Tag Archives: alpenglowyarn

The SkeinMinder and Economies of Scale

There are 5 days left on the SkeinMinder Kickstarter campaign, and a few people have whispered this question in my ear: What if it doesn’t fund?  No need to whisper or wonder, let’s flat-out talk about the big white elephant.

Let’s back up a little and first ask, “Why is the goal of the campaign to sell 100 SkeinMinders and not 20 or 30?”  It comes down to a simple manufacturing principle – economies of scale.  As the quantity of something you build goes up, the per unit cost of building it goes down.  Dyers should already be familiar with this concept, since hand-dyeing is manufacturing.  It may be small-batch pretty manufacturing, but the same principles apply.  Both parts cost and labor cost goes down when you increase your batch size.

Let’s look at parts cost first.  I’ve priced out the parts for the SkeinMinder at several different build qtys, below is a graph of these.

SkeinMinder BOM_Chart1

The cost is normalized (compared to) a build quantity of 100.  Since I based SkeinMinder pricing off of the 100-build cost, I’m calling it the normal, 100% parts cost.  The parts cost for building 20 SkeinMinders is 200%, or 2X the cost of building 100.  The parts cost for building a single SkeinMinder is 400%, or 4X the cost for 100.  Dyers see this a little bit – buying 10 pounds of yarn is cheaper per pound than buying 1 pound.  Dye cost decreases when you buy larger qtys.  The reason that the curve for the SkeinMinder (and electronics manufacturing in general) is so steep is that there are over 100 parts in the SkeinMinder.  Some of the parts are also custom made, and quantity really has a huge impact on those because specialized human labor is involved.

Which brings us to labor costs.  This should be more familiar for dyers.  You have to do the same tasks whether you’re dyeing 1 skein of yarn or 10 skeins.  You still have to heat up water, you still have to mix (or extract) your dye, you still have to wash the yarn and dry it.  Doing this for 10 skeins may take 2-3 times as long as doing this for 1, but it doesn’t take 10 times as long.  Therefore, your cost of labor per skein goes down.  For the SkeinMinder, I estimate that it’ll take about twice as long to make 100 as it will to make 20.  So my per unit labor cost for making 20 is 2.5X the per unit cost for making 100.

With 2.5X labor cost and 2X parts cost, it should be pretty obvious that the SkeinMinder will also have a different viable sale price depending on if it’s manufactured in a batch of 20 or a batch of 100.  In order to keep the final SkeinMinder sale price as low as I could ($365), I based it off the 100 qty cost.  This is why I also had to make the campaign goal selling 100.  (Note: the actual campaign total is slightly more complicated because there are non-SkeinMinder yarn rewards as well, which all have additional costs.  Plus Kickstarter fees and shipping counts toward the total, so those have to be factored in as well.)  If I set the campaign goal lower and met it but only sold 20 SkeinMinders, I’d be in trouble.  They’d be much more expensive to build, and I’d end up losing money.

Which of course brings up another question, “Couldn’t you build 100 now anyway, and sell the rest of them later?”  This is a topic that dyers should also be familiar with – the significant cost of holding inventory (aka – another way to lose money).  If it funded at a lower goal, I’d likely have just enough money to fulfill the non-SkeinMinder rewards plus (hopefully) buy parts for 100.  But then I wouldn’t be compensated at all for my labor.  I’d still be spending time buying parts, scheduling everything, and managing vendors.  I’d still have to spend time assembling SkeinMinders.  Sure, I could delay assembly until I’ve actually sold the remainder, but guess what?  Remember that 2.5X labor cost for assembling batches of 20 vs 100?  Yep, I’ve just increased my unit cost by assembling them in smaller batches.

