June 19th, 2008
Some clients insist on a quoted project price. As a design company it is very hard to sustain ourselves on flat rate projects. Once we start designing a new product and the client evaluates it, they almost always have new ideas and improvements based on what they have seen.
Estimating the time a project will take is a tricky process. It is, after all, research and design. We do our best, but honestly, it’s very difficult to create a concrete projection. You just don’t know what the obstacles will be, and how hard they’ll be to get past. Generally that means creating an estimate and adding ten to twenty percent depending on the number of disciplines involved, the state of the requirements and client history. That’s not to say we don’t ever take the chance, we’re just pretty cautious when we do. Sometimes we have taken a loss, and sometimes we have declined to submit a proposal. It depends on the project.
In one case the potential client wanted a detailed project plan completed as a quote. It was an exciting project, and we would have loved to get it, but it would have taken hours just to set up the plan, and we had no assurances that the project would have been awarded to our company. We also had no guarantee that our project plan would not have been used by another company. We would still love to take on projects like that one. It would be nice to find a way.
June 9th, 2008
Recently we signed a contract with a new client to work on reverse engineering an existing product. I took one of our engineers to meet this client to talk with him and to find out the actual requirements of the product, so that the engineer would be prepared to make those changes in his design implementation. The interesting part was that while the engineer & the client were talking alone, the client said “hey, you know, I really need this thing by the end of July, but don’t tell the owner, I don’t want him to worry about it”. Now, I appreciate his concern, but that’s something I need to know. Scheduling time for a project without a deadline is a very difficult thing, and if I had not been told about the July deadline, we might have failed this client, just because he didn’t want me to “worry about it”. I need to make sure that doesn’t happen. So how do we encourage our clients to be up front with us and to really give us the scoop on what they need?
June 24th, 2007
In order to develop this replacement product I have estimated approximately 100 hours of labor. It is always hard to estimate the amount of hours required. The are so many variables that can impact the time and cost of any development project.
In this specific case we are redesigning an existing product, which limits the time involved debating what features the product will have. We also limit the product development time by controlling feature creep.
The customer is already selling the unit. They have dollar amount they can invest in NRE and they know how much they are currently paying.
As it turns out, our estimated NRE costs are higher than the amount they have in their budget. Fortunately, because we are designing a product to their specific requirements, and because we are eliminating the profit margin and overhead of the previous large manufacturer, we are able to add a royalty to each unit.
This is one of the ways a smaller startup manufacturer can compete with larger already established manufacturers. Almost like sweat equity when you buy a fixer-upper.
“An entrepreneur tends to bite off a little more than he can chew hoping he’ll quickly learn how to chew it.”
— Roy Ash: President of Litton Industries.
June 18th, 2007
It always amazes me the way some new projects come our way.
I was recently contacted by someone who used to manage the company where another engineer I know worked. He contacted the other engineer about creating a product that another company is discontinuing.
As near as we can tell they are stopping production because their sales volume does not justify redesigning the product for ROHS.
The company that contacted us sells 75-100 units per year. As a small manufacturer trying to build our business, we believe it is worth investing NRE (non-recurring engineering costs) at a reduced rate in order to have a new product to add to our current production.
“The secret of my success lies solely in my tenacity.”
– Louis Pasteur