The Slowest $380 I'll Ever Make

So it's been a while since I've posted anything.  In addition to a number of small personal obligations I've had over the past few weeks, I've also been spending a lot of time shipping out QR clocks to my customers and handling customer service requests.  I've been really eager to post a final summary of the whole QR clock experiment, but I had to wait for the experiment to end first.

Now that all of my clocks are happily in the hands of their new owners, I can.

Planning

The QR clocks were never intended to be a get rich quick scheme.  The theme of my blog has always been "make an educated guess, try it, and learn from your mistakes". I've been curious about things like ordering from Alibaba and getting PCBs assembled for a while now, but the requisite minimum order quantities have prevented me from trying any of these things.  I try not to be too shrewd with money when it comes to a learning opportunity, but I really couldn't justify dropping the coin required to make 50 of something if I wasn't going to be able to sell them later to at least cover costs.

Fortunately, Tindie offered just the thing I needed.  If I could get 50 or so pre-orders for a product, I would have at least that many guaranteed sales when I finished my little experiment.

Originally, I was planning to start with the Ice Breaker as it's a fairly low cost device and would offer the least amount of risk on my part, but the QR clock was a much more popular gadget, and I already had a few emails in my inbox asking to purchase one.

Pricing

My other posts detailed the process of designing and constructing the prototypes, but when I was done with all of that, I estimated that the clocks would cost about $65 a piece to make at quantities around 50

This left me in quite a pickle.  I was hoping that making a run of 50 would make the clocks much cheaper than that.  Given how the clock is inherently a gimmick piece of art, I was afraid that charging too much would prevent me from getting the sales I needed.  I was hoping that I could sell the final device for $50, but that was looking impossible.

Given that I was doing a fundraiser through Tindie, I only really had one shot at getting it right.  Tindie provides two weeks to reach your pre-order goal, and I was only going to be able to go viral once.  If the clock didn't get to 50 orders, I simply wasn't going to be able to make it happen.  Then again, not making it happen wasn't really the end of the world.

I decided that failing to reach my goal and cutting my losses was preferable to working hard to make it happen and losing money due to the low price, so I bit my lip and set the price to $100+shipping.  $100 was well beyond what I was originally hoping to charge, but I anticipated a bunch of unexpected expenditures along the way.

I was right.

Fundraiser

The Tindie fundraiser went really well.  On my last day, I reached 45 pre-orders and decided that it was close enough to 50 to go ahead and move forward.  I lowered my goal to 45 and magically reached my goal.  Now I just had to build them.

Original Sales

What follows is a summary of all of the things I ran into along the way of developing, manufacturing, and selling the QR clock.  I thought it'd be fun to start this summary in the black and slowly work my way down to the red.  Let's see how low we can take this.

Tindie Money: +4403.25

Total: 4403.25

One thing that I somehow failed to acknowledge when starting this project is that Tindie charges a percentage for their services.  Fortunately, they get around the PayPal transaction fees by bundling payments together, but their services aren't free.  Selling 45 clocks for $100+shipping does not leave me with $4500+shipping.

A Shipping Mishap

The Tindie interface is a little strange, and you have to decide on a shipping amount for each individual country you ship to.  I ran some quick numbers and settled on $10 for domestic and $25 for all international shipments.

Somewhere along this process, I screwed up a bit and somehow set my shipping rate for Canada, Australia, and Switzerland to $0.  The folks at Tindie were nice enough to point this out to me, but not before I had already processed three sales to these locations.  Fortunately, one kind gent from Australia noticed that he paid zero shipping and contacted me offering to make up the difference.

On the flip side, two of my orders were from within my apartment building, and I offered to refund shipping on in-building orders to get a few more sales.

After PayPal got their slice of these:

Shipping Discount: -20.00

Shipping Mishap: +23.72

Total: 4406.97

That's right, I'm covering EVERYTHING.

Extra Sales

After the fundraiser ended, I managed to bag a few extra clock sales directly through my site.  This cut out the Tindie fee, but it also added the PayPal fee.  Despite all of my setbacks, I had 6 extra completed clocks to sell.  With the shipping costs and PayPal fee taken into account, this set me up another $600.

Extra Sales: +642.66

Total: 5049.63

Prototype Development

Alright, that's enough earnings for now.  Let's take a good chunk out of that.

When I first started doing the math for the QR clock, I was only considering profit made on the individual unit sales.  It was only after I started running the numbers that I thought it'd be a cool idea to try to make back the development costs as well.  If I could manage to cover the costs of the original QR clock prototype, it would be the first time in Ch00ftech history that I didn't lose money on a project.

