The price is right. Right?

Donkey ass
I was an Ass at this!

A big issue for me was to figure out how much I could charge the retailers for my drill bit holder. In lack of good advice I begun a trial and error strategy that failed miserably!

I know nothing
The production cost was easy to get grips on. My manufacturer was very clear on what he needed to deliver the gadget. On the other hand I was clueless what the retailers margins were. I heard that some jewellers had an average profit over 1.000% and the local grocery store maby had about 50%.

My buddy’s advice
Earlier a Big shot buddy was nice enough to gave me some free advice and helped me out with some business strategy. Among many things, he suggested to focus on how much profit I needed and we came up with 25% to keep any sneaky bastards away.

My advisor’s advice
I also had a professional business counsellor who skilfully avoided answering this pricey question. It later turned out he was a complete bastard.

A wheel of un-fortune.
Spin the wheel or take my advice?

Excel* calculations
Starting from around me having 25% profit and the retailer around 300% I typed in many different scenarios. If I sold over 100 000 units it would just cover my expenses. Was that good or bad? It took over a year before I found someone that told me my calculations were fucked up.

I had no money, hardly any income and needed a painful loan to start the production. So the first order had to cover most of the expenses and I set the price stupendously high. This made the retailer only a tiny profit but they were really kind to accept. Since this ”very high” price for my drill bit holder worked for them I should have been able to stop myself from going on a crazy rampage later on.

*Actually I use Open Office.

The worlds worst advisor

Image from LOTR
His previous assignment screwing this poor old man.

It is difficult to evaluate advice you receive and it doesn’t help when your professional counsellor is a compulsive liar.

Mr experienced expert
I found my man! An old business guru, expert in the retail market and he wasn’t nearly as popular as Miss Cutie Pie. So I easily booked our first meetings. Everything went smooth, only the lack of useful advice bothered me a little.

Experienced bullshit
Taking advice is all about trusting people and this silver back liar seemed very trustworthy. The big firm he was working for lowered my guard as he claimed I would instantly get sufficient economical funding if I just presented a retailer order for my drill bit holder.

When I finally got the retail order and asked for the necessary funding he made a complete U-turn. Denying everything previously said and tried to
disparage me. I was so stunned I forgot to punch him in the face.


Economic disaster
Now everything was hanging by a thread. I had pressured the retailer quite hard to place this order and now I couldn’t deliver. Desperately me and my wife went to several banks trying get a loan without success.

You fix this!
The last resort was to contact the organisation and presented the tight spot this idiot had put me in. The lady I spoke to didn’t even ask, she knew who the fuck up was and helped me get the loan I needed. Now I was a little delayed, but back on track!

Return of the Idiot
A year later I received a call from this compulsive liar. He was cheerfully purchasing my invention Gearfix
in a store and wanted to congratulate my success. Obviously he hadn’t grasped that I hated his guts. Don’t worry, he will never call again.

Patent problematics

Screwing image
Unscrew your assumptions of patents.

Miss Cutie Pie advised me that my lamp holder wasn’t that great and I certainly didn’t need to patent it.

Mo patent?
I thought it was
mandatory to have a patent on your invention. But from the very beginning she quickly stated that, even if I managed to get a patent, it would be very easy to legally bypass it.

Design protection
So I applied for the much cheaper and easier design protection from OAMI. It’s supposed to stop the competition manufacturing and selling something with the exact same shape as my gadget. Not that great, but a patent wouldn’t be better in this case.

Patent perks
If you ask me, a patent is good for three things:

  1. If you have LOTS of money you are able to sue people/company’s that infringe your patent.
  2. You can sell or license your patent to others and get sweet royalties without doing shit.
  3. To make sure your not infringing some one elses patent by mistake.

Poor man’s choice
It felt like a drawback that I wouldn’t have the advantages a patent brings. But in hindsight it worked quite well just having the design protection solution.

  1. If someone would infringe on my design/patent I didn’t have the money for any legal process.
  2. Producing Gearfix was rather lucrative to do “in-house” in comparison of a small royalty.
  3. Accidental infringement wasn’t an issue in this case.

A nagging question

The answer is...
It’s confusing to know when you have the right information.

How much money should I charge the retailer for this type of product? A simple question you might think?

Big shot buddy
In search of competent advice I got hold of an old friend and a high rolling international business man used to make huge international strategy’s and other big shot stuff for mega corporations.

Out of the league
It was really nice of him to take time and help me out but his range of expertise was above and beyond this task. And I was so clueless that I hardly knew what to ask. The one thing I knew I didn’t know was pricing and margins. What should I sell my little drill bit holder for?

Crazy calculations
Sadly my friends approach went completely off. He was used to negotiate deals for million dollar high tech equipment and now tried to implement that knowledge to my tiny rubber holder. On top of that I wasn’t really providing any helpful numbers to the equation. The conclusion was that I had to sell over 100.000 units just to go break even. This was waaaay of the spot and would haunt me for quite some time

Years later
The correct answer to my first and most important question was answered over two years later. But during that time I desperately went on a crazy rampage ruining many of my business prospects. But that’s another story I will go to depth with further on.

Miss cutie pie

A good looking gnome
Its nice to have a nice mentor.

After making sure the prototype actually worked I made up my mind to go for it. However, I was in really bad need of professional help.

Public investment organisation
In Sweden you can get really nice business counselling from a public investment organisation called ALMI. They are specialists in helping stupid inventors like me and its financed by the state and some other guys. Apparently its good for our small country economy to help out poor inventors.

Miss Cutie Pie
At first I was assigned a really talented and good looking young woman as my mentor. But she was so popular it was a hassle to book meetings. My rubber gadget wasn’t in her range of expertise and I had to wait over three weeks for another meeting. Unfortunately this meant I had two good reasons to look elsewhere.

The unpopular one
I’m a self employed guy, used to
rapid decision paths and quickly found another counsellor with a completely empty schedule. His field of expertise was the retail market I was aiming for – Perfect!… I thought…

Read about my new counsellor here.