first-timer questions on selling kits

[awesome-o]

Hi there,

I'm looking to put together kits which include some hardware and an instruction booklet. I've never sold a physical product before, though, so there's a lot of stuff I'm not sure about, like:

- What kind of product warranty is reasonable to offer customers?
- Where do you get packaging (ie. boxes or bags) and what kind of packaging works well?
- Are there good places to get instruction booklets printed?
- How do you handle online payment processing?
- How do you figure out prices? What kind of profit margin is appropriate? (I am guessing this can vary a lot?)
- Can you get special deals on hardware if you are reselling things like hard drives or SD cards as part of the kit? Are there any "gotchas" about reselling hardware, or places to get good deals?
- Should I get product liability insurance, or is that a waste of money?
- What are the best distribution channels? (ie my own web site, or are there good third-party sites for selling kits?)
- Is there important stuff that I am just totally missing?

Thanks to anyone out there who has advice, all tips are greatly appreciated!

[BruceF]

Is there important stuff that I am just totally missing?

The main thing is that a kit business (like any other business) is a lot of work, and you have low odds of success if you don't do a good sized pile of your own research and business planning first. Nobody's going to be able to provide the exact right (for you) answers to that list of questions and in effect just hand you the template for a shiny new kit business. What works best for you depends a great deal on what you enjoy and are good at, and on top of that, not all kits and kit markets are the same.

Here's one thing from the blog on pricing that you'll definitely want to read and think about, and there's lots of useful information in this kitbiz forum that you should spend an afternoon reading through. Did you see the recent thread on postal services, for instance? Have you gone to their sites and tried to puzzle out what kind of service it is that they offer, and how it might be relevant to you? There is a great wealth of information here, if you're willing to dig just a little bit.

And good luck! The world needs more kits.

[Len17]

Adafruit has posted a bunch of info:
http://www.ladyada.net/library/kits/index.html
http://www.ladyada.net/wiki/partselector (includes packing supplies)

[adafruit]

we have a general overview here of adafruit:
http://blog.makezine.com/archive/2010/0 ... tries.html
http://www.slideshare.net/adafruit/hope2010-4790096

we also have a 15 step outline here:
http://www.edn.com/article/470126-Voice ... siness.php

and some tips here:
http://www.ladyada.net/library/kits/index.html

- What kind of product warranty is reasonable to offer customers?

we usually say 14 days after receiving the product, for some stuff like assembled products we're pretty flexible depending on what the issue is, and what the customer posts up here in the forums.

for kits is a little hard since it's basically parts. in general we say that we're reasonable and will come up with a fair solution with the customer. we're not sure a one-size-fits all will ever be something we do given the diversity of our products.

- Where do you get packaging (ie. boxes or bags) and what kind of packaging works well?

we like uline and list it all out here under shipping:
http://www.ladyada.net/wiki/partselector

- Are there good places to get instruction booklets printed?

we print ours out on a xerox solid ink printer and/or we post the documentation online and folks can get instructions or print them out on their own.

- How do you handle online payment processing?

paypal and authorize.net for credit cards.

- How do you figure out prices? What kind of profit margin is appropriate? (I am guessing this can vary a lot?)

chris anderson who runs diy drones and also WIRED based some of his margins on a presentation we did, here's what he says:

"Thus the rule of 2.3x. You should price your product at at least 2.3 times its cost to allow for at least one 50% margin for you and another 50% margin for your retailer (1.5 x 1.5 = 2.25)."

http://blog.ponoko.com/2010/11/16/ten-r ... 94-rule-1/

40% or 30% are also often used.

but - just want to note that the ponoko blog post has incorrect math, margins are INVERSE

so 50% margin is 100% markup. 2 x 50% margins is 400% markup, not 225% which is actually 2 x 30% margin (or so)

- Can you get special deals on hardware if you are reselling things like hard drives or SD cards as part of the kit?

for sd cards we've spotted deals at petra, or j&r or even bulk sellers on ebay. for deals on hardware lots of googling and emailing.

