Always Run the Numbers

It all started with a phone call. A woman heard about me and needed my marketing and possibly production help.

She just knew that she had done all the right things for marketing. She had been to the classes, she had taken the courses, she had hired all the right designers to design the packaging…but she didn’t seem to be getting anywhere on money.  I set an appointment and she brought over all her paperwork, files and samples. We sat at the table going through all the information.  She had a great package, interesting idea but she still couldn’t figure it out.

I started to drill down into her product.  Where I found what was plans for what looked like a machine; she had “invented” a very expensive way to use foil in ‘color weaving’ hair. (For you gentlemen, it means putting highlights into hair to look kissed by the sun.)

I took a look at manufacturing… which at this point she was doing herself.

She ‘invented’ and paid to have built a machine that took: smooth flat foil cut it into 4” widths and put in a ½” fold at one end. That machine cost $24,000 to build and wasn’t always accurate.

At the end of the production line was a box that the machine was to fill.  Seemed simple enough…till I told her turn on the line and let it run about 10 minutes.

That was an eye opener! About 1 in 5 sheets she was taking out of the line crumpling up and throwing into a waste container.  At the end of the test I made some mathematical calculations.  Asked why she took product out of line and she told me it wasn’t pretty enough to be in the box.

So I told her the bad news, even adding the tiny amount of the recycling of the waster container foil return… she was losing about $4.00 per box.  She was never going to make a profit on even one box of this product. No matter how pretty it was.

There is more to this story…but always, remember to put everything into your costs in manufacturing of any product. And if you purchase a piece of equipment that only works 80% of the time; don’t pay for it! It is a money loser.