How do I figure out how much my product will cost?

Are You are thinking of starting your own business or do you have a business and are wanting to understand the entire cost of your product from start to finish?

Do you want to better understand your numbers, or feel like this is holding back your growth?

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Research and Development;

Research and Development Cost - This can be “set up fee” and might set your business up for the next 10 years it could be something you continually invest in depending on your aspirations, the market and your products success, when working out your financial goals of your business and yearly budgets you will understand how much you can allocate to RnD

1. Identify the scope of your R&D project: Clearly define the goals and objectives of your R&D project, as well as the resources and timelines required to achieve them. This will help you to accurately estimate the costs associated with your R&D efforts.

For Example - I want 10 products tested across 10 different manufacturers again this should not blow out your entire business budget or cash flow it should be well inside where you are confident to achieve the results you require less can be more though more is interesting to see what else the marketing is producing. 

2. Determine the personnel needed for the project: R&D projects often require specialized skills and expertise, so it's important to consider the cost of hiring or contracting the necessary personnel. This could include wages, benefits, and other employment-related expenses

Engineers, Cad Drawings, Manufacturing specialists and many more options depending on the type of product 

3. Consider any additional expenses: In addition to personnel costs, there may be other expenses associated with your R&D project, such as materials, equipment, and facilities. Make sure to include these in your budget as well.

4. Allocate a budget for contingencies: It's always a good idea to allocate a budget for contingencies, as unexpected costs can arise during the course of an R&D project. This could include unforeseen expenses such as additional materials or unexpected delays.

Tech packs, samples are not perfect maybe you need 3 or 4 rounds of samples, understanding prototyping a product is a game of patience and resilience 

5. Review and adjust your budget as needed: As your R&D project progresses, it's important to regularly review and adjust your budget as needed. This will help you to stay on track and ensure that you have the resources you need to successfully complete your project.

Always be looking for Government Grants for Manufacturing #1 tip 

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Manufacturing cost / Cog of Goods / Product Costs;

In manufacturing a product or buying raw materials, the cost of goods refers to the expenses incurred in producing a product or creating a supply chain. 

These costs can be divided into three main categories: direct materials, direct labor, and manufacturing overhead.

1. Direct materials: These are the raw materials that are used to create the final product. Examples include metal for a car, fabric for a shirt, or ingredients for a food product. FOR SURE YOU MUST INCLUDE PACKAGING HERE 
2. Direct labor: These are the labor costs associated with the production of the product. This includes wages for workers who are directly involved in the production process, as well as benefits and other employment-related expenses.
3. Manufacturing overhead: These are the indirect costs associated with manufacturing a product. Examples include utilities, rent for the manufacturing facility, and maintenance and repair expenses.

To calculate the cost of goods for a particular product, you would add together the costs for direct materials, direct labor, and manufacturing overhead. 

This total cost is then divided by the number of units produced to determine the cost per unit.

It's important to note that the cost of goods is different from the selling price of a product. The selling price is the price at which a manufacturer or retailer plans to sell the product, and it includes not only the cost of goods but also other expenses such as marketing, transportation, and profit margin. Read on for more information about logistic costs and Marketing costs. 

Why is QC included in COGs?

But First how do you determine the quality of a product and yes this 100% should be included in you yearly budget under COG and should be variable considering the volume of units per orders, I hope its constantly going up :) 

1. Include the cost of quality control checks in your COGs calculation: Quality control checks are a vital part of the production process, as they help to ensure that the finished product meets certain international safety standards and Product Quality levels. As such, it's important to include the cost of quality control checks in your COGs calculation. This could include the cost of hiring quality control inspectors, as well as any equipment or materials needed to perform the checks.
2. Consider the potential costs of product defects or failures: In addition to the direct costs of quality control checks, it's important to consider the potential costs of product defects or failures. If a product fails to meet quality standards, it may need to be reworked or scrapped, which can significantly increase the COGs of the product. By incorporating these potential costs into your budget, you can better understand the true cost of producing a high-quality product.

Ship here, Ship there, true Logistical Costs.

This is a robust list of costs to take into account from the idea of the product all the way to the end delivery to the golden customer, there could also include shipping samples to your manufacturer or agent. 

1. Transportation costs: These are the costs associated with moving a product from one location to another, and can include fees for shipping, trucking, air cargo, or other modes of transportation.
2. Warehousing costs: These are the costs associated with storing a product in a warehouse, including rent, utilities, and labor expenses.
3. Inventory carrying costs: These are the costs associated with holding inventory, such as the cost of financing the inventory, insurance, and storage.
4. Order processing costs: These are the costs associated with processing orders, including costs for personnel, systems, and equipment.
5. Distribution costs: These are the costs associated with distributing a product to customers, including costs for packaging, labeling, and handling.
6. Reverse logistics costs: These are the costs associated with returning or disposing of products that are defective, damaged, or unsold, including costs for transportation, warehousing, and handling.

But Wait There's More;

Though the below could be argued need to budget into their own respective aspects of your overall business budget.

1. Financing cost: This includes any financing costs associated with borrowing money to fund the production of the product.
2. Marketing and advertising cost: This includes the cost of promoting the product and making it known to potential customers.
3. The Cost of Doing business - This is the most impactful and the most important learning each year what mistakes you made and how you can lessen the blow of those mistakes or unknowns that just happen. We have seen alot and will see more curve balls though having WAC here to help see them coming :) 
4. Sustainability - How the investment will pay off, though we have so much experience in this space and we would recommend reading about how sustainability and the use of a circular economy mindset will pay dividends in the future of your business

How Do I use this Guide / Stuff that, you help me.

We recommend - taking each bolded section cut and paste this into a spreadsheet and start mapping out as much as you can. 

This is the thoughtfulness required to understand how much it costs to manufacturer a product some people get lucky but a lot less have products in garages collecting dust.

I have some, We all have if we are here reading this tried to buy something somewhere to sell. Or you are thinking about it now, reach out and have a chat, if you have actually read this all now and want a free 30 minute session with one of our business development professionals we would be more than happy to discuss what your upto and what's next. 

Click to Chat with the team ASAP 

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