What would your life be like if you spent your time working on your own project, making enough money to live the life you want to live? Hold that image and think about what it would take to get there.
First of all, you have to pick an idea that you love. Remember, this project is going to take over your life!
When I came up with the notion of TV-B-Gone (makezine.com/go/tvbgone) universal remotes, I couldn’t know how it would change my life, and a bit of the world. I learned a great deal from the process of bringing it from a mere idea to a successful reality. By sharing my experience, I hope I’ll help make yours that much easier.
The steps I’ve outlined in this article may not seem all fun. But remember, each step along the way, the process is based on a project you totally love, and you know deep inside that you need to put it out into the world. The lows are something to get through to learn from.
The highs are incredible! You’ll meet people with ideas to support your idea. You may travel places where you’ll meet more incredibly cool people. You’ll learn so much about yourself and the world as you play parent to your “child” and watch it find its own place out there, knowing that you can take these experiences and use them to make your idea (and your next ideas) work better, with fewer problems, and more fun. The process is incredibly fulfilling.
1. Build a working prototype (of product and package).
You may not be an expert at everything. To build my prototype, I coordinated a bunch of friends to help with the tasks they’re good at: to do a printed circuit board (PCB) layout, to design the case, and to create mechanical drawings for the remote.
I also tasked friends to create graphics for the packaging and website, to design, program, and host the website, to incorporate the company (a lawyer friend), to set up accounting software, to do publicity, and to do fulfillment and shipping. You’re the one who will coordinate all these people’s tasks into a unified vision.
In addition to these, some things needed to be done that were a surprise to me:
Barcode — If you want to sell your product in stores, you may need a barcode printed on the packaging. GS1 (gs1.org/barcodes) is the organization that keeps track of all companies’ barcodes.
Package design — Nearly all products need to be sold in some kind of packaging, and there are many shapes and sizes to choose from. The one I chose is called a clamshell, since it’s hinged and opens up from the bottom, somewhat like a clam.
I found out that the size of the package is important. If a package is too small, that may limit the price people are willing to pay for it. But if a package is too big, it costs much more to ship and to store.
Carton design — The factory where your product is manufactured needs to put the finished products into shipping cartons. How many units do you put in each carton? If you want to sell wholesale, you have to pick a number that buyers want. I chose 20.
Someone needed to design the carton so that it fit these 20 in such a way that they wouldn’t get damaged in shipping. A designer also needs to size the carton so that an integral number will fit perfectly on a shipping pallet in all directions, and needs to know what markings to put on the side of the carton to please customs officials and tell recipients what’s inside. Fortunately, my manufacturer was able to design my shipping carton for me.
2. Obtain funding.
Manufacturing your project takes money, but not as much as you might think. To develop TV-B-Gone took about 18 months of my time, and about $2,000 of my dollars, including a trip to China to check out the manufacturer I finally chose.
There was an additional $10,000 in non-refundable engineering fees (called NRE fees) that I had to pay my manufacturer for all the tooling necessary to make the plastic case and the plastic packaging, and for setting up the cool artwork for the packaging, and such.
When it’s time to truly press the Spend button and get your first units manufactured, you need to come up with the money to pay for each unit. Depending on your project, this can vary from a fraction of a dollar to several dollars apiece. Since the minimum quantity most manufacturers will consider for production is several thousand, even if your product only costs you a few dollars each, the cost multiplies quickly.
Where do you get the money?
I borrowed from friends and family. The advantage of this approach is that everyone who gave me money likes me, likes my project, knows I’ll do my best to pay them back, and, luckily for me, did not require a large amount of interest in return.
Another route is “angel” investors who have spare cash to invest in cool projects. If you need millions, I’d suggest rethinking the cost of your project, as your only alternative is probably a VC (venture capitalist), which often means losing control of your project (and your ability to love it).
3. Manufacture your product.
It’s much easier to have a life if you hire a contract manufacturer (CM) rather than manufacture your product by yourself. Many CMs can take charge of the process and turn your idea into pallets of packaged products. However, the more aspects of your project you have completed beforehand, the less the CM will cost. Most people go to a CM with a prototype of their project, complete with artwork for packaging, and the CM takes it from there.
