Plan to Proto to Production: Part 2

If the planning phase didn't scare you off, then welcome to part two of our three-part series! It's time to take that revolutionary idea, coupled with detailed market research, and get to work on a prototype. While the design and prototyping phase can be long and arduous, it’s certainly exciting! The goal of this phase is to get a working product that you can use as a proof of concept and take into manufacturing.

In the last article, we discussed how many small businesses fail, how to survive (and thrive) in the market, and strategies to outperform your competitors. Referring back to the postmortem study of startups, 52% of startups fail because they run out of cash and/or they don’t have the right team. We call this "engineering expiration."

The "engineering expiration” is due to one of three significant factors: the wrong engineer(s), financial misplanning, or lack of revision control. Product design is the costliest phase of a new product, and new companies often don't realize this. Many companies will have to spend five to ten times the selling price of a new product on its design, meaning that positive cash flow won’t be realized in the first year or two. And this only covers the basic design, prototyping, and tooling. If you have a genuinely innovative or unique product, you’ll want to patent it as well, which can run another $5,000-$20,000+. Once again, we realize this sounds very "doom and gloom," but we have a few simple things to keep in mind to avoid engineering expiration.

Regarding The Wrong Engineer(s)

Unfortunately, for every engineering success story, we’ve heard a horror story. An engineer, or engineering team, is the most critical aspect of bringing a product to life. The speed, accuracy, and cost of engineering resources affects your design phase heavily. When it comes to finding your engineers, you can hire directly or outsource.

• Direct hires are a great option if you have the funds to hire full-time staff and know one heck of a recruiter. If you’re willing to offer it, company equity is a great way to supplement pay and motivate staff to reach milestones. The downside is that success falls on you and your engineers alone, and it can be difficult to confirm the skillset of the engineers before hiring. Potential employees tend to over-sell themselves, so this can be a challenge, especially if you don't know what questions to ask or what red flags to look for. If you have your heart set on hiring an engineer directly, we’re more than willing to assist you in vetting them.
• Outsourcing has its pitfalls, but the good news is you can do your research! If you’re using an engineering firm, check their reviews and ask for references from their former clients. Ask those clients how complex their design was, how long it took to receive their design files, and how often those files were revised. You can always ask a contract manufacturer (CM), like ourselves, for an engineering referral. The upside is that CMs typically work hand-in-hand with the engineering firm they refer. Speaking from experience, a CM wouldn't refer an engineer that architects projects that cause headaches.
  Ensure you get cost estimates, executed NDAs, and firm contracts in place before work is begun. Engineering is expensive and an engineer's time can range from $90.00 per hour on the low end to $250.00 per hour on the high end. And the more complex the project, the more expensive, and the less we recommend outsourcing. You’re probably not the firm’s only customer, so if you have a project that would typically take six to eight weeks for a full-time hire, it can take a couple months or longer for a firm to complete.



Regarding Financial Misplanning

Whether it’s a home renovation or a tune-up, it seems as though problems with a project can appear out of nowhere and cost you more than you thought – or budgeted for. To be safe, you should add an additional 50% to 100% of your projected design cost to your forecasted budget. It’s always better to come in under cost than over! Under-budgeting can leave you scrambling for investors and put you in a poor negotiating position.

Software engineers, mechanical engineers, component obsolescence, incorrect component datasheets, prototyping costs, and product pivoting are all costs that can sneak up on you. The hardware is always the obvious cost, but who is writing the program for the PCB? Do you need a user interface? What will the end-user product design look like? What happens if the factory makes a mistake on the datasheet, and your engineer must troubleshoot and redo the design? These are all common issues and have uncommon costs associated.

While you can't predict all costs, asking upfront can help mitigate your risk for a few. Ensure the hardware designer is including software and mechanical design in their price. If not, get a quote. Sticker shock is common in the prototyping phase – depending on the prototyping house, the cost of 5 units can be as expensive as 50 or 100. As counterintuitive as it may seem, avoid getting more than you need. Buying too many boards in the prototype phase has its own set of headaches and hidden costs (more on that in the following article).




Regarding Lack of Revision Control

This is the silent killer. It seems so simple, yet "scope creep" is a genuine issue we have seen put more good companies out of business than the other two issues combined. Lock down what you want your product to do in the first revision. Far too often, we see companies add small changes and features to their initial product, placing them in a constant “it can be even better” engineering loop. To quote Voltaire, "The best is the enemy of the good."

More frequently than not, when a company is frustrated with engineering and a prototype hasn’t been manufactured, it typically comes down to either unreasonable expectations or scope creep. Scope creep is far more common and can be summed up as:

• We want feature X
• Engineering begins work
• We also want feature Y
• Engineering modifies work
• We also want feature Z
• Engineering modifies work
• Repeat until you go out of business



To fix these issues, control your revisions and your expectations – especially on the first product. Unless it is indispensable, get the first iteration of your product to market, then build on it.




Proto To Production

We love hearing from potential customers and enjoy nothing more than getting a product to market that started as an idea. Avoiding engineering expiration is much simpler than most make it out to be, so take that chance and get started! Don't fall prey to the common pitfalls and read on into the third and final portion to get tips on moving from prototype to production next month.

P.S. The third part is kind of our specialty!