The Economics of 'Boutique'
Until I started building them myself, I always assumed custom amp builders were raking in big bucks for minimal effort. Experience revealed the falacy of this notion.
When one spends several years designing the best product possible, it makes no sense to build it with any less than the best components. As I discuss elsewhere (Documentation), I place no financial value whatsoever on "intellectual property". I engage in engineering because it satisfys me to do so, and the benefits I acrue by learning are ample reward. When I price my products I look at what they cost me to build, and how much time it takes me to build them, so let's examine those factors.
The smallest/simplest of my designs consumes just over $650 worth of parts and components. That's what it costs me to build.
So, if I can assemble and test a unit like this in 20 hours, and figure $50/hour as fair compensation for a competent amp tech, we have a minimum selling price of $1650.00. Factor in, what? 20% for distributors and middlemen, plus another 15% for advertising, overhead, etc., and you’ve got a $2227.50 selling price. Assume for the sake of argument that by exploiting the economics of scale (which, in this case, isn’t much, since we’re dealing with a hand-built product), maybe we can pare this down to $1999.
At the moment, since I'm selling direct and not spending much on advertising, I'm selling this amp for $999.00. This means i'm paying myself the princely hourly rate of $17.45.
Clearly, this is not an endeavor that promises quick and easy riches.
Seems to me that some skilled entrepreneurs are making a fair compensation for doing some honest work. (Certainly more consistent with the way Capitalism is supposed to work, as opposed to the gross caricature of our current politico-industrial complex, but I digress…)
It’s also interesting to evaluate the cost/benefit equation from the consumer’s perspective.
Some recent research for an auto purchase reveals some interesting and relevant parallels.
I had taken a fancy to the idea of acquiring an early 1970s vintage BMW 2002. These, I was delighted to discover, can be had in superb condition, for pretty reasonable prices, especially compared to the price of some low-end econo boxes. My wife, ever the pragmatist, suggested that I research the price of replacement parts. The result was quite interesting.
While virtually all components were more expensive, often considerably so, than parts for, say, my 1991 Ford Taurus, in every case where a comparison could be made, buying the same quality upgrade parts for the inexpensive vehicle costs virtually the same. For example, Koni or Bilstein shocks for the BMW cost the same as those parts for a Plymouth Horizon (which I use as an example because I actually did put Konis on my ’78 Horizon – with great results), or any other car. Similar comparisons occur across the board. Yes, that BMW exhaust system is four times the cost of the one I put in the Taurus, but if I were to opt for a similar stainless steel system for my Ford, the cost would be similar to that for the BMW.
Hence, one might conceivably reconstruct that Ford Taurus using all premium parts, at which point it would theoretically be of the same quality as the more expensive vehicle, ignoring, of course, the benefits of superior design and engineering (that, you end up getting for free when you buy the more expensive vehicle.) Of course, when you’re done you still have a . . . Ford Taurus . . .
This represents a far different value proposition than, say, buying some mass-produced unit whose inflated price is justified only by the recognition-value of their cosmetics and name plate.