Of course, people always ask me things like "wow, how long did it take you to make this?" or "How much money did you waste spend trying to synchronize your windshield wipers to music?" I've always made a point out of not tallying up these numbers. I consider my hobby fun, and it can't be a debilitating addiction if I don't know how much it's costing me!

Anywho, once I added up the PCBs, the components, and the LED modules that I ordered off Adafruit, the total came to a little over $300.

PCBS: -117.10

 Digikey: -125.82

Displays: -87.31

Total: 4719.40

This left me with a handful of extra parts, and 4 extra PCBs.  Since I wasn't planning on using the same design for the clock I was to someday make and sell (the LED modules were too pricey), I gave away the 4 extra PCBs to a nice gent in Australia for a $50 donation to Hurricane Sandy relief (what is it about Australian people that makes them so nice?).

V2 Prototype

The original QR clock was built just to see if I could do it.  I had no idea if it would be possible to get an AVR to generate QR codes and display them like that.  Because of this, my normal project thriftiness was present.

It was only after I decided that I was going to make and sell them that I really unkinked the money hose.

I ordered LED display samples from two different vendors on Alibaba as well as some from Futurlec:

I also ordered five PCBs and enough parts off Digikey to stuff all five.  I always order extra parts in case there are any issues.  The plan here was to assemble one clock and if all went well stuff the other four by hand to add to the 50 or so I ended up ordering.  Though a little tedious, this would cut down on some of my wasted components.

The original QR clock used a 3.5mm barrel DC jack.  It turns out that this type of DC supply is very rare for 5V applications, so I was looking for a good vendor that sold 5V DC barrel jack supplies with cables long enough to mount on a wall.  I ordered a few off Amazon for about $30, but none of them were suitable, and I ended up moving to micro-usb instead.

Of course, changing the power connector meant that none of my extra PCBs were useable.

PCBs: -168.80

Futurlec White Displays: -17.20

Colored Displays: -125.60

Digikey: -98.20

Pretty White Displays: -67.3

5V Supplies: -29.10

Total: 4213.2

The Real Deal

With all the prototypes out of the way, it was time to make the real thing.  This included the PCB price as well as the assembly costs and parts themselves.  There really isn't too much to say about this whole process that I didn't already say before, so I'll just cut right to the price (which is a where a majority of my Tindie money went).

PCBs (55): -569.00

Assembly: -329.10

Shipping: -420.00

Parts: -640.59

Displays (500): -1363.74

Total: 890.10

A Quick Sale of Extra Stock

The second prototype left me with sixty+ colored LED displays from the first Alibaba vendor that I didn't consider pretty enough for a final product.  Thirty of them were of the "diffuse" variety which aren't as pretty as white ones I ended up using, but were good enough to sell with a kit at reduced cost.

The defective white LED displays I got left me with a few extra PCBs that I didn't have enough LED displays to stuff.  I decided to bundle them with some of the diffuse colored LEDs and managed to sell off three extra clocks at a 40% mark down.  One of my customers even sent me a picture of his finished kit clock along with an original white one he also purchased (see above).

Clock Kits: +203.01

Total: 1093.11

Packaging

The decision to not include a power connector with the clock was partially motivated by the fact that I wouldn't be able to anticipate the length required for the end user, but also because reducing each shipment to a single flat object allowed me to ship them in padded envelopes.  I purchased a box of high quality Jiffylite envelopes for the job.

I also wanted to add a little branding to each shipment, so I ordered some extra Ch00ftech stickers, and slipped one in each package.

Stickers: -54.00

Envelopes: -29.95

Total: 1009.16

Shipping

To ship the clocks out, I signed up for an account on Stamps.com.  They offered one month of free service, and make shipping everything out pretty easy.  I was excited to find that while my domestic shipping estimate was right on the money, international shipping was actually almost $10 cheaper than what I was charging.

I also picked up a pack of shipping labels.  They only worked for domestic shipments, but they added a little bonus professional look to the final product.

Labels: -14.56

Shipping: -521.57

Total: 473.03

Counting Eggs

So where does this all leave me?  I'm still $444.60 in the black, and I have a few clocks left over.  How many?

Well, most of the development time after my fundraiser, I was expecting 45 sales through Tindie.  For some reason though, I only actually ever got 42 sales.  I'm not sure why this happened exactly.  Maybe three customers requested refunds?  Regardless, I was excited that the $4,400 Tindie sent my way was for three fewer clocks than anticipated.  So that makes my current inventory:

Original Shipment: +55

Tindie Sales: -42

Extra Sales: -6

Kits: -3

Clocks Left Over: 4

Of these four clocks, two have minor cosmetic defects. On top of that, I also have a bunch of left over displays and V2 prototype PCBs.

So at this point, it would appear as though I'm all done!  I'm still up over $400, and I've got another 4 clocks I could potentially sell.  Unfortunately...

