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Non-Recurring Engineering (NRE) Costs

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.

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