So the case of building 100 when I haven’t sold 100 turns into a big cashflow problem.  All the money I raised would be tied up in inventory, and I wouldn’t be compensated for my labor until the rest sold.  Which, judging from the campaign, might take 3-5 years for all 100.  Dyers who retail should understand the cost of inventory on a deep personal level, because the following scenario has probably happened to all of us at some point.  You have a show coming up in 2 months.  You spend money up front buying yarn and dyes.  You spend 2 months dyeing yarn for the show full-time.  You have auxiliary expenses of show fees, advertising, etc.  Then you go to the show and…..you don’t sell nearly as much as you thought you would.  You’ve covered your show expenses and parts cost, but don’t have enough left over to compensate yourself for your 2 months of labor preparing for the show.  Which means you have to find some other way of paying your rent and groceries for those months, and your money is tied up in your leftover yarn until it sells.  So you’re a bit stuck cash-wise.

Basically, the point of the Kickstarter campaign is to avoid the above scenario.  Sales happen up-front, which funds the cost of parts, and the labor for the time it takes to make them.  The number of sales is a known quantity, so I avoid guessing and making too many, then being stuck with a bunch of inventory and not able to pay myself.  So it brings us back to the original question – what happens if the Kickstarter doesn’t fund?  Is it just not economically viable and no more SkeinMinders will ever be made?  Is there no hope for winding efficiency and tools for hand dyers????

Don’t worry, the show will go on.  It’ll just be a slightly different show.  If the campaign doesn’t fund, it proves that the market isn’t big enough to support a run of 100 SkeinMinders.  There’s still a market, and I’m happy to say that the people who want a SkeinMinder (or another SkeinMinder) are quite vehement in their demand, but it’s smaller.  So I’ll have to make them in smaller batches, which means that I’ll have to increase the price.

I’m working on pricing now, and even though my costs for making 20 will be over 2X what they are for making 100, the final price won’t be 2X.  I just don’t think that would be viable from a customer perspective.  I’m looking at margins, and figuring out a price and a way to build them that will be economically neutral.  Meaning that my time will be fairly compensated, but there won’t be enough margin to make it a self-sustaining manufacturing line (there won’t be enough profit to buy parts for the next batch and keep a continuous production cycle going).  It’ll likely be a build-to-order product with about a 3 month lead time.  I’ll take a deposit up-front in order to split the financial risk between me and the customer.  If I charged the full amount up front, the customer is fronting the entire cost and trusting me to deliver.  (Which of course I will, but it’s not guaranteed from the customer’s perspective.)  If I waited until just prior to shipping to charge anything, I’d have to front the entire cost and trust the customer to not change their mind.  A 50-50 split allows me to at least cover the parts cost up front, and it commits the customer without putting the entire burden on them.  I’d handle orders through my own website, not another crowdfunding campaign.

Ok, cool.  So why should you still bother to back the Kickstarter?  From my perspective, it gives me a much clearer idea of the demand, so that I can price it for the right batch size.  I can’t guarantee that everyone who backs at $365 will necessarily back at a higher price, but it’s a really good starting point.  Also, I super appreciate everyone who was willing to commit to the Kickstarter.  If you end up ordering a SkeinMinder from me directly, I’ll see if I can do a small discount, and I’ll at least throw in free shipping.

From your perspective, if you want a SkeinMinder, you can’t lose by backing the campaign.  Kickstarter is all-or-nothing, so if it doesn’t reach the funding goal, you won’t be charged.  Nothing happens, you keep your money.  If you still decide to buy a SkeinMinder at the higher price, you’ll be able to order one through my website.  And hey, if Kickstarter does actually fund – awesome!  You’ve helped to make it happen (seriously, backers attract more backers!) and you get a SkeinMinder at a lower price than you otherwise would.

To all my backers – thank you so much for your support.  Even if it doesn’t fund, it’s definitely been a worthwhile experience.  And I know more now than I did 40 days ago, which is always valuable.  :)   Now to write a few more emails because it ain’t over til it’s over.

-Carrie

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The SkeinMinder is on Kickstarter!

SkeinMinder Postcard Kickstarter_Page_1

I’m pretty excited to finally be able to write that and tell you all about it!  Well, mostly.  I have to admit, I’ve done more writing in the past couple of months than I think I have in the past 5 years combined.  I wrote personal emails to many many dyers, wrote a new SkeinMinder website, wrote the entire Kickstarter campaign, wrote a bunch about it in my Ravelry Group, and now writing more here!  It’s a good thing I like to write.

