Ponoko

How to Make Your Product at Least Cost

Jill is a graphic designer from Oakland, CA. While riding her bike to work, she was inspired to create a set of custom-made bike gear-themed coasters to sell at local bike shops and in her Etsy Store.

Here Jill takes you step-by-step through the process she used to turn her idea into a profitable product with Ponoko. Making her coasters at the lowest price possible means she pockets a healthy margin selling to stores and direct to customers.

You can apply these steps to your own project, or you can download all the files here .

      Imagine it
              Your Product User
              Your Product Design
              Your Product Materials
              Your Target Price, Cost & Profit
              Your Design Challenge
      Design it
              Download a Laser Design Template
              Use Existing Images
              Get the Essentials Right - Lines Colors and Widths
      Prototype it
             Zero Cost Prototyping!
             Low Cost Prototyping
      Make it
              My Final Design & Material Choice
              Make a Few for User Testing
              Yippeee! My Final Product
              Time for User Testing
              Final Product Line!
      Sell it
              Packaging Your Product
              Setting a Profitable Price
              Profiting from On-Demand Inventory
              Promoting Your Product
     Print this guide

Imagine It


First up, I needed a plan. A clear idea of my product, who it would appeal to and how much I needed to make and sell it for in order to turn a profit.

Your Product User

Take a moment to consider who will be using your product, and why. I had bicycle enthusiasts and their thirsty friends in mind.

Your Product Design

Rough out your design. I mostly tried to get a few ideas I had floating around in my head onto paper.

Your Product Materials

My coasters needed to look good, but also stand up to repeated use. I was thinking materials like black acrylic or natural cork. So I bought a few $2.50 material samples. I kinda liked the cork:

Your Target Price, Cost & Profit

Some basic research showed a set of 4 custom-made coasters retails for between $15 and $50 - with many sitting around $30. Working backwards, I figured my ideal price points were:

Your Design Challenge

Now you have your design challenge. Mine was to design a set of 4 bicycle themed coasters at less than $7.50 for making, materials and shipping from my Personal Factory. That’s a target production cost of $1.88 per coaster (75% less than a retail price of $7.50 each).

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Design It


Now that I had an idea of where I wanted to go, it was time to prepare my first design for laser cutting. Here are my top tips.

Download a Laser Design Template

Open a Personal Factory laser design template in Adobe Illustrator. Using the template makes it so much easier to get a good result.

Use Existing Images

I did an image search to find a few gears with crisp images on a clean white background to make outlining easier:

Next - I imported the images into Adobe Illustrator, and converted the gears into black outlines:

Get the Essentials Right - Line Colors & Widths

I needed to use these settings to cut along the lines of the gear drawings:

* Stroke Color - Blue (R0, G0, B255).

* Stroke Width - 0.01mm.

To engrave along the lines of the gear drawings I needed to use these settings:

* Stroke Color - Red (R255, G0, B0).

* Stroke Width - 0.01mm.

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Prototype It



My goal was to find a happy compromise between design aesthetics (look/feel) and efficient engineering (cost).

Zero Cost Prototyping!

Before I paid to make anything, I used my Personal Factory to price lots of design iterations instantly. I learned a whole lot and it didn’t cost me a bean ...

Summary:

Target Production Cost = $1.88 per coaster (75% off retail).
First Quote - #1 = $5.40 per coaster (28% off retail).
Final Quote - #9 = $1.64 per coaster (78% off retail) !!

Here’s what I did to reduce my production cost, without actually making anything:

1) My Design - I reduced complexity. Result = 38% off retail.
2) My Material Sheet Size - I increased sheet size. Result = 63% off retail.
3) My Personal Factory Option - I compared Free v Prime. Result = 73% off retail.
4) My Volume Options - I scaled up my order size. Result = 78% off retail.

Here are the details ...

1) My Design

I tested price by laying out some gears onto a template for the smallest P1 material sheet size:

I uploaded this design to my Personal Factory and added my material of choice:

And got an instant price:

Oh no! My first quote was $25.75 total - that’s $6.44 per coaster!!

Fine if they were for me or a gift for a friend - but I wanted to sell these for profit. I needed to get the total cost lower than $7.50 total, or $1.88 per coaster.

I noticed the ‘Making’ cost was the highest, so I needed to adjust my design to bring this down. (I dealt with materials and shipping later).

Here are the 5 design iterations I went through ...

