Guest Speaker: Jon Dimmer

    Last week, a gentleman by the name of Jon Dimmer came in and bestowed upon us a tremendous amount of knowledge pertaining to the fiscal nuts and bolts of running a business. He seemed like an incredibly experienced and successful entrepreneur, owning a large network of equity and assets.

    One of the most important things he talked about is the life cycle of funding a business. He showed us an awesome diagram detailing which stages require which types and amounts of funding. It was enlightening to see at what points in the company's life it would need to leverage different types of funding. More importantly, Jon explained when not to use funding. While there are a myriad of different options companies tend to go with at different stages, not all of them are necessary. Aside from grants, no form of funding comes without a drawback: loss of equity, interest, more board members to please, the list goes on.

    In terms of my company, this got me thinking about how I could launch the operation while minimizing external funding requirements. In my case, I am starting with a small operation that has the potential to go large, but also to stay small and boutique. For my funding plan, I estimated the need for about $10,000 startup cash. This would cover R&D and advertising for a crude first product. It would work with no other employees besides myself and a small order volume. However, upon expansion I would need to look more carefully into funding. One option I personally like is using kickstarter to pre-sell products. Since the nature of my company is such that products come out in waves, so having pre-release funding would help with the cost of producing a wave in the correct volume.

    In the far out future, VC funding would only be required if the company were to make a major expansion such as opening up a factory or increasing sales volume by a huge amount. As Jon told us, VC funding is okay as long as the received amount of money is less than the amount of growth it will cause your company (in short, there are other things such as dilution that should be taken into consideration).

What is the Price of my Product?

    Recently, we have been tasked with determining the price of the product and/or service that our hypothetical business sells. Now initially, I thought this task would have a straightforward approach: determine the price of materials and production, factor in research and marketing, add a little bit for profit, then round the number to the nearest $5 or $10 and call it a day. This was, as I had wrongly assumed, the standard procedure for pricing a hardware product. It seems like the "fair" and "logical" way to go about it. At this point I will provide a brief reminder that my product is a piece of hardware (potentially with accompanying software) that plugs into a synthesizer (a.k.a. electronic piano) and provides, with its various knobs and sliders, an extra degree of control to the user.
    I had assumed the aforementioned method of pricing until our teacher, Andrew Fry, told us a story about how a company he owned had increased the price of a piece of software tenfold so that corporations would take it seriously; not viewing it as cheap and sub-industrial. The surprising part of this story was that this tactic actually worked. It led me back to a conclusion that I had been led to working at a small retail business this past few years: a product is worth as much as people will pay for it.
    This leaves me to make a decision. As Andrew Fry had stated, pricing a product is a combination of laser precise marketing science and wild, un-addled voodoo. Find the magic number that makes you the most money. On the other hand, my personal convictions do steer me towards creating a quality product and charging a fair and reasonable price for it. Looking at similar items in the market, I could imagine that my product would land in the range of $50-$200 depending on quality of materials, number of dials, etc. While I want to deliver a product with quality and affordability, I cannot have my cake and eat it. This leads me to the conclusion that I want to deliver my product in two tiers: a bare bones model priced at $50-$75 that contains a reasonable amount of hardware at a good price. This model would likely use lower quality materials in order to meet the price point, built to perform the core functionalities of the idea without any frills. I would then have a "pro" model priced at $125-$175 that is designed with quality materials, genuinely built to last, doesn't skimp on cool features, and contains enough hardware to satisfy any tinkerer. This would satisfy two distinct classes of customers. Since my product is easily replicable, I feel like I would have to keep prices competitive in order to lower the chance that another company swoops in and builds something similar for less. That being said, I am excited to learn about patent laws from our next guest speaker; being able to patent my idea and be the exclusive producer of such a product may change the game for me, so to speak.

Guest Speaker: Brian Forth

     This week a gentleman named Brian Forth came in to speak to our class. A repeat guest speaker, Brian is the founder/CEO of the Tacoma web design company SiteCrafting. While the service they provide (website and app design and maitenance) is fairly run-of-the-mill contracting, the way they go about their operation is a wonderful example of what a company should be like.
  The first thing that struck me was Brian's entrepreneurial experience and how it evolved into his company. He started as an elementary school teacher who did web design for a friend here or there. Soon enough, just through word of mouth and quality of service, he had numerous clients  and a booming side business. He eventually left teaching to pursue this full time. He then slowly expanded his one man company into the 30-something person operation it is today. While he seemed to be omitting a lot about the struggles involved, it still seemed like he had an experience where he was in the right time at the right place, took a risk after he had built some momentum, and succeeded ever since. This, to me, is a paragon entrepreneurial story.
  What I liked the most about Brian's operation was that they have no marketing team. Not that they made a point not to market, but their developers and leaders do enough networking and branching out on their own to promote their services. The reason they remain so successful is simple word of mouth; their customer service and product are so good that they are constantly recommended to good clients. That is something I have never encountered, and it's incredibly inspiring. It gives me a little faith that in my future endeavors I can (partially) rely on the quality of my work to speak for itself and bring me success.