3 Tips to Success for Hardware Startups

February 13, 2015

7:00 am

Succeeding with a startup is extremely difficult.  It’s both costly and risky.  This is even more so with a hardware startup.

With a hardware startup you must work especially smart because any mistakes are more costly.

Below are three tips that I learned from my startup that will greatly improve your chances of success with your new hardware product.

 

#1 Be 100% Sure You Are Creating the Right Product

It is a lot harder to make changes or improvements to a hardware product.  You can roll out a new software revision almost instantly. But it can take you many months to roll out a new revision to a physical product, and that’s not including the engineering time behind the revision. So early and accurate market research data is absolutely essential for a hardware startup.  Use online surveys and polls as much as possible.

Also, connect with every expert you can find to get their feedback.  Stop worrying about someone stealing your idea – that doesn’t happen in the real world.

 

#2 Find a Manufacturing Partner

Partnering with a manufacturer is the most important thing you can do to ensure the success of a hardware startup.  The right manufacturer can help you fund product development, manufacturing setup, and even your inventory.

You need to find a manufacturer that makes products similar to your product, and that has extra unused capacity.  Manufacturers don’t like unused capacity which not only means idle machines, but idle employees.  These manufacturers are the most likely to work with you. In most cases, a manufacturer will also need to see some interest from at least one significantly large customer.  So work on finding both as early as possible.

 

#3 Sell Then Buy, Not Buy Then Sell

This may very well be the most important advice when it comes to a startup selling a hardware product.  Inventory is a real killer for hardware startups.  Having inventory that you can’t sell is absolutely the worst case.

You will initially need small quantities of your product to use for samples, market testing, etc.  But beyond that you should ALWAYS have an order in hand from a customer before you purchase the inventory.  This tip (or really a rule) is so easy to break (I did), but it is the worst mistake you can make.

Following this rule will slow down your early progress because many customers will only purchase AFTER you have inventory in stock ready to ship.  But for now, you have to bypass these types of customers.  Instead you need to focus on customers that will give you an order before you have to manufacture it.

Focusing on selling outside the U.S. is a great way to accomplish this goal.  U.S. customers typically expect you to carry U.S. inventory for quick shipment.

This isn’t the case for international customers who will order direct from your Asian factory.  Typically you’ll need a master distributor for each country and they will instead be the one to stock inventory.

If you always sell then buy, you can completely avoid having any inventory.  This fact alone will significantly increase your chances of surviving to sustainability and profitability.

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John Teel is an electronics design engineer, serial entrepreneur, and founder of Predictable Designs. He has developed products for tech companies that now sell in the millions of units. John now helps other entrepreneurs, startups, and small companies bring new electronic products to market. Download his FREE cheat sheet – 18 Steps to Market for Your New Electronic Product.

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