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Cost of Production and Development

Adapted from content excerpted from the American Express® OPEN Small Business Network


Present and discuss a design and development budget. This budget should include the cost of the design of a prototype as well as the expense to take it into production. Be sure to include labor, materials, consulting fees, and the cost of professionals such as attorneys. While the cost of production section may be more readily apparent to product companies, this section is important for all businesses. Service businesses have expenses such as consulting services, training for principals, and preparation of materials, among many other things.

Tips

  • Design and development costs are often underestimated. Contact a trade group to find out about average industry costs for developing products similar to yours.
  • When charting costs, provide a contingency plan for what will happen to costs if problems such as delays, a failure to meet industry standards, mistakes, etc. occur.
  • Be sure to include the cost of patents and other elements necessary to the production of your product or service.


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