I recently had a question sent to be about the price of a product that I sell. I sent that person a reply. But because there are quite a few of us members here that are also Vendors in one form or another, I thought it would be helpful to post an excerpt from my response here.

As motorcyclist, surrounding ourselves in the 'motorcycle' world, we sometimes loose sight that on the grand scale of things we are a small market and small markets tend to equate to small production runs and other factors that, in the end, makes products in our world seem out of reality when compared to another, for instance, 'auto' world.

My response wa:

I am not insulted, I would not expect everyone to be fluent in the costs associated with producing a product and putting on the market at a fair and reasonable price, for both sides of the equation.

In the case of the harnesses, you obviously haven't taken the time to really evaluate the manufacturing cost. Looking at materials, did you price them out? How about 1 complete roll of tape to wrap each harness, go on the internet and find your best price for a roll of 3M 33+ tape. How about the 10 connectors ranging in price from $2 for the cheapest to $19 for the most expensive. Then throw in the required diodes, sequencer modules, and other odd supplies.

Now labor, taking into account a couple dozen wires of various lengths and colors, a couple dozen hand soldered splice joints, and sixty some odd terminal ends; how many hours would you take to build one? What it your time worth?

Do you have the equipment to do the job? I bought mine.

Time, process, and considerations that went into design we won't get into specifically, but would you put any value on it?

We basically covered direct costs, what about profit? Should a business earn a profit, or just conduct business for the jollies?

Yes, I could probably cut some costs and put the product out there at a lower final price. Like in my first example, the tape, you can buy vinyl electrical tape for $.99 a roll. But there is a difference between 3M 33+ tape and $.99 a roll tape, and I won't sell crap. I could also cut my profit, but then why bring the product to market to begin with.

All that being said, no product is worth more or less than someone is willing to pay for it. So far over a hundred satisfied customers have acknowledged the quality and value of that particular product.

I hope I have not offended you. I hope that I have convinced you that not all business is out to screw a person out of every possible dollar. Some business people, like myself, work hard at trying to offer value for the dollar. A pencil is a pencil to look at, to understand it, it is a machined wooden tube filled with a graphite compound suitable for writing at a certain color, painted, and topped with a rubber eraser held on by a formed metal band. 

End

Every Vendor I have had contact with on this forum and the VMC site have proven, to me at least, to be quality upstanding businessmen just trying to make an honest buck without screwing anyone, while enjoying the 'sport' and life.

As the owner of two businesses, one that I have been involved with since I was 9 years old (I am now 45) and having started the second within the past year; I can say this, there is making a profit and then there is making a profit.  I am of the Henry Ford school of thought when it comes to profit, that being that you set your price just high enough that you make a decent profit yet low enough that you sell more.  This is the thinking that I would rather sell 10 items and make $5 profit per item than sell 5 items and make $10 profit per item, you sell more, make the same profit but have your name also in the minds of more customers.  While I ended up losing money on the exhaust tip run due to higher than quoted plating costs, I only had my profit figured into the basic machining of the product.

Just so you guys know, the standard hourly rate for a machine job shop hasn't gone up much in the past 10 years and that rate is between $55 to $65 per hour depending on what part of the country you are in.  If you have to go to an outside shop to do your manufacturing for you then they are getting some of your profit as that hourly rate for job shop work also includes their profit on doing the job for you.

The exhaust tips I sold ran nearly 3 hours of machining time alone, plus material costs of about $45 per set, plus the cost of the studs, button head screws, then the shipping materials and such which is considered overhead and you can see how the price of something can suddenly start creeping up.  I have decided I will not be doing another production run of the exhaust tips until I have the time to do them on my own cnc lathes and machining centers, then I will be able to keep my base cost the same (my profit will be in the hourly rate I figure for machining) and any increase in cost will strictly be due to plating costs.

BTW, I have been in contact with company that used to make many accessories for the Honda Goldwings to see if they want to take my design for a tubular style trunk rack and produce it since they have all the manufacturing capabilities for working, welding, and chrome plating tubular steel.  I told them that we have to keep the price similar to the tubular racks that are available for both Goldwings and H-D Ultras, that being around $130 for the rack.  If all goes well they should have the first prototype pieces to me by January.  I'll keep you guys who are looking for something that is functional, good looking, and far less costly than the racks that are currently offered appraised of the progress.

Mr. Wizard