Before They Hatch

As much as this has been a learning experience for me, I like to think that I managed to anticipate a lot of the issues that I ended up experiencing.  Things like low yield from the manufacturers, costs of shipping, etc.  One thing that literally never crossed my mind was packaging.

I forgot that mail carriers could be so abusive, and so not two days after I shipped the clocks out, I started getting complaints about clocks arriving damaged.  Unfortunately, I shipped almost all of the clocks within those two days, so there really wasn't that much I could do other than sit by my inbox and wait.

While the padded envelopes did a great job of protecting the front and back of the clock, they did little to protect the edges which in two cases caused the USB port to be ripped off.

My official policy when handling these complaints was to offer a 100% refund including shipping both ways, a replacement clock (if I had any in stock), or a 30% refund if the user wanted to attempt to repair the clock him/herself.

In almost every case, my customers were hobbyists and were very willing to attempt repair.  Some of them even stated that they had hot air reworking tools and turned down a refund in lieu of replacement parts.

I ended up shipping out a replacement LED module, two replacement clocks, and a 30% rebate on the one with the two damaged corners.

Partial Refund: -30.00

Shipping: -34.52

Total: 408.51

Note, the $380 in the title of this post is from an addition error that I missed before publication.

This may not seem like a whole lot, but keep in mind that it's cut into my small supply of extra clocks. While it only cost me $60 or so in cash, it cost me $200 in potential future sales.

My plan is to sell the damaged clocks at a steep discount (figure that they can be repaired to some degree by an avid hobbyist, and it's better than throwing them away), so they're not completely sunk (email me if you're interested).

What Didn't I count?

Solder

It might seem inconsequential because so little is used at a time, but when you do 6480+ solder joints, you burn through at least a few dollars worth of solder.

Tools

For the same reason, my soldering iron pretty much needs a new tip by now, and my angle cutters now get jammed up every time I use them and probably need to be replaced.

Government/legal stuff

I still haven't talked to my accountant about this, but once I look into it, I'm willing to bet that I owe someone a cut of the profit I've made.  I'm really hoping that the small scale of this project will let me fly under the radar, but I'm not going to count on it.

If the project were bigger though, I'd probably have to get some kind of safety certification before selling them in a real store.  UL listing isn't cheap.

Time

This one gets a special heading because it's so important.

Because this project was a such a great learning experience for me, I considered my time as valueless.  With the exception of the LED soldering step, I never kept a good time log, but I can make some approximations to give you an idea:

Original QR code research/software: 20hrs

Designing circuit: 8hrs

Laying out V1 prototype: 15hrs

V1 Prototype assembly: 2hrs

QR clock Prototype firmware: 25hrs

Shopping for parts: 6hrs

Laying out V2 prototype: 15hrs

V2 prototype assembly: 2hrs

V2 Prototype firmware: 8hrs

Production firmware (optimization): 20hrs

Promotion (video, etc): 8hrs

Attaching rubber feet to clocks: 1hr (with help of friend)

Soldering LED modules: 25hrs

Repairing defective boards: 3hrs

Packing and shipping clocks: 3hrs

Sum: 161hrs

 This is probably a very conservative estimate.  It's hard to judge how long things in the past took me, because I tend to estimate how long it would take me to do now which would obviously be much less thanks to all that I've learned.

I also have a number of different circuit layouts that I started to work on while I was considering other LED display options that never made it into the final version such as the 3D model I built of the home brew LED display that I never used.

So when you work out the math, I earned approximately:

$2.53/hr

Not that glamorous, is it?

Lessons Learned

What follows is a summary of everything that I think I learned through this project.  Most of it is a recap of what I've talked about before, but some of these are little tidbits that I couldn't really fit anywhere else.

Not all parts are created equal

It was only after assembling and programming 40-some clocks that I decided that it might be a good idea to test their auto-dimming feature.  I was disappointed to find that the firmware I wrote for the original clock didn't work too well on most of the others.

It turns out that there was quite a bit of variance in the electrical properties of the photodiodes that I was using.  Most of my projects are one-offs, so I usually set my thresholds and constants by trial and error.  This was the first time I've ever needed the same firmware to run on multiple devices.

I ended up having to simplify the dimming algorithm by increasing the hysteresis and cutting down the number of dimming levels down to two.

Charge way more than you think you need

I started out with the goal to break even, but even if I was planning on making money, I was having trouble picturing myself charging anything more than $100.  In reality, had I charged $150, I probably wouldn't have lost too many customers, and I would have made well over $2500 on the deal.

I guess the tendency when creating a product like this is to compare it with the price of other products on the market.  What I should have realized is that the market for a specialized device like this is much smaller, so the startup costs associated with smaller quantities have to get passed on to the consumer.

