15 steps to starting your own electronic kit business

DIYdad,
How are things going with your business? I am interested in this and would like to see your website and learn more. Is there a way I can contact you via website?
Thanks

Just an update: Back in 2008, I said "...I can now see it's possible to reach $10K a month in sales by December 2008." Well, one thing I didn't count on was the recession happening. I did not reach my $10K goal for December '08. It only reached $7K. However, I did reach more than $10K for June '09, and $15K for Oct '09. So biz is still growing even in this bad economy. And with more people trying to "save" money nowadays, DIY projects I think are making a comeback.

A nice article. I am just bored with my current job where no creative activity is available. Besides that I have to trave about 80km to my office and then back. I just feel tiresome and locked up in the routines. I have done many electronics projects and have been looking on oppertunities for starting kits buisness. I am sure this article has helped me in my decisions. I do not know much about websites. Besides there is so littel interes in my country for DIY projects. But I hope that the interest could be developed by publishing electronics/DIY aricles in magezines. Anyway thanks for writing so much.

I got into this busniness 3 years ago, niche products, micro/pcb designs. 18hr days and 2 years later I broke even. It's really really hard especially in small markets. Loved every minute but now working 8hr a day making 6K/mon for a corporate. Much easiler money...

If you are making electronics kits especially ones targeted at the ham radio market remember this - if you want to wind up with one million dollars the most important thing is to start out with two million dollars and don't stay in it too long! This is why Heathkit does not exist any longer - whatever kits you are going to offer are available pre made from Asia for less than your cost of offering them. If you have another job and your time is worth nothing - then it might pay for your hobby and justify it but why not just spend time with your family and enjoy other things in life?

Just to recap, my kit business made $7,500 this May. My previous record has been broken!... And the next 6 months will be even more exciting! Based on past trend, I can now see it's possible to reach $10K a month in sales by December 2008. So for all that gloom and doom recession talk here in the US, IGNORE THEM! Turn off that stupid CNN! Don't let that stop you from launching your own kit business. There is a big whole wide world of non-US customers to sell to!... and they're all feeling pretty rich out there, and wanting to buy US-made products.

Gordz, RE-READ the first part of my post again on pricing. Are you running a retail parts business or a kit business? Where's the premium on the R&D and knowledge and the programming that went into that microchip and project? How are you going to recover the cost of your prototypes? Splitting profits with a friend does not make your venture look attractive. One of you will work harder than the other, but profits are split evenly. This will just build resentment in the long run and possibly destroy your friendship. Why do you have to do this with a partner? Either hire him under you or do a work-for-hire contract with him. You're still at the starting gate, and you already lost 50% ownership (and future profits) of your future business.

Business strategy? Profit=Income-Expenses. Either increase your prices and increase sales, OR lower your parts cost, and lower overhead and expenses. That's it in a nutshell.

I'm just approaching 1 year in this kit retail business, but actually I've been working from home in my own consulting business for the last (8) years now. Quit my job from an electrical engineering company 8 years ago, and striked on my own... and it was the best thing I ever did! What I used to make in a year, now I make in 2 months. (and now the kit biz is bringing in addtl $6K/month sales). And no stupid bosses and office politics to deal with. I am the owner, CEO, engineer, secretary and also the janitor that clean the toilets :)

My advice is start small or just part-time, take calculated risks, plan every detail of your operation & WRITE EVERYTHING DOWN (which is equiv. to a Business Plan), before you jump in. Tweak and adjust business plan weekly or monthly. Treat it as a GUIDE... not as a MAP. Things change and will change. You need to be FLEXIBLE to adapt and take advantage of opportunities around you.

Don't be depressed about the gloom and doom economy news of today. Instead, think how can I use this to my advantage, survive or even grow during these slow times. HERE'S A TIP: While the US economy may be slow or down, NON-US customers are feeling rich and buying stuff! That's a TIP for you!

I liked the DIYdad comment's: Hi DIYDad, Can You teach me some business strategy. I have a plan to have my own electronic's shop but I dont know how !

This is more or less how I got started... It all started when I needed to find interesting content for my blog site to increase my web traffic (and therefore, increase my Adsense revenue to maybe $200-$300 a month) - as you can see, I had such a very small goal :) So I documented my process of designing my product from scratch on my blog. Took lots of photos, and basically blogged about what I'm currently working on. Pretty soon, I'm getting emails from people wanting to buy my PCBs, then if they can buy PCBs and parts, then they want to buy a PSU, then a case, then they want to buy other kinds of projects!... some even want me to build it for them, and sell them a completely finished, tested product... even at HUGE HUGE PROFIT Margins, they don't care. They want it. I'm approaching my 1st year anniversary now. I've sold A LOT of kits... and sales continue to increase every month. To the poster that said "it's now worth the time", I think that's a little harsh and too negative. If you do your homework, and really crunch the numbers and eat, breath, think, and see numbers... and you have a product that people want, and you know all the little costs here and there by heart, inside out... BEFORE you even sell to the 1st customer, you'll have a good chance of success. For me... there was very little fear that the new business will fail. My BIGGER fear was not launching it... because I know it will work! And I don't want to see some other schmuck do it, just because I was too chicken to do it myself. Yes, like any business there was some risks involved... but it was a very calculated risk. ... After the first 15 days of operation, I realized I was VERY WRONG with my calculations. I grossly UNDER-ESTIMATED my sales. I was pleasantly surprised that the first 15 days of operation generated more than $3K in sales! 10 months later, sales are between $6-7K a month. Gross margins of 50% to 70% (depending on which products). My average order is between $180-190 per customer. What happened to my Adsense? Yes, I have also achieved my monthly goal there. :) So, I say "Dream on, plan hard and work smart" to anybody that wants to get into this.

Hi - I saw the speech too. It made sense, but was relatively general. I know people who do this and make enough money to support their habit (DIY, that is). I would encourage all engineers to become more familiar with the DIY community. Seeing these people do circuits with no formal training is inspirational, and makes me want to do something outside my comfort zone. If you are not learning more, you are in jeopardy of becoming obsolete.

It should have said that you need to make 40% profit (which is about 66% markup). $16.50-$10.00=$6.50 $6.50/$16.50= ~.4 = 40%

You state to add 40% (twice) for pricing, but your numbers are closer to 65%, and your starting retail range is below your computed retail price.

I don't get your math. If your parts cost is $10.00 plus 40% for wholesale thats $14.00 plus 40% for retail thats $19.60. If you can't get the simple math right how good can your whole scheme be.

Step 0: Most likely it's not worth all of your time. Getting someone to see your website is almost impossible unless you know someone with a heavily trafficked website that will promote you. You'll be lucky to get any magazine (even EDN) to give you a one-time blurb. Again, you have to know someone. You'll go to a lot of trouble, end up discouraged, and and will have spent a lot of time with no net profit. Sorry to be so blunt/negative, but that's by far the most likely scenario. The hard truth is like with most other business ventures, it will fail to produce expected results. Some people get lucky, though, so as long as you're willing to accept the fact that you are almost guaranteed not to succeed to the level you hoped for, then go for it. Really, think about this long and hard before you put a lot of time and money into it. It's just as easy as 15 steps.

Good stuff - I like this kind of business. You probably won't get rich - but it is fun and satisfying!