It’s important for me that TV-B-Gone makes the world a better place, and not at the expense of the people who manufacture it. I used the following criteria in choosing my CM:
Good quality production
Treat and pay their employees well
Have and adhere to safety standards
Treat the environment well
Give me a price I can afford
The CM I chose fulfilled these criteria. They had an office in the San Francisco Bay Area and manufacturing facilities in China. Since my criteria are important to me, it was worth a visit to China to interview the people personally and to check out the plant for myself.
Since your project will be manufactured on assembly lines, your CM will create an assembly process that makes sense for your project. Your CM orders the parts and may hire other companies, as needed, to make the electronic boards or make your plastic cases. Once these are ready, the assembly line can begin.
No matter where you manufacture, the cost and time of shipping is a consideration. Shipping companies, called freight forwarders, charge by weight and volume, as well as distance. It turns out that even with import tax and shipping costs, it was much more affordable for me to manufacture outside the United States. Air shipping is the fastest — about three days — but costs about four times as much as surface shipping, which takes about a month.
4. Market and sell your product.
You now have your product manufactured, and shipped to you. So where do you sell it? Stores? Online? What’s the retail price? What’s the wholesale price?
Pricing — I started out thinking I would only sell TV-B-Gone online. If I sold it for $14.99 (all prices in America end in 99), and my cost per unit was a few dollars, then I’d make a bunch of dollars per unit. Seems reasonable. But if you have a popular product, you need lots of help. And you have to pay your help.
And if a store wants to buy your product, then you have to sell to them for about half the retail price. There are many larger stores that prefer to buy from distributors, and the distributors need to make money.
I chose to accept credit cards online, which meant I needed a credit card processing company, who, along with PayPal and Google Checkout, all took a cut.
Oh, and then there’s the cost of hiring a company that answers phones for wholesale customers’ orders and sends these larger orders to my fulfillment center.
With all my hard work, I was barely breaking even. I had to raise the retail price to $19.99.
Then I learned a lesson in retailing: the retail price should be set at five to six times your manufacturing cost!
Website — You need a website, of course. Make it look good! You’ll need an online shopping cart to sell your product. These can be purchased, or you can program your own, as I did. Make it easy to navigate to the Buy page, and simple to go through the buying process.
Order fulfillment — When customers place orders, you need to get your product to them. This is not trivial! You could fill a few orders a week yourself. But imagine receiving more than 20,000 orders in the first several weeks, as happened to me. I had a wonderful problem on my hands.
Luckily for me, my friends hired their friends to stuff mailers with TV-B-Gones, label them, print and apply postage, fill out customs forms — it was an international business from the start — and get everything to the post office, working like crazy day and night. This was stressful!
Fortunately, fulfillment houses exist to perform this task. As with your CM, you need to know that your fulfillment house is doing its job. I went through three before I found a match — the right products were getting to the correct customers on time.
Customer support — Be ready to solve problems for people who buy your product. To minimize the amount of support needed, make sure the instructions are plainly visible on the packaging.
You’ll probably want to hire someone to answer the flood of emails you’ll receive.
I have a set of answers to frequently asked questions, all of which are on the FAQ page of the TV-B-Gone website (tvbgone.com).
Publicity — How do you get the word out about your cool product? Advertising is expensive. But there’s free advertising that’s actually better. It’s called “news.” Media outlets are always looking for content. Give it to them, and they’ll love you. And if one high-profile website or magazine or radio or TV program picks up your story, then others jump on board, and soon the world is talking about your project!
Mitch’s One Rule of Doing Business
This is the most important paragraph of this entire article. This rule was developed with a considerable amount of pain on my part and I implore you to take it to heart. Here is my one rule: Only do business with people you like!
This rule applies to all aspects of doing business. It applies to employees and contractors that you may want to hire. It applies to the people lending — or even giving — you funding. It applies to companies who provide services for you, and to people who want to give you publicity. And it even applies to your customers.
With my TV-B-Gone business I pay all 12 people who help me. I get what remains. It turns out that this is just barely enough for me to live on. And that’s great: I make enough money to live a life I love!
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