Zero Cost Prototype #1: $25.75 total = $6.44 per coaster (14% off retail)

My original design. I looked for areas that might slow down the laser (the making cost is tied to the time the laser spends making the design - complex and intricate shapes take longer to make):

Zero Cost Prototype #2: $24.87 total = $6.21 per coaster (17% off retail)

I removed some curves along the gear teeth by turning them into straight lines (like a truck, a laser will slow down around tight curves):

Zero Cost Prototype #3: $24.50 total = $6.12 per coaster (18% off retail)

Then I decreased the number and size of the gear teeth:

Zero Cost Prototype #4: $22.48 total = $5.62 per coaster (25% off retail)

Next I reduced the size of the internal holes:

Zero Cost Prototype #5: $22.48 total = $5.62 per coaster (25% off retail)

Finally, I tested line engraving the interior of the coasters instead of cutting them, but that was no less cost. So I decided to stop here:

2) My Material Sheet Size

I laid out my lowest cost design on a design template for the largest P3 material sheet size …

Zero Cost Prototype #6: $134.80 total = $3.00 per coaster (60% off retail)

I managed to fit 45 coasters onto one P3 sheet (instead of 4 coasters to one P1 sheet):

And because the order was over $100 I got free shipping:

I was getting closer to my goal of $1.88 per coaster, but I looked for more ways to save money …

3) My Personal Factory Options - Free or Prime Account?

Up to this point my digital prototyping has been in my Free Personal Factory. So I decided to look into the Prime Personal Factory

Zero Cost Prototype #7: $91.93 total = $2.04 per coaster (73% off retail)

I uploaded my Prototype #6 design into my Free account, and the Prime price was getting closer to my ultimate goal of $1.88 per coaster :-)

3) My Volume Options

Although I was pretty close to my design goal of $1.88 per coaster, I wondered if I could reduce cost further. This would give me the option to reduce the retail price, or bank the extra profit, or know I have some wiggle room if a retailer negotiates hard on my wholesale price.

I found out the Prime Personal Factory automatically gives me the lowest price based on the size of my order - up to 55% off the base cost:

Zero Cost Prototype #8: $447.42 total = $1.99 per coaster (74% off retail)

Using my Prototype #6 design, I entered a quantity of 5 sheets of P3 material to make 225 coasters:

And here’s the Prime pricing I received with the automated volume pricing ...

Zero Cost Prototype #9: $3,028.12 total = $1.64 per coaster (78% off retail)

Just for fun, using my Prototype #6 design, I entered a quantity of 41 sheets of P3 material to make 1,845 coasters (461 sets of 4), and here’s the Prime pricing:

SUMMARY: Zero Cost Prototyping - Target Production Cost Surpassed = 78% Off Retail!

Digital prototyping with your Personal Factory can deliver the production cost you need to earn profit at competitive retail and wholesale pricing. I spent $0 to prototype my design digitally and got the cost down from the original quote of $6.44 to $1.64 per coaster (78% off retail) - and discovered plenty of other options along the way.

Low Cost Prototyping

With my pricing sorted via free digital prototyping, it was time to see my coasters ...

Keeping My Options Open & My Costs Low

Here’s what I did to see how it all worked, and to get a real life sense of my favorite designs at the lowest cost:

1. Design Variations - I wanted to see my 4 different designs. (It could be my lowest cost option looked terrible).

2. Smallest Material Sheet Size - I laid out 4 different designs on the P1 design template.

3. Lowest Cost Material Type - I selected cardboard. At $0.50 per sheet it’s the lowest cost prototyping material, and because it’s soft it’s the fastest and cheapest to cut.

Here’s the instant online quote I got for my first prototype - very low cost ...


Yippeee! My First Personal Factory Delivery

I was able to pick my favorite design from the 4 different tests, based on how they looked and the pricing work I’d done earlier:

Next it was time to start making for real ...

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Make It



And now for the fun stuff …

My Final Design & Material Choice

From the price testing and cardboard prototype earlier, I decided on this final design. And from the three $2.50 material samples I bought earlier, I decided to do my first real test using the cork material:

Make a Few for User Testing

I laid out my winning coaster design onto a template for the smallest P1 material sheet size and ordered:

Yippeee! My Final Product

A few days later I received a very special delivery. I was pretty excited!

Time for User Testing

I tested my coasters with potential customers - biking friends, my friendly bike store owner and his customers. They loved the design and I took pre-orders.

But some wanted a different material. So I repeated the process above to make some in black acrylic ...

Final Product Line!

With cork and black acrylic coasters in my new product line, I was ready to sell.

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Sell It



With my product line ready to go, it was time to make some money …

Packaging Your Product

Time to consider packaging. l wanted it to look great, but be very low cost. This cost me $1 per package:

Setting a Profitable Price

With all costs now calculated, it was time to finalize my retail and wholesale pricing.

