This is broken down into a low volume startup company, and an even lower volume at home company.
Breakdown is that both end up with products around $750. More after the break
The Good – Fast option
Above is my current calculations on how much a powermeter needs to cost in order to run a company on this as a product. Some of the numbers are rough, but if you look through you see that total cost for parts is around 210 dollars, however each requires a minimum of 5 hours of labour. This is based on a low volume production method. Initially it’ll be closer to 20 hours per unit by my estimate but could easily be brought down to 4 – 5 in batch production methods. I could see it might even drop to < 2 hours in larger batches. Unless I needed to churn out 20 – 30 a day this isn’t possible.
What is your time worth? What is my time worth? That’s the big question. Let’s look at the basics. A fresh out of University undergrad engineering graduate essentially expects 60k/year. Without health, dental, benefits, etc this works out to approximately $32/hr once vacation is accounted for. This totals to about 200 dollars of labour per crank. Lets add that on but lets examine skilled labour as an alternative.
If the engineer was replaced with skilled labour it could be lowered – however a high level of accountability and skill would be required. Based on my experiences this will end up being $24/hr. It may actually be lower, but they will require training, supervision, and…. ergonomic breaks. All of this is tedious work. Strain gauge installation can be very difficult and not something I could do every single day. A bad day can cost hundreds of dollars in gauges, but the real cost is lost time. If it takes 1 hour to install a gauge, it takes an additional 30 mins to remove a bad gauge, and then another hour to get it installed again. I always factor in 1 gauge in 2 to be a bad install, but in reality my ratio is 1/10 or better.
Back to the skilled labour, we arrive that there is no management or facility. Based on some preliminary rental research and rough estimates, approximately $1250/month minimum is needed to have even a basic facility. Based on the expected time frame to make each unit, this works out to 480 powermeters per year. An additional $31.25 is now tagged on per unit.
The next big expense is going to be all the testing required, this totals out to be about 25k. I’m going to amortize that over half a years maximum production capability. Realistically I’d guess that it would take a year to two years to hit that total demand. Though, that is a guess. This brings the price per unit to 533 for engineer assembly, 485 for skilled.
Back to management / R&D / Support / Etc this works out to another engineer employed, but this time it’s full time labour divided over the shipped units. This results in an additional $125/powermeter. I firmly believe that there is a need to continuously improve, design, expand, and debug as well as being there for consumers. A lot of company’s get flack for that last issue. I want to make sure that the time for me to reply to a problem is less than 24 hours at a maximum. It can also be amortized over a higher volume as I’d likely be the one in this role.
What does that work out to? Well, $741/$694 Eng/Skl.
I’m sure that this could elicit reactions such as “you just showed it could be cheaper, your estimates are bad”, or the other end of the spectrum I could get responses of “wow that’s cheap, you just proved everyone who makes these are greedy!”.
I’ve intentionally left out a lot of things. I’m also not to this point of operation and I don’t know when or if I will. I’ll be making prototypes at home, and later maybe in a rented garage or something similar. I don’t know if 500 units/year is a reasonable number or if it is too high or low. If I was to run a small facility with several employees the cost per unit skyrockets.
Cost per meter, $700 – $725.
The Good – Cheap option
Lets assume low volume, second “job” production. You’ll notice costs have gone up for items such as cranks, strain gauges, ancillaries, etc all due to reduced volumes. Electronic components and PCB haven’t changed significantly but what has is the labour. The labour goes up significantly per unit. To compensate, and with the assumption of myself as the only real employee, the labour rate goes down (I’ve halved it in fact). In order to sell production units (though development products are exempt) I need FCC and ANT+ approvals. Assuming free time construction, I could probably pull off 50 units in theory over 6 months if I needed to. Likely more, but it’s hard to say.
Cost per meter, $725.
In conclusion
What does this all mean. It means that moving from one type of production to another type means more overhead, but more efficient production. That being said it looks like I’ve hit a pricing number. Rounding up, approximately $550 for developer units, and $750 for production units. Without high volume manufacturing techniques that seems like the peak. Now, if I were to include “profit” it’d have to go higher. Some more research has to go into these numbers, but it’s a start.