...figure out how to get this keyboard thing not lose me money on every run
This really shouldn't be happening, and Ryan is the last person it should happen to. I have to say I'm a bit concerned.
Agreed. Ryan your prices are fairly towards the lower end of the spectrum given the quality/customization options and especially given that you design cases for keyboards that no one else is working on (with a realistic deadline in mind). You should really look at slapping a flat $20 or even $50 fee on top of your current prices to make sure you end up in the green. That, or partner with Massdrop. You already handle all of your R&D etc. so there shouldn't be an IP transfer requirement to just run GBs through their system. Throw a poll up on there in the next week or two and let it get votes for the next 6-8 months until you're ready to run your next big project.
nobody runs GBs for the money, but ryan should at least be breaking even for how good the end product is
Thanks, guys! I really appreciate that. Firstly, if for some reason anybody is particularly preoccupied with the continued financial viability of my projects, I cordially invite them to pick up a
Norbaforce keyring.
(Though hopefully no appeal to altruism is necessary; I actually think they're pretty cool—check out the video.)
Anyway, I've actually been doing a lot of meditating on this very subject over the past few weeks: namely, my level of commitment to continuing to do keyboard projects after shipping my current on-order group buys (Heavy-6 and Norbaforce Round 3.14). Puddsy's point is well taken, but I believe that if one wants to do anything truly creatively ambitious or interesting, the resources of a profitable enterprise make it much more feasible. As such, I think profitability is a worthwhile goal, even though I haven't yet quite hit that mark. It would simply make it possible to do cooler stuff, and more sustainably.
As such, I had been intending to double-down and make some 2019 investments in my keyboard work/infrastructure in hopes of figuring how to turn it into a more sustainable business that could become a primary focus of my time. However, I still sort of vacillate every day on whether that's a worthwhile goal. This is perhaps a good occasion to muse out loud on the subject and, in so doing, to clarify my own thoughts for myself. And maybe some of you will just be curious to learn a bit of the background of these projects, so I'll indulge in a bit of navel-gazing below.
I enjoy making keyboard-related stuff enormously, but there are two things that make it sometimes quite discouraging. The first one is just the economics. I tend to focus on the quality of the end product and its creative properties, which means hiring various third-party firms to help me with stuff like inspections, logistics, etc., so that I can meet my own standards of cosmetic of quality and the seemingly insatiable demand for me to make more housings available. However, compared to most consumer products, these are fantastically small-scale projects, so I have very little price negotiation leverage with manufacturers and, when it comes to the non-manufacturing vendors, I often find myself carrying the same overhead of an operation that has millions of dollars a year in revenue (whereas my projects aren't even the tiniest fraction of that). For example, my monthly carrying costs for the business, whether or not I sell anything that month, is easily something like $2000+. This includes a bookkeeping firm and accounting software system that are required to comply with IRS requirements, inventory/COGS tracking software (which is shockingly expensive), third-party sourcing and inspection firm, MailChimp subscription, SurveyMonkey subscription, web hosting, Shopify subscription and fees, warehousing and fulfillment fees, etc., etc.. On top of all that, California requires over $1000 in yearly state and local fees just to be able to have a business here, before you take in your first dollar. So that means that, in any given year, even before I've sold a single item, I start out down $25,000. And I can't just sell $25,000 in housings to cover that, because the majority of the retail price on a given item goes to direct costs related to manufacture. That $25k needs to be margin after manufacturing costs are paid. All this just to
break even. And the problem with group buys is that you price them in advance, so you have to have an ironclad handle on what all your costs are going to be before you actually go into production. Any slight miscalculations or surprises and it all comes directly out of that margin, easily pushing a project from the black into the red. So I can find myself investing hundreds of hours of work on a project and a over year of stress, worry, and fighting with factories for quality, as I did with the Norbaforce project, and at the end of the day finding myself actually
paying for the privilege of contributing my time and taking all that financial risk—all due to factors entirely out of my control. Even for the most temperamentally entrepreneurial of folks, this can be a bit demoralizing.
