How much money do I need to launch a new physical product? (Part 2. The costs)

Last week we took a good look at validating your product idea and seeing if there’s a market out there to sell to.  

This week, we’ll dig into the costs.  Specifically, what costs to consider and how to find out what they’ll be.

I’m going to take each in turn.

Chipmunk Coach physical product costs

Production

This will most likely be your biggest cost.  Whether your product is bespoke, or a variation on something that already exists (like my muslins, for example), there will be a cost involved in producing it.

How much will vary greatly, depending on the materials used, the complexity involved, the country it’s made in, etc.

Obviously this is a lot to consider and the best way to find out the cost is to get your specification out to suppliers and ask.

I’ve spoken about sourcing from China in previous posts and these might prove useful reading:

If the thought of sourcing from overseas either scares you, or you’d rather your goods were made locally, keep an eye out for an upcoming post about sourcing in your own country.

Remember…

Even if it’s something you plan to make yourself, you still need to factor in the cost of materials and your time.

Any extras

Manufacturers may add on extra costs for things like plate fees (one-off), washing labels (if applicable), labelling products (with barcodes, for example), and a whole host of other things.  Be sure you know what these costs are, upfront, to avoid any nasty surprises.

Also consider any other costs involved in creating your product such as designs for your product / branding / logo / label / packaging, etc.

Packaging

Packaging costs range greatly depending on what kind of packaging you’d like and how much you’d like to customise it. (i.e. a plain brown box will cost less than a printed one.)

You may also find that the MOQ (minimum order quantity) for packaging is higher than for your actual product – so be sure to check this.

Your supplier will also be able to get this cost from you.

Shipping

Whether you’re shipping domestically or internationally, unless you can actually go and collect the products yourself, you will be paying for some kind of shipping.

The method you choose and which terms you use all impact the cost.  I’d suggest these posts for more information:

Import fees

Finally, if you’re importing your goods, there will be fees involved.  

You can choose DDP shipping terms (see articles above), which means you won’t need to handle it yourself but, either way, you’re paying for it.

These resources, for the UK and the USA should prove helpful.

Adding it all up

If you add all of these up, that’s the total cost to get your product created and to your doorstep (or wherever you’re sending it!)

So this will look like:

Product + Extras + Packing + Shipping + Import costs = Total product cost

Divide by the total number of products you’re ordering and you have your cost price per item.

The costs you might forget

Do however remember, that to work out if your profit will be profitable, you also need to consider the other things, that may happen after the product has already been ordered and arrived.  Don’t forget these, as they eat into your margins too.

I’d suggested adding these into a budget, at least for the first few months, so you get a true reflection of what you need to pay,

  • Marketplace fees.  Most platforms charge a flat fee, a commission, or both.  Do look into where you want to sell. Even if you use your own website, you’ll have to pay a hosting fee and possibly a transactional fee for each payment.
  • Storage.  Unless you’re storing goods yourself, you’ll need to pay for this.
  • Fulfilment.  Whether you have a fulfilment provider, or you’re nipping down to the Post Office a few times a week, work out what the costs will be to get your product to your customers.
  • Marketing / giveaways. Initially, at least, you might want to invest in marketing and / or do some giveaways or promotional discounts to get your product moving. Factor this in!

So there you have it, whether the figures look good (and / or scary!) at least now you know much much money you’ll need to get your product launched.

What will you charge?

Just a note that now you know what your product will cost to produce and whether people will buy it.  To work out if it’ll be profitable for you, you need to work out what you can actually sell it for.

I actually suggest putting a price on it before working out the costs.  While that might sound backwards, if you know your target selling price before you get the quote for actually producing your item, you can actually be more objective.

It also means that if the costs you get for production, shipping, etc, just don’t add up to a profit, you can either tweak things so they do, or put the idea aside for now.

The main thing is, you won’t be spending money on something that potentially won’t make you any money.

Validating your product idea

Speaking of which, if you missed part one of this series, head back now to check out how to get an idea of whether your idea will sell – before you even think about parting with any money.

What other things concern you about launching a product?  Comment below and I’ll try to cover them all in future posts.

Interested in launching your own physical product? Sign up and be the first to here when the course is available

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