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Senshafuda Project - some numbers
Posted by Dave Bull on February 11, 2011 [Permalink]
Continued from the previous post in the thread
Here's the projected budget for this project (and series, if it becomes that). Some of these numbers work from the bottom up (based on the actual costs of the components, which are totally fixed by the suppliers), and some are from the top down (calculated as percentages of the selling price).
Now the selling price can't be calculated until all the costs are worked out, so it's a bit of a circular process, but that's what spreadsheets are for ...
Anyway, based on a price of 3500 yen (within Japan) and $35 (overseas) - more about that disparity later - we get something like the following chart for the expense side of things. This is assuming an initial production run of 200 sets (each with three senshafuda, printed as a 3-up on one block set, trimmed apart when done):
| Expenses for initial batch of 200 sets | |
|---|---|
| Supplies | |
| - Printing paper | 46,000 |
| - Wood blocks | 20,000 |
| - Packaging | 20,000 |
| Workers | |
| - Designer's royalty (10% of retail) | 70,000 |
| - Carver's fee (15% of retail) | 105,000 |
| - Printer's fee (25% of retail) | 175,000 |
| Total | 436,000 |
Going by today's exchange rate, that's about $5,300 (US) I'll be spending to get the first one out the door. Actually, it will be a bit more than that, because I haven't included 'general overhead' in there - things like the costs of doing all the administration / calligraphy / billing / addressing / wrapping / going to the post office, etc. etc., but anyway this is the important stuff.
Now let's say that the collector breakdown for this project will be the same as with my current Mystique project - 2.4 people overseas for every 1 domestic. Given that ratio, the breakeven point for this comes when 146 packs are sold (43 domestic / 103 overseas). That gives a gross overall margin of only around 25%, and believe me, letting your manufacturing costs come to 75% of your selling price is not really sustainable as a business model.
But for a project like this, all I am asking is simply that it doesn't bleed money hand over fist. If I can sell a good bunch of that 146 by the time the next cycle comes around - in three months - I will be laughing. I can then give the crew the 'OK' to make another set, and we'll be sailing ... These kids will have some work, collectors will have something interesting (and for gifts too, of course), and Mokuhankan will be a step closer to whatever future it is heading towards. (And I guess it won't hurt the 'senshafuda tradition' to be pushed forward a bit, too ...)
About the price differential between domestic and overseas ... A strict exchange of currencies would give a US price of $42 to match 3500 yen. I think that would be too high.
This is exactly the problem I have faced with my Mystique prints this year. When I first put together that concept, just over a year ago, the exchange rate was much more 'friendly', and a domestic price of 3,500 yen was quite close to $35, so that's where I pegged them both. But the $ has slumped severely (or the yen has climbed, whichever way you look at it) since then, so the collectors who are paying in foreign currencies (including Euros and Pounds) are getting the prints much more cheaply than Japanese-based collectors. By the time I have brought their payment 'home' to my local account, I currently receive only about 2,800 yen from each overseas collector.
This is not a complaint, as I knew what I was getting into when I announced "Price Protection!", but it's not just Toyota and Sony who watch the exchange rates every morning ... It affects my income dramatically too!
So at the moment, Mr. Toyota and I are both a bit resigned to either: 1) getting a lower price for our product from overseas customers, 2) raising the overseas price to give us the 'correct' income (but thus losing sales), or 3) moving our manufacturing overseas (hah!). That's life when you are an exporter, and your currency is strong.
Anyway, where was I ... Yes, so this budget looks like a basically doable set of numbers for this project, assuming that they do indeed sell in the quantities I'm projecting. If they don't, then I'm going to take a $5,000 bath. It's clearly not the kind of margin that Mokuhankan as I sketched it in the 'fantasy' posts a while back could operate on, but this project isn't trying to carry that burden. As I said, it's mostly for the purpose of getting some work on the table for a few of the younger workers (and I have to admit, because it looks like fun).
If they do come through with the quality that I am expecting, and if these things do find some acceptance in the market, then we'll see how far we can take it ...
This thread continues here ...
Added by: Anita Cage on February 11, 2011, 10:19 am
My immediate reaction is to question starting a new project at a price which gives you this large a discrepancy between the domestic and overseas return. I'd also suggest the inclusion of a percentage figure to account for the potential administrative costs which cannot be fully predetermined in a new venture.
I'm an awkward customer taking this side of the argument but I believe a price of $45 US is much better. It works well with the idea of three items in the pack and it gives you a tiny bit to work with on that unknown administrative front.
Added by: Barbara Mason on February 12, 2011, 12:22 am
Dave,
I agree with Anita, if you just make it 2500 yen and let people pay the difference raising it to $45. None of your collectors want to see you lose money on these. I doubt anyone will remember you said you would "never" raise the price. You have no control over the exchange rate of the dollar to the yen and many times in the past it has worked in our favor so we have already reaped the good. Starting a project that will not make money makes no sense at all. The prices are already so reasonable and $10 will make very few give up buying your work. Going to a movie costs $10 in the US now.
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