Recently (like over the weekend) I received some interesting comments from Adrian in Toronto, Canada who just happens to make wooden bicycle baskets which he sells on Etsy. (https://www.etsy.com/listing/112199977/lightweight-wood-bicycle-basket) and (http://lumberjocks.com/projects/80153). He finds himself in much the same situation as we have with the tension between beauty/features and price/time. When every aspect of a product involves a specific process or production step how do you calculate what is an economically viable amount of time and effort for a given return? My partner in crime, Jeff, likes to start with a profit margin based on a minimum hourly wage that he is willing to pay himself and then works back from there. I prefer to start with a price that I think a particular product could realistically sell for and then figure out how to streamline and simplify the process to make that possible. One of Adrian’s baskets (shown below) features a natty plywood snap that holds the whole thing together. This allows for the basket to flat-packed for shipping (why didn’t I think of that?) but as he says in the comments that one part alone took twenty iterations to perfect.
Wow. That is a lot of time and energy for a small detail which in reality is unlikely to be fully recouped through sales partly because much of the design process is internal. What I mean is that Adrian, I imagine, not only spent hours in the shop figuring this out but also thought about it while brushing his teeth or waiting for the kettle to boil. Creativity adheres to no known business hours. Many times I have sat all day at work trying to come up with a solution with no success only to come by the crucial insight while watching Downton Abbey or nodding of to sleep (probably both at the same time). The point is, is that creativity cannot easily be dovetailed (pardon the pun) into a rigid time structure. So how do we define the right ratio of time/effort/profit? As I read Adrian’s comments I started to do some back of the envelope calculations of how much time each crate basket took to make from the raw material to the finished product. I’ll leave out the material costs for now partly because our initial run was so small that the material costs don’t accurately reflect what we would be paying were we to ramp up production. It breaks down some thing like this:
Each basket contains five bamboo plywood panels. Each panel from the cutting of the basic shape to putting in a dado, routing out the center space and drilling the rivet holes to sanding/finishing probably took 10 minutes each including set up time. So lets say 50 minutes per basket for the wood portion. Now add the aluminum which had to be cut to length, drilled, bent to shape and sanded with Scotchbrite was probably another ten minutes each. There are eight aluminum bands on the basket so that comes in at an hour and thirty minutes per basket. We were unable to get the assembly time below ten minutes so we have almost two and half hours per basket in total. Even at federal minimum wage of $7.25 per hour, that adds up just over eighteen dollars per. If we calculate a more realistic hourly wage of say $25.00 an hour that is over sixty dollars an hour. Materials would come in at about $20.00 depending on quantity and quality and you have a basket costing over eighty dollars which was about the price point I was aiming for. That would be just about viable if were selling them ourselves but we would much rather sell them to bike shops so if you add in a 30% margin, pretty much the minimum for retail, and you end up with a pricey boutique item with tight margins and low quantities.
It is rather depressing to see your best ideas filleted by mathematics in this way but also very illuminating and instructive. Numbers don’t lie……