The second issue is that when you're not physically manufacturing the stuff yourself, it's nearly impossible to get manufacturers to care about the quality of the end product as much as you do. The ways factories will try to screw and cheat you are truly endless, and witnessing this firsthand regularly makes me despair for our species. Factories all seem to care only about inputs and not outputs; that is, if they went through the motions of making your parts, regardless of whether what comes out at the other end looks good, they figure they've done their piece and will do everything they can to collect their payment before you have any chance to do anything about it. Factories will regularly deliver parts, representing them as good to go, that absolutely no honest, non-blind human being inspecting the part would have passed as cosmetically acceptable—just hoping that you somehow won't notice, or that the cost will have been so high of shipping and importing them that you won't want to go to the bother and expense of returning them because doing so would cost more than it's worth. With the exception of a couple of trusted US manufacturers (which, sadly, don't make machined parts), this has happened to varying degrees on literally every manufacturing run I've ever done on any product, keyboard and otherwise. Factory visits, QC docs, third-party inspection firms, reiterating my high quality standards across endless conversations before production begins: none of it seems to prevent it from happening. I'm constantly switching factories and searching for better ones after previous ones prove themselves to be somewhere on the incompetent-malicious spectrum; I've explored in detail working with probably about 50 different factories just this year on keyboard related projects alone. I regularly see reject rates as high as 50%, and getting it fixed often happens partially or entirely at my own expense, all the while stressing out as I watch shipping timelines slip, again entirely outside of my control and in spite of effusive assurances beforehand by factories that they're different and nothing like that could possibly happen with them. When I feel like I'm letting people down by potentially slipping delivery timelines and all the vendors I'm working with are figuring out how to pass off inferior product as acceptable is when I really start to feel like it's not fun anymore. I've been having one of those weeks this week, actually. But I know from experience that this feeling also usually passes, and in the end I always figure out how to ensure that only good stuff goes out to people who support my projects.
As to how to start making this process less miserable and someday actually financially self-sustaining over the long term, I have a few ideas. Firstly, I really need to get away from the group buy model. For one thing, it's a lot of overhead responding to requests to change addresses, people selling slots and wanting to switch buyers, changing their mind and cancelling their orders or wanting to switch finishes, and responding to the unending barrage of "any updates?" messages on six different social media platforms (I always push out updates whenever there's anything important actually to report). But, even more importantly, group buys make pricing the product an act of total guesswork, as unforeseen costs always seem to creep into every project, no matter how much experience I accumulate and try to account for things that went wrong on the last project. Producing in advance and then selling in small in-stock batches would make sensible costing and pricing possible. The trouble, of course, is that doing in-stock inventory means making guesses about how popular something is going to be, and also taking a big personal financial risk. The landed cost of a batch of keyboard housings, even around the factory MOQ, can easily run around $40k and well upwards, which to my mind is a lot of money to front, especially when you don't know whether and how many people will actually buy the thing. I recently decided to take this plunge experimentally with my TKL carry bags (coming into inventory any day now, or so I am promised), but I don't really know if I'll sell only 10 or if the whole 200 will sell in a matter of hours like some of my other stuff has. ¯\_(ツ)_/¯
Regarding clappingcactus's suggestion: I'm afraid that switching to Massdrop might only worsen the problems I've described above. It only creates more layers of indirection, money-vacuuming middlemen, and loss of accountability for quality to the final end factory. I don't personally have anything against Massdrop and have only had largely positive dealings with them, especially the lower-levels folks like Yanbo, formerly Kunal, and now my old pal Elbert who works there. However, I'm sufficiently enmeshed in the keyboard community to have heard quite a few truly compelling horror stories from fellow designer-creators (many of them quite well-known in the keyboard world) who have sworn off the notion of ever working with Massdrop after whatever that person's last project was with them. It's enough to give one pause. And, in any event, I simply just don't want to give up control over the QC process and have something arrive on people's doorsteps that's junk, but with my name on it.
Another obvious suggestion would be trying to source outside of Asia, something I have tried endlessly over the past two years to arrange. I don't source products abroad in order to save money; I do it because it's the only way I can find factories even willing to consider the work. Low-volume consumer products with high cosmetic standards are something most US machine shops don't want to touch with a 99.5-foot pole. The ones that are left here in the States prefer exclusively to work with high-paying aerospace and medical customers who don't care about a little scratch here or there because they're functional parts. When, after exhaustive searches, I have been able to find factories that are even willing to quote the job, it varies anywhere from 2-10x the China price (no joke). But a $300-400 housing is already pretty bonkers. It's also very hard to find shops that do finishing work (such as blasting, polishing, anodizing, etc.) at all here, regardless of price.
Anyway, I don't really have any great answers on these subjects yet beyond to persist. I do keep getting better at finding ways of playing the various strengths and weaknesses of certain factories off each other: for example, I have one factory that can do stainless steel cost-effectively but is awful at finishing, so I arrange to get them to make the parts and then ship them to another trusted shop on a different continent to do the finishing work. I use a different place for CNC milling billet aluminum, and yet another for machined sheet goods. And I've been working with a company that does computerized inspection processes that are quite rigorous that might prevent me from personally doing all the final inspections by hand in person. Combining that with more in-stock stuff and fewer group buys (when finances permit) might make things more sustainable. I also have some other big new product ideas that could help bankroll ongoing keyboard work, but I won't bore anyone with those details here, as it's all still very much in development.
Anyway, since a few of you seemed interested, I thought I'd give the full back-story to my rather off-hand comment before. Any thoughts are, as ever, welcome.