In any case, I don’t want this blog post to just repeat what you can already find on the website or Kickstarter campaign.  I’ve kept my blog a little more personal, a little more behind-the-scenes, a little more of a direct pipe from my brain to your eyeballs.  So I’ll keep the pitch short – the SkeinMinder is a tool for indie dyers.  It automates their existing motorized skein winders.  You can plug in your winder, set it to a number of rotations, and the SkeinMinder will keep track of them, and automatically stop your winder for you.  It may not sound like much to knitters, but for dyers with table-top winders, it’s revolutionary.  You can read more about life with and without a SkeinMinder on the campaign page.

When I say that the SkeinMinder is the best project I’ve done, I really do mean it.  Sure, I’ve worked on way flashier cutting-edge tech projects that were pushing the limits of what you could do with off-the-shelf electronics.  The work was fun, and I love an impossible challenge.  The SkeinMinder is comparatively simple from an electronics standpoint, but it has an element of personal connection that is rarely present in a pure tech project.  What I mean by this is that I’m actually improving people’s lives.  I realize I’m not feeding starving children or curing cancer or anything, but I’m making a huge impact on people that kind of mean a lot to me – indie dyers.

There aren’t many businesses who cater to the needs of indie dyers.  We’re a very small niche, we pop up and disappear all the time, and we tend to run our businesses without a lot of spare cash.  Newsflash, right?  Dyeing yarn is a lot of hard work for very little pay.  Lots of personal satisfaction, sure, but not a lot of dollars.  So who would actually try to make tools and sell them to this market?  You’d be marketing to a group of people that don’t really function as an industry, don’t have an official organization or network, have a high turnover rate, and are struggling to be profitable.  Pretty much only another person with a passion for dyeing would attempt this. To anyone else, it’s just a losing proposition.

You can see this with the main tool that indie dyers use – skein winders.  They’re all made by other dyers, or the spouses of dyers.  They’re expensive because they’re made in small quantities – one, five, or maybe 10 at a time if business is screaming.  The SkeinMinder faces the same challenge, but even more so because it’s an electronics product.  It’s possible to make electronics in small quantities, but not at a price at which you can turn them around and sell them to someone else.  You need to build batches of about 100 for the cost of parts and manufacturing to fall enough for that.

This is why the SkeinMinder’s Kickstarter goal is $65,000.  The stack-up goes like this: I need to make 100 in order to sell them as low as $365 each.  Add fees, shipping, and start-up costs to that.  And then, in order to ship in August, I’m going to have to work on the SkeinMinder full-time for 4 months.  I’m not going to be able to dye yarn (other than what I’m dyeing for the Kickstarter rewards), and I’m not going to be able to do any consulting work.  So it has to be able to pay me a fair and reasonable wage for that amount of time.

Making the SkeinMinder is a bit like hand-dyeing yarn – it’s mostly a labor of love.  I don’t know if dyers are a big enough market that I can sell 100 of them.  I really don’t know if I can actually reach the majority of hand dyers by the end of March.  This is where you come in.  (You were waiting for this part, right?)  Yes, backing the campaign is super awesome and you will have my gratitude until my dyeing breath (see what I did there?).  But what’s even more awesome is spreading the word about the SkeinMinder.  Dyers tend to the get their news from other knitters, so the more knitters who know about it, the more the word will spread to dyers.  Sharing, re-posting, re-gramming, re-tweeting, blogging, and podcasting all make a huge difference.  Thank you to everyone who has done that so far!

I really hope that I can reach out to dyers everywhere.  And not just because I want to work on SkeinMinders for the next 4 months, but because I truly want dyers to have better tools.  Wrangling yarn is so much work, anything to make it just a little bit easier is so worth it.  When my beta group wrote me their testimonials, I actually might have shed a tear or two.  Their workflow improved so much and they were so grateful for it – I was moved.  Every engineer’s dream is to make something that people love.  And here I am, living the dream.  Now to do everything I can to make it come true.

Join us on kickstarter 2

<3,

-Carrie


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