Congratulations. Your Kickstarter campaign reached its funding goal. Now you face a fundamental question: are you going to make it yourself or contract it out?
Kickstarter projects that focus on actual, physical products seem to fall into two basic categories in regards to fulfillment strategy: make it in-house or find a contract manufacturer. It may sound straight forward, but it’s really easy to screw this part up. It’s a costly decision that can make all the difference for a project with little room for error.
Each route offers benefits and drawbacks, with the right strategy depending on the specific project as well as the ensuing demand from the Kickstarter campaign. Most project creators seem to have a plan of which route they want to go before they get started. Often times it’s this initial decision that dictates how the creator thinks about pricing and setting the funding goal for the project. The smart “make-it-ourselves” creators know how to crunch the numbers: tallying up an accurate bill of materials, sourcing from low-cost suppliers at bulk pricing (a topic of a future post), and adding sufficient markup to cover overhead and profit. The savvy “contract-it-out” creators rely on a factory vetting process and competitive quotes.
My suggestion: plan for both strategies.
Even though fleshing out plans for both options creates more work, it’s worth it in the long run. Many of the smartest maker/entrepreneurs are already doing this.
If you’re planning on making the entire production run in-house, it can’t hurt to establish relationships with contract manufacturers prior to launching the project. If you get into a pinch (which you will), you know where to go for help. Also, getting quotes and feedback from manufacturers can help expose materials, tools, or processes that will take longer or cost much more than you expected. Many of these manufacturers have been doing this a long time and they’ll price in the externalities – the pitfalls and stumbling blocks that us new makers tend to overlook.
If you already know you’re going to use a contract manufacturer, make sure you do your homework. I’ve heard numerous horror stories from projects that had factories fail them, often times after having sunk huge costs into the process (most recently from the team who made Pen Type-A at World Maker Faire). Going through the process of planning like you were going to make it yourself, although tedious, will give you a much better handle on costs and production timelines. You’ll be better informed when you meet with your manufacturing partner. It’s also worth getting quotes from multiple manufacturers. If one stands out as significantly cheaper, dig into the reasons why.
Also, recommendations are a great thing. Ask project creators (ideally, with a similar product type – electronics, plastics, complicated assembly, etc) who have successfully fulfilled projects if they can make an introduction to their manufacturing partner.
The post-Kickstarter process is never a straight line. And, most likely, the path to fulfillment will be a hybrid of the two scenarios. With OpenROV, we’ve done almost everything in-house, but we have strategically batched out parts of the process for cost and timing reasons. We know the costs intimately and have had several options for each step.
I’d be remiss if I didn’t mention and link to Zach Hoeken Smith’s masterful blog post on The Mystical Art of Cost Estimation.
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