Are there any "gotchas" about reselling hardware, or places to get good deals?

usually buying 1 to test out makes sense.

- Should I get product liability insurance, or is that a waste of money?

for that you should talk to an insurance carrier in your local area to see what they think and what your exposure is. they'll give you a quote and you can see if that's something you want at this time. most businesses after awhile do carry some type of insurance, it's really how you feel about these types of things and where you're at starting your business. we can't tax/legal/insurance advice, but there are tons of experts who do this for a living.

- What are the best distribution channels? (ie my own web site, or are there good third-party sites for selling kits?)

a lot of makers (kit world) resell through maker shed, but it all depends on the product. there's thinkgeek, adafruit, sparkfun. but going direct first to work out any issues with the product and optimize your product is usually a good start.

great questions!

cheers,
adafruit

[Shaos]

we also have a 15 step outline here:
http://www.edn.com/article/470126-Voice ... siness.php

Right now I'm slowly moving through these steps and see that this list is kind of oversimplified - in reality things are a little bit more complicated...

[adafruit]

Right now I'm slowly moving through these steps and see that this list is kind of oversimplified - in reality things are a little bit more complicated...

everything is more complicated than a 1 page article in a magazine. we do our best to provide tons of resources here, hundreds of posts, dozens of articles, videos, talks at conferences, live video shows with q&a. they're guides, the best and only ones out there we think, they are not a second by second instruction set for life or business - that would not be possible

everything everyone needs is out there, the only thing that will not be - is you're drive and motivation to get it done, that's the one thing no one can provide to anyone!

last night on our live video show-and-tell a 14 year showed his kit, he designed it, made boards, made the web site, sells them online and is going to maker faire to sell his kits.

http://www.lookwhatjoeysmaking.com/

kids are great when it comes to these things, they don't know how to fail.

cheers,
adafruit

[Shaos]

yes, adafruit did a great job to popularize kitbiz - thanks!
but I think it should be useful for many to have some kind of open user-driven community to share real-life practical experience in kitbiz (probably with a standard disclaimer that it is not tax or legal advices) - actually this forum is a kind of that imagined community, but right now it is not systematized - for example people are asking the same questions over and over again (there is no FAQ here)
when somebody has started kitbiz that brilliant 15-step article is not enough anymore - deeper view is required - so options are go on yourself and learn on your own mistakes or learn from others and share your experience for next newbies - I'm ready to learn and share

[adafruit]

yes, adafruit did a great job to popularize kitbiz - thanks!
but I think it should be useful for many to have some kind of open user-driven community to share real-life practical experience in kitbiz (probably with a standard disclaimer that it is not tax or legal advices) - actually this forum is a kind of that imagined community,

we think so too! "Forum rules: Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions! "

there are TONS of great questions and answers and resources here, and a disclaimer.

but right now it is not systematized - for example people are asking the same questions over and over again (there is no FAQ here).

please feel free to write a FAQ if you'd like to help out with this (or anyone else) we don't think we'll be providing a specific kit-biz FAQ at this time, we have a collection of resources we've created we might do a post with just all of that however! if you could collect what you think the most FAQ that would be helpful too!

when somebody has started kitbiz that brilliant 15-step article is not enough anymore - deeper view is required - so options are go on yourself and learn on your own mistakes or learn from others and share your experience for next newbies - I'm ready to learn and share

we don't think one article is meant to be the only resource, you're here posting questions, reviewing all the links and resources the process never ends, we learn something new everyday and try out best to share it as well.

what additional information are you looking for that's not here, google-able or in a presentation we've done (and follows our kit-biz forum rules?).

cheers,
adafruit

[Shaos]

we think so too! "Forum rules: Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions! "

but almost any question related to "running a business" has legal nature...

[adafruit]

but almost any question related to "running a business" has legal nature...

that's not correct, margins on kits, how to use services like USPS/UPS, paypal, authorize, packaging materials, part suppliers, zen cart mods, reselling options - etc... most questions here are not legal questions.

shaos, at this point if you're not satisfied with anything we've provided please let others post instead, thanks.

cheers,
adafruit