Blog Archives

Many people who hear the word “entrepreneur” or “start-up” typically think of a software team that came up with the latest and greatest app or web-based solution.  Most people don’t correlate the word entrepreneur with somebody developing hardware or physical products but the fact is that many aspiring entrepreneurs migrate towards software rather than hardware due to some false beliefs or myths.  In the next two blog posts, we will discuss eight common hardware product development myths that are commonly discussed in entrepreneur circles. Don’t believe the hype, get the facts and build something you’re passionate about.

(1) Hardware development is prohibitively expensive

Hardware and software product development are not easy and both have more similarities than differences in terms of the cost.  Both require engineers, tools, computers, time, and money, all of which are hard to come by as an entrepreneur.  If you are developing a hardware product for the first time, here are some hints on how to minimize your burn rate as you proceed along the product development life cycle .

• Work with an engineering services company that has flexible billing arrangements such as amortization of engineering cost into product manufacturing or fixed total engineering costs. Avoid the hourly engineering rate which requires you hand over a blank check to an engineering services team.

• There is usually no need to spend money on any expensive production tooling in the early prototyping phases. Even if a production-like method must be used to produce a part in a prototype, the cost can be minimized by fabricating only what is absolutely necessary to make the parts.

• Only fabricate the quantity of prototypes sufficient to meet the needs of the team plus a small number of replacements. Do not fall victim to prototype companies that demand a minimum order quantity (MOQ) of prototypes. You run the risk of filling your garage with units that will never see the light of day.

• Use the early prototypes for as much qualification testing as possible. Many times, there is no need to use production parts from expensive production tools for early qualification tests. Work with your end to end service team to map out a test and qualification strategy that allows you to test as much as possible on early prototypes.

• Once you enter into the production qualification phase, try not to lock up cash in expensive inventory by purchasing large quantities of your product. Work with your team and supplier to get a smaller volume, say 1000 production products, that will allow you to test out the market prior to ordering more. This will also prevent expensive inventory reworks.

(2) Service providers and suppliers don’t work with entrepreneurs

Many entrepreneurs have the false believe that all suppliers only want to work with companies that have lots of money and large production quantities.  The real truth is that suppliers really just want to be involved in successful products.  Your success equates to their success.  In order to find suppliers who work with micro-enterprises or entrepreneurs, network at entrepreneur and start-up groups and ask for recommendations.   Entrepreneurs shouldn’t just try to find a service provider or supplier that is willing to accept them as a client.  The entrepreneur should strive to work with a world-class supplier who is capable of fulfilling all their end-to-end product development needs.  This includes services starting at the idea stage all the way through the manufacturing demand fulfillment.

At first, it can be difficult to get the attention of a supplier when you are an entrepreneur with a product idea and without much money.  In the end, you need to convince the supplier that it is worth their time to team up with you to help get your product onto the shelves and into the hands of customers.   This requires that you show them the dedication and persistence you have for your vision.  Show them prototypes, customer data, letters from distributors, and the business plan.  This will provide proof that you are a devoted entrepreneur who wants to team with a world class supplier.

(3) My idea will be stolen by my suppliers

There are just too many stories being told of entrepreneurs who have had their ideas stolen by service providers or suppliers.  This has created an entrepreneur paranoia that prevents open communication with suppliers and sometimes prevents the entrepreneur from developing their product idea.  As a general rule of thumb, suppliers have no desire to steal ideas.  Suppliers know just as well as entrepreneurs that executing an idea is extremely difficult.  These suppliers are focused on running a business and your product will help them grow the business.

Aside from the legal protection of non-disclosure agreements, patents, trademarks, and copyrights, the entrepreneur should follow these words of advice if they are concerned about intellectual property theft:

• Try to avoid working with suppliers who have direct access into the market you plan on selling.  For example, don’t work with a flashlight supplier who sells to the largest retailers in the world if you have a unique flashlight design.
• Break up the product design and manufacturing into separate suppliers who don’t work with each other.  This will prevent any one supplier from having all the pieces to the puzzle.  A good end to end solutions service can help you with this strategy.
• Trust your vendor and develop a long-term relationship.

(4) I need to manufacture in China to be successful

There is a myth that product manufacturing must be done in China or another low wage country if an entrepreneur wants to have any chance of success.  Fortunately, this myth is untrue and there are cost-effective and technically advanced suppliers located throughout the world, serving local markets.  For example, the United States still has an extremely large manufacturing base and in particular Southern California has one of the largest manufacturing bases in the United States.  As written in the report Southern California is the nation’s largest manufacturing economy, if Southern California were a state, it would be considered the third largest manufacturing “state” with 765,000 people employed behind California and Texas.

When entrepreneurs are first starting out to develop their product, think about local service providers before picking up the phone to speak with a supplier half way around the world.  Entrepreneurs do not need to travel to China or another low wage country to successfully manufacture their product.

To Be Continued……..

Need more information? Please contact us with any questions or contact me directly at joseph.donoghue ( at ) leardon.com