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    1 Reply Latest reply on Jan 7, 2010 11:48 AM by TheSoloGuide

    Proffit margin?

    Goldmizer Newbie
      I desined and own the patent on a new product nearing the market. I have just received the quote for the manufacture of the product which does not include packaging, labeling, or logistics. This cost is over half of the prospected high end retail price.

      Example: Mfgs cost $78.00 per unit, dealer cost: ? , and an MSRP of $149.95

      This product is revolutionary of sorts with a very large target market. However a big percentage of this market would hope to never use it. It is geared to survival but will also be used for recreation. increasing the retail price is not much of an option. If the retail price is too large it could deture purchases. Since this products conception, I have always said I would like to see this hit the market retailing for somewhere between $75.00 to $150.00.

       


      Considering that this product wil lprimarily be sold to retail outlets at a wholesale price, is this a cenario that would allow for a desirable proffit margin by the retail store as well as allowing a profit to myself? I have been told by a few people that retail outlets generaly prefer to make 50% on their sales. If that is true, I would have to set a dealer price around $89. 00 to $94.00 I beleive. Should I look for overseas manufacturers?

      I look forward to hearing some solid advice.

      Thank you,

      Goldmizer
        • Re: Proffit margin?
          Tracker

          Rick:

           


          Retail tradition wants a high markup on the products they sell. Some other things that you will need to discuss with potential retail partners are their return policies (some are very liberal, allowing customers to return a product for any reason) and co-op marketing requirements. Both of these have the potential to reduce your profits even further.

           


          Yes, offshore manufacturing can help reduce your costs, however, I've worked with some companies that partnered with manufacturing companies in China only to later learn that these companies copied their product and sold it under their own name. I'm not suggesting that all Chinese manufacturers do this, but be wary. I've traditional found that US companies are excellent to work with when prototyping, but have a hard time competing with offshore companies on price when going to full production.

          If you choose to prototype in the US and then partner with a company offshore for full production to reduce costs, you could end up paying double on tooling costs unless you can find a manufacturer that has a location in the states for prototyping and offshore locations for mass production.

           


          The other option to minimize your headaches for taking your product to market is to license your patent to a manufacturing / marketing company. You earn a royalty on sales and leave the burden of taking the product to market to the company that licenses your design.

           


          All the Best,

           


          Doug Dolan

           

          The Solopreneur's Guide

           

          http://thesologuide.com/