15 steps to starting your own electronic kit business
A couple of weeks ago I decided to buy an Arduino microprocessor kit. I’ve been looking for a good platform to do some sensor monitoring, and Arduino looks perfect: Cheap, easy to interface with, onboard A/D, D/A, cheap, and it also provides me an excuse to learn the Processing language. I ended up buying the Arduino board and other incidentals from a site called Adafruit, because the site had lots of documentation on several Arduino-based projects and it offered a no-brainer pre-selected hardware kit of jumpers, etc. The site looked good and it had what I needed for a good price. My order arrived in two days, exactly as promised. Excellent – my kind of company.
So when I got to Maker Day at Maker Faire yesterday afternoon, I was happy to find that Limor Fried, the founder of Adafruit, was giving a presentation on how to start your own business selling kits. This is a growing business right now, as people look for reasons to teach their kids how to solder, or just want to build a neat device. (Adafruit teamed with the Maker Store to offer the infamous TV-B-Gone kit that garnered a lot of attention at CES this year.)
Limor offered the following 15 steps to get your hardware kit business started. With her permission, here they are.
First, three assumptions:
-There is only one of you. Or, if you are a couple, married or whatever, you work as one. Multiple people in a business make everything way too complex.
-You have a current job providing your own seed capital.
-You are computer literate and the internet doesn’t scare you.
1. You need an expertise/skill set/interest that you can parlay into a product. For example, Adafruit’s newest product seems to be a GPS system that operates off an Arduino platform.
2. Think of a memorable name for you company.
3. Register a domain name based on your company name. And don’t just get the .com version – also get the .net and .org versions.
a) File a DBA (doing-business-as). This lets you do business under your new business name rather than your own personal name.
b) Open a bank account under you DBA name, with (free) checks
c) Get a credit card under your DBA name. Keep all you business accounts separate from your personal one to simplify matters at tax time.
d) Go to the library and read every relevant book by Nolo press.
5. Get a straight-forward digital camera (nothing fancy, doesn’t need to be SLR) and start learning how to take good pictures of your projects, which will ultimately become your products.
6) Make a lot of stuff: Here’s a verbatim: “Make a lot of stuff. The only way is to — make a lot of stuff. Don’t tell people about the failures (yet). Get maybe 2-4 projects under your belt. Purchase everything related to your biz on the biz on your biz bank account/credit card. This makes your accounting hella easier than stuffing receipts in a box. But hopefully you’ve already done some of this [project work.] Take lots and lots of photos of your progress.” (This whole development/documentation stuff takes anywhere from 2-12 months.)
7. Photos. This is very important to communicate what your self and your projects are all about to your audience. Learn to take good ones. Be prepared to spend hours learning what makes a good photo and how to take it. Use video if that’s what it takes. Learn to use the freebie software available to adjust lighting, values, etc. And come up with a “moneyshot,” the one photo that perfectly explains your project. Another great suggestion: Don’t take a picture of the parts on a PCB – take a picture of what the project allows you to do, like put on a lightshow, or looking good on your coffee table, or whatever.
8. a) Do basic documentation of your project and put it online. You can even use a freebie wordpress site, or instructables. Put the picture at the top of the project page. Below that, have a one-paragraph description of the project with stats. Example, if you built a DMX-controlled RGB LED light, your paragraph should describe how bright it is, that it’s dmx controllable, how many LEDs, and in general why it’s cool.
b) About the website: steal a neat website idea from one you like. There’s no reason to put a lot of design effort in at this point to the website, since you’ll scrap the first one anyway.”
c) Her point here is the people who will give you publicity are very, very lazy/busy, and you should make it as easy as possible for them to copy and paste your photo and description to their blog post.
OK, now repeat this step for each of your projects.
9. Fill out the rest of your website with info about yourself to give visitors a sense of who you are. Put up a picture of your cat. And include your email address with a comment, “If you’re interested in purchasing one of my products, drop me a line.”
10. Now you’re ready to go look for traffic to your site. Send a short email with a link to your site and a 2 sentence description to blogs that would be interested in them. Like, probably Make. Also post to forums for your type of DIY stuff, but DO NOT SPAM.
11. Look at your website statistics, read all your comments from visitors. What are they interested in?
12. Find the project that is easiest for you to sell/re-create. Figure out what a full price list would cost if you made 100 of these, getting the best pricing you can. UPDATE: (See comments below.) Now allow for a 40% profit, or about a 66% markup.Now add the markup again. This is your retail cost. So if your project is $10 in parts, wholesale is $16.50, retail is $27.50. $25-$75 retail price range is a good one to start with.
Buy enough parts to make 25 projects/kits. Use PayPal “buy now” buttons and put them on the project page. Decide if you want to sell internationally. It’s more expensive, but it opens up your market considerably.
13.Create a support network for your new customers. Create a forum/mailing list. Questions should only be answered once and then they go into the FAQ or documentation. The support will eventually drop down, and you’ll have some profit. Cool. Now, since you added that 40% retail margin in step 8 you can go looking for some re-sale outlets.
14. Repeat/refine the last few steps, making new projects, creating a blog if you haven’t yet to document projects. Try to release a new project every few months. Get better! Because you’ll stagnate if you don’t. Plus, you can look into hiring help, upgrading your bookkeeping, buying equipment, etc etc etc.