Exercise: Consider Production Costs
Exercise is to consider production costs, so in order to have a successful product, you need to be able to produce it for less than someone is willing to pay for it. That's basic profitability math one o one so your production cost is really your material materials, plus your labor and either overhead into production cost and here's why? Because you're not making your product outside in the woods for free, you have a roof, you have electricity, you have tools, you have all of these things in your overhead and you need them to produce your product. So I like to think about that in our production costs, even if it's just in a ballpark way and then remember any time you're pricing, this is my pricing my starting point pricing formula of choice materials plus labor plus overhead plus profit is your wholesale price on our wholesale price times at least two is our retail price. We don't time new underpricing here. I've talked about it in a lot of other classes on guy have plenty of resources...
on designing an fda dot com about pricing as well, but it sort of reminds you guys about this as we do our evaluation, one of the other things you want to think about is what is the cost to produce a prototype versus the cost to put an idea into production so there are certain types of products that are just cheaper to make the more you do it as a reason that vote sarah's in that boat stationary anything that you're getting made a prototype is always going to cost you more so we want to make sure we're running our cost that you're looking at what the production cost is because that's going to set your final price and then just the costs go down the more that you produce so there are other things to you know if you buy more gold the cost goes down thinking about those kinds of things as well so I want you guys to identify your mpp your minimal minimum a profitable price that's a mouthful mpp is easier your minimum profitable price for your new product and so then the other things that you kind of want to think about is you're evaluating here is how much upfront cost is involved so some things require a lot of upfront costs sometimes you can mitigate that so with sarah we talked about you can she test out her photographs about getting any product produced this kind of minimal minimum viable product that you can take to market can you take preorders and then something is just know that there is going to be more of a material costs tiffany is just going to bite the bullet and pay for materials now the nice thing about at least the gold is that it's, always scrapple and re sellable. So it's. Very possible that if the collection sits, you recoup some of your cost. I don't think that's going to happen for you. But that is important to kind of keep in mind.