2018 Business Improvement Plans (2017 Recap Pt2)

If you missed the first recap of the business, make sure to catch that as well.
You can find it here.

This post is about some of the planned changes coming in 2018. Note that these are planned, but not guaranteed. Reality can, and often does, put a damper on things. That and un-planned opportunities and ideas can get in the way too. Great example? I never planned on doing LED adapters for the Bally/Stern equipment. The opportunity was there, I went with it, and it was the single biggest thing that ever hit this business.

So what IS planned for this year?

Software Upgrades]

Software upgrades are already in progress, but the change will be swift and dramatic as I start 2018. A lot of this goes back to the profit margin / efficiency improvements discussed last post. Having a healthier bottom line makes many things possible which weren’t affordable until now. The many freeware packages out there are decent, but professional software does have big perks.

Financial Software

All my internal accounting is moving away from crappy Excel spreadsheets designed by yours truly. They have been making my bookkeeper/wife cringe for a couple years now, and they’ve become cumbersome. We’re moving to Quickbooks. This will be a more streamlined, integrated, and powerful approach. It may not be something that makes money for me, but it makes handling the business a lot easier, which gives me more time to work on production and product development.

Design Software

Speaking of product development, I’m rapidly shifting away from KiCad for board design. It’s served me well for close to a decade, but I’m bumping against its limits now. Particularly the need for improved routing of schematics and traces. After trying the demo for a month, I’ve started moving up the tree with DipTrace. It may not be perfect but it’s definitely smoother and faster to use for me in most areas. Since I have to re-design everything already, it’s the perfect time to switch. The full-up package may be expensive, but DipTrace is also scaled. Meaning I can buy the more basic pack, with certain PCB size limits, and upgrade over time as I need to. It’s a good fit for where I am right now.

New Markets

Oh, and about the product lineup? Well, I’m going to be moving outside of doing exclusively pinball. Don’t worry, I’ll still be doing all the pinball stuff I’m currently handling, and continuing to expand my lineup. I have far too many good ideas, a rather full pipeline, just that I’ve identified another market that I want to start working concurrently. That is the Arduino makers market. Parts of my current lineup would be a good fit to get my toe in the door, and I’m well positioned to start adding some Arduino specific products as well. In fact, they’ll probably be easier as I can hopefully stick with 100% surface mount assembly there. Due to the nature of the Arduino customer base, it’s actually advantageous to NOT solder connector headers in place. I’ll just include the headers in the package.

I’m going to ramp this up a bit slowly at first, but once I get traction it could be a hell of a ride. I’m not going to make myself dependent on this, however, because it’s going to involve some new business issues I haven’t had to deal with before. One is having actual competition, there’s a LOT of AVR stuff out there. The other is Chinese knockoff’s, which would become a very real possibility if I have a good idea brought to market. These issues aren’t even close to scaring me off, just that I have to plan for how to deal with situations of this nature.

My Online Systems.

Then, lastly for now, and this is actually a top priority that I’m going to work on right away, my shopping cart software. I’ve been using Prestashop since I set up my shopping cart system. I’m having issues right now with it, and it’s causing havoc with international customers. I can’t ignore 30% of my customer base, so I need a solution. The more I did, the less happy I am with my current system and its quirks. So it’s time to evaluate different software packages for my shopping cart. I don’t need a complex system, but I do need it to look professional and be a self-hosted package.

Right now I’m leaning toward OsCommerce, so don’t be surprised if my shopping cart completely changes in a few days here.

In Closing

So those are the major changes going on for 2018, some of which are going to be visible to you, some of which will not. I also have a healthy plan for product development, but I’ve decided to stop making that public. I’ve had a few people jump onto design ideas, and beat me to market with them. I’ve also had some designs move down in priority and/or get cancelled. So I won’t be announcing new stuff until it’s just about ready to hit the market.

In a few days hopefully I’ll have my numbers put together for how 2017 ended, until then keep ‘flippin.

