If you try to find information on the cost of product design, most sources will give general indications, often surrounded by numerous caveats about the complexity of specific projects, etc. Whilst it is true that each project is different, and that complexity does have a major impact on costs, such general advice does not help anyone trying to work out the budget for the design of a new product.
So we thought it would be useful to not only show specific costs for a genuine project, but also to publish the project proposal (see the panel on the right). This means that we are sharing not only how we approach costs, but also how we break down a project into stages, and the work that results from each phase. Are we mad to be so open about our costs and methods? Possibly, but we think it is important to be utterly transparent about how we work and what we charge.
Meetings and discussions
To begin at the beginning, we’re happy to sign Non-Disclosure Agreements before you tell us about your project (provided they are reasonable) and only charge travel costs if visits to you are frequent and/or involve long distance travel. We do not charge for initial briefing meetings with clients and the preparation of a comprehensive design proposal (see the panel on the right for an example). This means that we are happy sit down for an hour or two to discuss exactly what you need from your new product design and then prepare and send you a ten or twelve page document that sets out our understanding of the work needed and how much it will cost.
So far, so free, with the possible exception of travel costs.
Our daily charge is £600.00 plus VAT. Of course, that doesn’t mean much if you don’t know what we can deliver in a day’s work. That is why practical examples are essential to put the costs into some kind of context. Most of our genuine project proposals are bound by client confidentiality, so we cannot publish them.
We do, however, have one project that we created for ourselves when we decided to design a monitor stand and mounting bracket for a Mac Mini computer. Although it is a relatively simple project, involving mostly sheet metal construction, we thought it would make a good example of how a project is structured and costed.
We understand that it may not relate directly to any project that you may be considering, but it is hopefully more useful than a bunch of generalities and bracketed costs that tell you next to nothing. The complete proposal can be downloaded using the link on the right.
The product that resulted from the proposal ended up looking like this:
The design proposal
Our design proposals follow a standard format that we’ve developed over the last 20 years. We view them as discussion documents, not ‘take it or leave it’ statements. We always use plain English and avoid professional clichés like ‘ideation’.
The document starts with a summary of our understanding of what you need to achieve based on our briefing meeting. This is a chance for you to correct any misunderstandings that we may have and ensure that our project plan will accurately reflect your requirements.
The main body of our design proposals is divided into project stages, which usually - but not always - come down to concept design, technical development, prototyping/testing and production data. Each stage sets out what it is for, what we do in the context of your project, what the results of each stage would be, and how much it will cost. All our proposals have each stage separately costed and each one is billed individually. So, if you got to the end of the concept stage and didn’t want to continue, that would be your only commitment (Something that, we’re glad to say, has only happened once since we opened our doors in 1990).
The costs given in our proposals are either quotations or estimates. If the work requirements are clear, we will give a firm quotation and that will be exactly what you are invoiced for, unless you change your mind and need additional work doing. Such additional work will be costed and agreed before it is carried out and invoiced. If the work requires some clarification, we will give you an estimate and firm it up into a quotation when we have the additional information we need. All of this means that you will never receive an unexpected invoice from Crucible Design Ltd.
The final stages of the proposal are a cost summary, an estimate of timescales for each stage and our standard terms and conditions. These are, like the rest of the document, written in plain English.
Our billing methods
Our standard approach is to work to itemised purchase orders from your company which set out each stage and cost centre for the project. We generate our invoices using an accountancy programme (Xero) and send them via email at the end of a month in which a stage has been completed, referencing the purchase order and project stage(s). Our standard terms are 30 days.
We reserve the right to charge interest on very late payments, but prefer to work closely with our clients and develop a relationship of mutual respect which means that, as we undertake to deliver our work on time, you take the same approach to your bills.
Once all the work is complete and paid for, the IP in the work we have created is automatically transferred to you and the project is concluded.
If you would like to know more, and read a real, costed project proposal, please click on the link in the column to the right of this blog. That will download the Mac Mini stand proposal as a PDF document.
The rest of the equation
Although this post is concerned with the real cost of product design, it would be remiss of us not to mention the other costs that any would-be entrepreneur or manufacturer has to consider before they sit back and watch the orders roll in.
Sadly, and unlike our sample proposal, we can’t be specific about these other costs, just summarise the issues that need to be considered. Although what follows will seem obvious to many, experience has taught us that people involved in the development of new product ideas often fail to consider many of the costs that the process involves, so please bear with us.
The first issue to consider, before any design work is done, should be the market for your idea – how big it is, who it is made up of, whether they have any money and if they are likely to spend it on your product. Many people, some of them very famous, have developed products based entirely on their own convictions. Occasionally they are right, but usually they aren’t. Paying for good market research and/or analysis is rarely money wasted.
Once the design work is underway, another major issue is prototyping and testing. This involves two considerations. First, it takes time. If you rush it or don’t bother, you are taking a huge risk. Secondly, multiple prototypes cost money, and if you are as punctilious as James Dyson, and build literally thousands of them, a lot of it.
Once you have the finished product, you will need to get it approved by the relevant standards agencies like UL. Don’t underestimate the time and money that this kind of process can involve.
Even once you are ready to make and sell your product, you will still have to consider tooling, production batches and storage, packaging, shipping, instructions, customer service/returns and, last but not least, sales and promotion. One of our clients spent £50k developing a new type of product and then £100k advertising and promoting it across all forms of media. The approach worked, and the product went on to be very successful, but it does underline the fact that product development is an expensive process.
If you would like to know more, or discuss the possible development budget for your new product, please get in touch. Our initial briefing/advisory meetings are free, and we might be able to save you a considerable amount of money.