Regardless, if a product does take off, retailers are going to want bulk discounts, and you can't afford for those discounts to cut into your bottom line.

Expect to spend a lot of time on the boring things

While I'm glad that this project turned out as well as it did, I really think I could have done a much better job if I just had more time.  The promotional video and viral campaign that I ran I felt were rushed, and they could have been a lot more attractive and entertaining if I had only spent more time on them.

I work full time as an engineer on top of writing this blog, and I often found myself coming home from work to pull an extra eight hour shift for this project.

Also things like packing and shipping clocks took a lot of time, and I was so eager to get this whole thing off my desk that I ended up making a few errors with labels (that I fortunately caught before shipping) and had to wait almost a month to get a refund for the trashed labels.

Turns out Switzerland and Swaziland are like two totally different places.

Trust no-one

Never count on a supplier to deliver what they promise.  Sometimes mistakes happen, and other times, people are just out to screw you.  Always have a back up plan in case of a major screw up somewhere outside of your control.

Put on your tinfoil cap and be skeptical of everything.  Just because something looks right doesn't mean it works right.  Foreign manufacturers know this and will often try to paint over their mistakes and hope nobody notices.

Pay yourself first

If you actually want to supplement your income with a project like this, make sure you bill yourself at a fair hourly rate.  Even something like $10/hr (cheap for highly skilled labor) will force you to price your product fairly.

At the very least make sure you break even.

Moving Forward

As of this moment, the QR clock experiment is officially over.  All of the clocks promised have been delivered or nearly delivered, and with the exception of a few lingering customer service requests, I don't expect to have to deal with it any more.

I'm still left with a number of extra parts though along with a few broken clocks.  If you're interested in getting a great deal on a "QR clock kit" or a "partially damaged QR Clock", shoot me an email.  Alternatively, I'll probably list them on the store once I get everything organized.

As for the $380, I would like to put it towards some kind of scholarship.  Just something small to cover textbooks for engineering students.  This is all up in the air at the moment, but if you have any tips regarding organizing a scholarship, let me know.

While this experiment was definitely a success, I'm not sure if I'm going to do one like it again soon.  I'm an engineer, not a businessman, and I found myself often frustrated and bored with the challenges I was presented.  I'm glad that I gained a lot of useful knowledge that will certainly help me out in the future, but I definitely don't need to turn every project into a product.

Furthermore, I've published plenty of half-finished or partially-working projects on my blog in the past, and I feel like the thought of potentially selling some of my future work is preventing me from publishing some of my projects which are good enough for a blog-post, but not polished enough to drum up excitement about another fundraiser.

I think for the next few big projects, I'm going to go the art route.  Rather than worrying about making a project into a commodity, I'm going to worry instead about making it cool.  I saw a painting of Spiderman in an art shop today on sale for $500.  If I passed the original QR clock off as an art piece, I'm sure I could have made at least $380 off the prototype alone by selling it to some nutty art collector.

Would have saved myself a lot of effort.

 


It's so cool.

Worked out of the box. I will probably hack it for fun.

Thanks for taking the care to build such a quality product.

Best,
Pat


All is well in Kent with the amber version working great!
Thanks!
Jim


9 thoughts on “The Slowest $380 I'll Ever Make

  1. Just wanted to say good post! As an aspiring engineer this blog has been awesome for learning about EE and being inspired by your cool projects.

  2. It has been great following your interesting journey - thanks for taking the time to share your stories during the process, as well as this wrap-up post.
    I think most other people would under-estimate the expected cost to produce something like this clock, and your experiences are great for others to learn from.

  3. Pingback: “The Slowest $380 I’ll Ever Make” #makerbusiness « adafruit industries blog

  4. Thanks for sharing the detail in this blog post. Much enjoyed!

    I particularly like the part when you bought sampled a few the Amazon bits to try. What a lot of people don't realise is the amount of parts you often get in "just to try" and then discard. Although you can often return them, you never do, and you end up with boxes full of odds and ends from over the years.

    It's things like this and multiple iterations that inflate the costs. These are always the things that get forgotten when going into a new project or remembering an old one. They are certainly always miraculously swept under the carpet when my wife quizzes me on the cost something!!

    I've been doing the same sort of logging exercise on some of my own hair-brained projects and I think I'll be shocked by my own hourly rate. I'm hoping to do a similar blog-post in the future.

    Thanks again!

  5. Pingback: Community Corner: This Week in Adafruit’s Community « adafruit industries blog

  6. Pingback: Getting Itty Bitty With The Ice Breaker 2.0 | ch00ftech Industries

  7. Pingback: Silverlight Developer » Blog Archive How much would you pay? » Silverlight Developer

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