2017 Recap – State of the Business

You know, I really look forward to these posts every year. I hope that anybody at all reads them. Particularly on a year like this one. I haven’t calculated the numbers yet, so I don’t know how it stacks up financially. However, from a business development standpoint, it’s definitely my most successful. Here’s all of what went into me saying that.

Volume starting to justify real efficiency improvements.

Lets face it, in the past I was basically a ‘semi-custom’ shop. Everything was made by hand, with an iron, and that made thru-hole parts the better choice. It made me flexible and the cost of entry was low. It was inefficient but it let me get in the game.

Well, things are busier now. The cost pressures are somewhat relieved. However, I am really struggling to keep up. Parts costs are higher, labor costs are higher. Most importantly labor TIME has been badly holding me back. I can only solder so much. I don’t turn enough volume to really see a benefit of outsourcing, and don’t have the liquid assets to afford it.

So I scrimped, and saved, and pinched pennies for a while. Not easy in a year with a big income gap in the middle. I finally brought in a surface placement machine. Last year I had started doing a few select, simple, assemblies in surface mount. These were just a warmup while I built up equipment. The equipment is now here.

What are the advantages? Lots of them. It cuts down labor time massively. What would take me days to do by hand, I can do in a few hours. I just ran 120 pieces of the new solenoid testers in about 2 hours, with surface mount resistors and LED’s. This would have taken me days to do in the past. And this is with a very basic, entry level, limited component machine. As time goes on, and I need to order new PCB’s, I’m going to be eyeing surface mount as extensively as possible. It’s the ONLY way I can continue to grow.

Surface Mount Technology Improving Margins.

Small secret. In the past, in the best of years, I barely turned any profit. Most years I’ve actually been losing money running this business. This is unbelievably common for new businesses, and I was mentally prepared for that situation. If you want to have a successful business it’s just the nature of getting started. Success takes time. I’m all out of generic platitudes now, so lets start talking about the future.

Going to surface mount tech has been a long term goal for me, because it will have a massive effect on profit margins. Not only does it significantly reduce time and labor expenses, it also has an equal effect on component prices. For some designs the PCB will cost less too, either due to smaller size, or because of less drilled holes.

As an example here, we’ll look at a generic 1/4w resistor. Absurdly common in everything electronic. Average price, if you order by the thousands, is going to be 3 to 6 cents each for thru-hole. A SMT resistor? About 0.7 cents each. That’s about 85% or so of a reduction in component cost of resistors. Which are much faster and easier to assemble too. Not EVERY component see’s that big of a price drop, logic chips can be about 10% to 40% less expensive, depending on the part. Still adds up though, that’s for sure. Oh, and the shipping costs go down too, since SMT resistors are much lighter in weight.

This means that some things I may actually turn profitable for me. The new bench displays are a great example. I was losing money on every piece I sold with the old version, after factoring in the labor time. The new version? I won’t give exact numbers but profits on them are pretty darn good now.
Solenoid/Special Solenoid testers are another one. I’ve sold a lot of them. They haven’t generated much of a net income in the past. Hoping that changes here.

Digging out of debt

I know, #1 question, will this mean reduced prices for customers? In some cases, maybe, in the long term. Right now it’s helped me hold the line to eliminate price increases. I have a fair amount of business debt that I’ve accrued in the past few years, which I need to pay down. The nice thing is that I actually AM paying it down now instead of increasing it. The rate of payoff should increase too, as profit margins continue to improve.

But I honestly cannot afford to lower prices right now. For the time being I’m just happy I don’t have to put parts on the credit card all the time. The more I can pay for expenses out of the bank account, and see the balance increase, the better shape I’m in. I’d love to make things cheaper for everybody but I haven’t reached that point yet. The truth is that as I continue to grow, my expenses are going to start increasing.

Within a couple of years I have a feeling the business will be moving out of the house and into a dedicated location. Then things will get really interesting. So I need to get my finances as solid as I can until then.

Going Forward

Now that 2017 is gone, and 2018 is here, there’s more things I am doing to improve the business. That’s for another post in a couple days. I’ve got boards to make.