should be sent out in a small cardboard box or a plastic bag. Your town or city should have a local bulk packaging specialist catering for everything from jewelery stores to takeaway restaurants, spend a while in their showroom looking at the options when you make those choices.
At this point you will have to consider the fragility of your components, as well as how you are going to send them to the customer. Consider for example whether you will need to provide a holder for any DIP ICs. Even go as far as to pack up a sample order in a padded envelope and weigh it to see which postal price bracket it fits in. You are likely to sell these kits internationally, so a few grams either way can make a significant difference to your postage costs.
Once you are happy with your kit packaging, take your sample kit and itemise everything included in it. Not simply the electronic components, but the packaging, the stickers, the instructions and other sundries. Make a spreadsheet and use it to compute prices for all these constituent parts for a range of production run sizes. For a first kit it might be worth pricing up runs of 25, 50, and 100. Research suppliers and price breaks, and don’t forget to include any sales taxes if applicable as well as customs charges on anything you may have to import. This last point is particularly important if you are having a PCB made in China, for example.
We produced just such a spreadsheet for our 555 LED flasher kit. In our case it’s in GB Pounds because that’s where this article is being written, and instantly we can see that when the kit packaging is taken into consideration, a small run of LED flasher kits will cost us just under 3 pounds each. If we were making these kits for real or in a larger volume this figure would be likely to drop significantly through quantity price breaks and a lot more effort put into finding cheaper sources, however this is just an example kit product for an article and we are assuming that you will not have the luxury of a large production run for your first kit. It’s a decision you’ll have to make, how many of an unproven kit to produce, as a mountain of unsold kits can represent a significant amount of tied-up investment. Twenty five kits often seems about right from this perspective, if it sells unexpectedly quickly you can always run up a load more.
Once you have an accurate view of how much your kits will cost to produce, you can think about the price at which they can retail. You should know what other manufacturers charge for kits of similar size so you will probably have an idea where you should position the kit, however you have to recognise that producing and packing the kit is in itself a significant amount of work for which the customer should be prepared to pay. You will always find a customer with a calculator who complains that they have just paid over £5 for £2.50-worth of components, however of course they are not just paying for the components but the development work that has gone into making a satisfactory kit experience. Ensure that your retail price adequately reflects the amount of work that has gone into producing the kit without pushing the boundaries too far, and your customers will understand that they are paying in part for your effort.
Now you should have a clear idea of your kit’s hardware: you’ll know what to order, how much it will cost, how you are going to turn it into a product, and what price it will retail at. You aren’t ready to take it to market though, because you have yet to complete one of the most important parts of the jigsaw puzzle. Your kit has no instructions as yet, and its commercial success will hang on the instructions you ship with it. The next article in this series will therefore be devoted to those instructions, as we take you through the process of writing a set of instructions for our LED flasher example kit.