John Burkhert

Raising the topline with good execution will make up for the expense of expediting development.

There is a simple equation when it comes to counting profits. The fixed and overhead costs must be less than the revenue for there to be profit. The first units out of the gate owe the company for all the nonrecurring engineering (NRE) costs. The item will be in the red until all that is paid back by the margin between unit cost and unit price.

In many sectors of the economy, particularly commercial, the cost of goods sold (COGS) is close to the selling price, meaning little margin after overhead is accounted for. (PCB design is among the overhead costs.) Many units must leave the factory and find a consumer before the project hits the breakeven point. Product cycles are such that price erosion puts the squeeze on margins right from the beginning. Consumer hardware is a tough game, no doubt.

Competition among the players keeps us on the path of continuous improvement. Sitting still while others strive to grab your market share actually means moving backward, so let’s take it for granted that we have to keep reinventing our products. Those new features, whatever they are, will likely add to the bill of materials (BoM), which increases the variable costs. We can soften that blow with a few money-saving methods.

To continue reading, please log in or register using the link in the upper right corner of the page.

Submit to FacebookSubmit to Google PlusSubmit to TwitterSubmit to LinkedInPrint Article