I am working on a new product that is geared towards boat owners and would like your input on the idea and comments on how to proceed with this venture. 

 

The product is a 19 lb remote controlled ROV (unmanned submarine) fitted with a colour camera, providing video to the operator back on the boat.

 

It is controlled with a unit that closely resembles a traditional gaming pad.  Video is viewed with a set of video glasses to eliminate the glare from the sun.  Max depth is 300 ft. 

 

Owners could use them to inspect their hulls, or anything on the ocean floor (wreaks ETC).

 

Admittedly, products similar to this exist already, but are out of the price range for recreational use ($6,000 USD and up).

 

Unfortunately I cannot post pictures of the prototype because I am patenting now.

 

Quality is high - cast aluminum hull, magnetic couplers ECT.

 

List cost would be $1,499 USD for the whole package.  After some time, I think that could be reduced to $999 USD.  COG+duty+assembly is around $300-$400 depending on qty ordered. 100 units would be $400, 1000 units would be $300. 

 

In your opinion - do you think this product is viable for mass production? 

 

 All comments good and bad are welcome.

I have spent 3000-4000 hours designing this product and testing it.  The next step is to complete the final prototype and purchase the moulds required for production. 

I forsee $40,000 USD as being a safe amount to start this project, but would rather find sources other then my personal savings to fund this.  What avenues would you suggest I try?

Thanks for the help,

Jeff

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That sounds like an exciting project. Good luck to you.

List cost would be $1,499 USD for the whole package. After some time, I think that could be reduced to $999 USD.  COG+duty+assembly is around $300-$400 depending on qty ordered. 100 units would be $400, 1000 units would be $300.

Use a 4x to 5x multiplying factor.  COG+labor = $400, sell it for $1600 to $2000. (okay, $1999)

Now, as you place more bulk orders for parts, the COG will drop due to quantity discounts.  I just want to put just a little bit of damper on this plan (based on experience with my own manufacturing)... Yes, seeing the big savings when you place higher quantity is great, and you can see your COG can drop a lot, and you'll become giddy because of the bigger profit... :)  But CASHFLOW is important.  You don't want to tie several thousands of dollars in inventory more than you need to, and be cash poor and don't have liquidity to purchase other materials or services. You don't want to get to a point where you can't complete a UNIT because you're lacking in some key parts, and you can't buy the part because you don't have any money left. Meanwhile, you have $10K in inventory sitting on the shelf.  (Get my point?)

There's also Just-in-time inventory (JIT). You can read more about this and it supposedly saves companies money because your dollars are not tied to inventory sitting on your shelf. You only get the inventory when you need it. Here's what... It may work for Toyota, Honda, or other big companies because they control their supply chain. It won't work for you or any small manufacturer as well as you think. Don't get sucked into this JIT nonsense.  Your enemy will be "lead time" from suppliers, factories, distributors. Just because you need 100 pcs of XYZ part next week, does not mean that the distributor has 100pcs ready to ship to you. (sometimes they do, sometimes they dont).  And what happens when you need this XYZ part and the lead time is 4-6 weeks? Well... you have 4-6 weeks of not being able to build/sell anything... which kills your cashflow (and that is bad.)

So find a balance between JIT and too much inventory. :)  And always have some cash/money all the time (very important.)

In your opinion - do you think this product is viable for mass production?

Do you think there is enough demand for that product?

Do you want to do mass-production?  You have to be realistic in your forecast.  You don't have to be a big volume producer to be successful.  You can be an "on-demand" or "boutique" manufacturer.  You build small quantities, but at very high quality.  And then you charge a premimum.... so let's make your price $2499.

Admittedly, products similar to this exist already, but are out of the price range for recreational use ($6,000 USD and up).

If yours is 10x better than the ones out there, you can probably charge $2999 - and you can still undercut your competition by 50%.

Now, whether individual boat owners will shell that sum of money for something they may only use once in a while, that's another story.

Maybe you can offer rentals?  They rent it for $400 or something.

Or maybe you can do the service for them... and they hire you and your equipment.

I forsee $40,000 USD as being a safe amount to start this project, but would rather find sources other then my personal savings to fund this.  What avenues would you suggest I try?

Bootstrap!

Build one unit, and sell it.  With the profit, buy more parts to build more units.

Build 3 more units, sell it. With the profit, buy more parts. You'd have enough profit to buy parts for 10 units.

<rinse and repeat>

Be patient. Bootstrapping is perfect for this kind of business.

You may find out that the 1st unit has some problems, or the customer requested a feature... so you can fix that problem, or incorporate that feature on the next unit you'll build.

Small refinements to continually improve the product... it's doable.

Be patient. It's not an overnight success. But if the numbers work, and you know there's big profit in it, you'll be fine.

Thanks for the tips.

I work for a medium sized OEM now and know that JIT is impossible unless your Toyota. 

Components for this ROV are offshore, so I would have to start with at least 10 units to keep my suppliers content, and cover shipping.  Lead times are around 20 days.  I can fly any of the parts over if I am in a pinch.  Normally they would go over the ocean.

The other problem is moulds are required to make a few major parts, so 12K is required upfront.  The prototypes were CNC machined from blocks of plastic and aluminum, which is fine for a prototype, but not for production.

JL

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JL,

A few comments and suggestions:

1. As a boater who lived aboard for 5 years, I would not purchase your product to inspect my vessel. The frequency of use for that purpose just wouldn't justify the expense. Maybe there is some other way to reach the boat owner community?

2. I spent some time working with an agency that specialized in assisting small  manufacturing companies and can tell you that JIT and Lean manufacturing can provide a huge benefit to the small manufacturing company.

3. Your $40,000 may be an underestimate of the capital required to bring a product to market.

4. I strongly advise against pricing your product from costs. Before you invest in manufacturing (parts, tools, molds, etc) determine and define the market for your product - including the price points.

Good luck with your project. If you'd like to discuss the specifics of your situation, feel free to contact me directly or send me a PM.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

You need to make it and start selling it. Unfortunately at the start, you will have to self fund. When you start getting traction then investors will become interested. There seems to be many different uses for your product. It comes down to finding the niche that catches on. Universities could be interested in it for research purposes. Coast Guards throughout the world may buy your product. Police and Military could be worth investigating.

Think about using your prototype as a means of getting advance orders. It will be easier to get investment with advance orders.

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iMarketing Ireland- My site for helping entrepreneurs make more sales online.

I agree with byrneof01

Sounds like a great idea. I have noticed boat rental companies send a diver in to inspect boats that are chartered without a skipper when they are returned.

There is a large market in Europe and the Caribbean for this, in recent it has exploded in Croatia. Might be worth looking into.

 

Best of luck

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Daniel
VentureDen
http://www.ventureden.com

Very good suggestions from the posters on this topic, I'll add my 2 cents.

It's good practice to start pricing your product after doing more detailed market research. As Robert has suggested there may be little demand in his geographic region, however as Daniel has suggested, the Carribean and European regions might have greater demand for your proposed product. Bootstrapping might be more useful in some respects, but always consider the big picture and develop a plan on how to enter your target industry.

You might find an investor through my company's webservice at "Capital Matchmaking" at Conektinc

The website is still getting ready for launch, but it is designed to match entrepreneurs with investors based on compatibility. Feel free to sign up and receive updates when we are ready for launch. You will not receive spam and your information will not be used for third party marketing purposes.

 

It seems like a wonderful project to me, to be honest you should start working on it who knows you made a revolutionary product which gives you unlimited revenues on this manufacturing project. But for funds, you have to make some initial funds and then can apply for a manufacturing company for sponsoring your project if it goes all well.

 

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