Bicycle Landmines

Myriad landmines on the way to production. Source: especesmenacees

In the first three articles in this series you’ve learned to solve a customer pain with a bike product, build prototypes, and hunt for a quality contract manufacturer (CM) to build it in volume.  If you’ve done well in steps 1-3, you’ll have 3-5 viable CMs.

Now you get to choose one and mass-produce your dream product, the success of which will ultimately hinge on your ability to navigate myriad landmines. Watch out for these 5 in particular:

Landmine #1: Your CM Isn’t Excited About Your Company

You’re not IBM. You’re a tiny company no one’s heard of and your CM doesn’t care about your $100K first order. They do care, however, about your big, future orders. You MUST start by selling the big vision of your company and show them the product roadmap with their pot of gold at the end of the rainbow. In our case, every CM knows our vision: we are on a mission to protect city cyclists and “while we’re only placing this small, 5,000 unit order now, next year it’ll be 25,000 bike lights plus three new products.”  And it’s true.

Landmine #2: You Skip The Factory Audit And Place Your Order Site Unseen

Our office neighbor once hired a CM through Alibaba to make his custom sandals. After months of emails and late-night Skype calls he decided he didn’t need to visit the factory and instead wired a $38K check.  After six months, 10,000 hideous sandals arrived at his doorstep.  And each one fell apart within hours of use.  Not only must you visit your CM, you need to conduct a factory audit, which we can cover in the Q&A within the comments section.

Landmine #3. You Overlook Design For Manufacturing (DFM)

After you’ve designed your perfect prototype you can just hand it off to your CM and let them produce it en masse, right?  Not even close.

You need to make sure that the CM has a blueprint for producing your product in volume. This requires an entirely different process and different machinery than was used to create your prototype. Additionally, a good DFM enables you to simplify the production process and complexity of parts required, which will cut your costs dramatically.

Trust us on this one – it’s worth the investment. We lost several months and over $500K in missed revenue by messing this up.

Bike Light Prototype

Even a perfect prototype is a far cry from DFM-ready production quality. Hit this landmine and you’ll lose months in delays and hundreds of thousands of dollars in revenue

Landmine #4: You Don’t Negotiate Terms and Pricing

Working with a CM isn’t like ordering takeout. There’s always room for negotiation. 

  • Anchor Pricing: Calculate your target bill of materials (BOM) cost in advance.  If you need a BOM of $20, anchor your CM at $15. They’ll either balk or bid, but it starts the price negotiation at a number that’s profitable for your startup.
  • Create competition: If you have a short list of 3-5 CMs you can make them compete against each other until you get a fair price.
  • Get Terms: Negotiations aren’t just about price. There are many levers you can pull including volume, minimum order quantities, and payment terms.

Landmine #5: You Don’t Ask for Help

You know what’s much easier and faster than learning 40 years worth of manufacturing expertise? Asking someone who has 40 years of expertise to help you.

Manufacturing partners like Dragon Innovation will take you from DFM through production and quality control (QC). If you can’t afford to hire DFM consulting, learn from their DFM course and supplement it by finding gray-haired engineers who have built consumer products.  For a little equity and $50 of pad thai and beer, I’ve brought over 100 years of collective DFM experience to our product design reviews.

In the next issue of #BIKESTARTUP we’ll give you our secret sauce for our favorite entrepreneurial pursuit: getting money to build your product.

In the meantime, ask us questions. We’ll answer every single one of them.


Slava Menn is a serial entrepreneur and CEO of Fortified Bicycle. He loves biking, building, entrepreneuring, and teaching. In this monthly series, he shares his team’s hard-learned startup lessons with aspiring entrepreneurs.

14 comments

  1. ononecog on

    Alex, A CM does not always mean china, Have you ever priced CNC machines?

    Say you have an idea for stem, you would need a CNC machine to machine it, a screw machine to make the bolts {you would not want off the shelf china hardware} possibly a lathe.
    You do not need just any cnc mill, you need a mill that will machine more than one stem at a time. you need a building to house the machines, you need a cnc programer, and a cnc operator. do not forget liability insurance. So…. you are probably now spent close to 1/2 a million and you have not even produced a product yet.

    Reply
  2. jeff on

    Been there, done that. I found that, although I gave up some flexibility, I found it better to have a few, at least, CM’s. I sold my cnc machines and most of my tools and have everything made still in the US. I even had a couple of CM’s that would make the product from start to finish( raw material to packaging).
    I sold that company back in 2003, but currently have started another company, so luckily I have kept some of my contacts and in the process of creating new ones.

    I still believe in sourcing materials and keeping the labor here in the US, even if it cuts into my profits.

    Reply
  3. Bazz on

    So where does a newbie start looking for a QC engineer for a project say in China? Is there somewhere you can find listings for instance?

    Reply
  4. Slava Menn on

    @john thanks! We love all aspects of biking too 🙂
    @elkbicycles – thanks for the kind words and you’re right: this may be a fit for Bike Retailer but BikeRumor is our fav.
    @alex: we design ourselves and if we could manufacture ourselves we would but as a 6 person company we can’t afford to buy die cast, injection molding, CNC, PCB assembly equipment. Prob a $2MM outlay. Also please see #bikestartup3 on local vs. overseas production. @ononecog: great point that CM doesn’t mean overseas. Some of our CMs are local.

    Reply
  5. Slava Menn on

    @jeff: cool that you have done this stuff too. Do you still have CNC machines? If so please contact us. We also believe in making locally even if it cuts into profits – it makes life so much easier and supports our local economy. In our case if we made locally prices would be $200+ for our bike lights rather than $50-100.
    @bazz: for a newbie getting started follow point #5: get help! Hire a DFM-manufacturing-QC company. Dragon Innovations and PCH are two of the better known ones however if you contact us I can send you more.

    Reply
  6. Mark DesJardin on

    This is a great article. It’s so true about the CM not caring much. Which can be really frustrating when, as the inventor you have high aspirations. I’m very close with the inventor of Fix It Sticks, and he dealt with this contently. We even live in Wisconsin where we have PLENTY of contract manufacturers. Great article, Slava!

    Reply
  7. Chinesedude on

    @Bazz, maybe I can help. There isn’t typically a listing for this kind of stuff, but you can also utilize a local headhunter, or better yet, use the local Workopolis.com equivalent if you have a basic understanding of Chinese to set up a company profile, job description can be in English, since you probably want to hire somebody who speak English anyway.

    Reply
  8. jeff on

    @Slava Menn, I sold all my equipment back when I sold my first company.
    I have sourced my current machining duties to contractors I used back then, as well as a few new ones.
    Im in the process of introducing a truck bed rack, which will be shown on the site, that has unique mounting system from everything such as bikes, surfboards, kayaks, lumber, pipe, etc. We also have several other projects in the pipeline.

    Reply
  9. zombieweekly on

    @Slava Menn – Thank you for your article. I work as a bicycle wholesales rep in Japan and since I don’t often see the factory side of things, there was a lot to learn. Where would one start looking to find employment in such field, say CM? I speak Japanese and English fluently and thinking about working abroad (Taiwan, Singapore, USA, etc) eventually. Perhaps an ability to speak Chinese would add chance to find work in such field? Thanks for your time.

    Reply
  10. Your Face on

    I am guessing Paul’s Components is a rarity, esecially considering the hundreds of other companies that USED to exist in the U.S. making cnc bike parts

    Reply

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