To start, I used a simple ‘cost plus margin’ pricing model to ensure profitability …

First - Calculate Your Total Production Cost at Various Order Volumes

Total Production Cost = Making + Materials + Shipping + Packaging Costs:

Sets of 4 Coasters 1 11 56 461
Material Sheets 1 x P1 1 x P3 5 x P3 45 x P3
Free Account Cost $18.64 $123.67 $618.33 $5,070.33
Prime Account Cost $15.69 $91.93 $447.42 $3,028.12
Prime Cost / Set $15.69 $8.36 $7.99 $6.56
Packaging Cost / Set $1.00 $1.00 $1.00 $1.00
Total Cost / Set $16.69 $9.36 $8.99 $7.56

Second - Calculate Your Profitable Pricing

My rule of thumb is 1 : 2 : 4 … $1 of cost means a $2 wholesale price, means a $4 retail price. In other words:

Profitable Retail Price = 2 x Wholesale Price = 2 x Total Production Cost.

Hence:

Sets of 4 Coasters 1 11 56 461
Total Cost / Set $16.69 $9.36 $8.99 $7.56
My Wholesale Margin 50% 50% 50% 50%
Wholesale Price / Set $33.38 $18.72 $17.98 $15.12
My Retail Margin 75% 75% 75% 75%
Retail Price / Set $66.76 $37.44 $35.96 $30.24
Overall Profit 50/50 62.5% 62.5% 62.5% 62.5%

To profit, this shows my retail price needs to be between $30.24 and $66.76 per set of 4 coasters to retain a profit margin of 62.5% assuming a 50:50 split in sales across both retail and wholesale channels.

Third - Set a Retail Price that Feels About Right

The information above coupled with knowing the market price ranges from $15 to $50 per set, I decide that my original retail price target of $30 per set is a good place for me to start.

Hence my profits will actually be:

Sets of 4 Coasters 1 11 56 461
Retail Price / Set $30 $30 $30 $30
Total Cost / Set $16.69 $9.36 $8.99 $7.56
My Retail Margin 44% 69% 70% 75%
Wholesale Price / Set $16.69 $15 $15 $15
My Wholesale Margin 0% 38% 40% 50%
Overall Profit 50/50 22% 54% 55% 62.5%
Prime + Packg Cost $16.69 $102.93 $503.42 $3,489.12

This third table tells me a few important things:

1) My Minimum Order Size - To hit a 54% overall profit margin, I need to order & package at least 11 sets of coasters at $102.93 per order. This is a good place for me to start my business.

2) My Most Profitable Order Size - To hit my goal of a 62.5% overall profit margin, I need to order & package at least 461 sets of coasters at $3,489.12 per order. This is a good place for me when I get a reliable stream of retail and/or wholesale orders.

3) Minimum Wholesale Order Size - To hit a 54% overall profit margin, I need to sell to retailers in a minimum batch of 10 sets of coasters at $150.

4) Tough Retailer Negotiation - To retain my profit margin, a retailer will need to order at least 461 sets of coasters to get a wholesale price less than $15 per set.

5) Taking a Tiny Step First - I know I can order & package just one set of coasters at $16.69 and sell them retail at a 44% profit margin, which is really nice to know if I do not want to spend the next level up at $102.93. But I also know that I can not sell this small order size at the $15 wholesale price because I will make a loss.

Of course, if I’m just getting started I can relax some of these 1:2:4 pricing ‘rules’. But they’re a great place to benchmark what is actually going on with my cash.

Without profit I can not continue my passion of making things for others. With profit I create new possibilities for myself :-)

Profiting from On-Demand Inventory

Continuing on my theme of keeping costs low, I decided to keep my stock digital until I had customer orders. This way I have zero cost until I make a sale and collect the cash.

The third table above shows that I can order just 1 set at $16.69 to fulfill a $30 retail order at a 44% retail margin. But I make nothing on a wholesale order - which tells me I need to set a minimum wholesale order size of at least 10 sets. And, in general, to maintain healthy profits I probably want to produce at least 11 sets each time I get an order, so I have a tiny stock on hand for fast delivery.

My friendly bike store owner pre-ordered 10 sets of 4 cork coasters when I was user testing in his store. He paid me the $150 wholesale price.

So I made the following design (of 45 coasters):

I sold 10 sets for $150 at a cost to me of $93.57 (= $83.57 production + $10 packaging). A 38% wholesale profit margin to get me started ($150 wholesale price - $93.57 total cost = $56.43 profit).

Promoting Your Product

I sell my coasters to retailers and on Etsy. Here are my top tips.

Good Photos Sell

Well lit, crisp high-resolution photos of your product are a must.

Describe Your Product Well

I describe what it is made of, what the dimensions are and what it feels like. I share a bit about myself as well, so folks can identify with me as a person.

Be Pro-Active

Don’t just sit back and wait for customers to come to you. In the case of local bike shops, I just walk in, introduce myself and start a conversation. For larger retailers, I search company websites to get in touch with vendor departments. Wherever possible, I speak directly to their buyers.

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Go for it!

  • Imagine it
  • Design it
  • Prototype it
  • Make it
  • Sell it

It really is that easy and low cost to make money selling your own products. You’re only limited by your imagination and determination. Ponoko can help you with the rest :-)

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