Starting a new model rocket company

[Rocket Doctor]

I am curious, if you were to start your own model rocket company, what would you do? Who would be on your board of directors ? Who would be your department heads?

In today marketplace, in what direction would you take your new company.

Keeping in mind, this has nothing to do with any past or present companies, this is a totally new company, of your own, in the 21st century.

[JRThro]

How much money do you think we have, to start a company with a board of directors and department heads in place at the very beginning?

I don't think even the larger hobbyist-oriented model rocket companies have all of those positions.

[ghrocketman]

I'm not sure even how to begin to answer this question without further information.
The most important piece being how much capital do I have to work with and is it all cash-on-hand or is it in the form of a credit line.

[TXFergie]

Well, everything would start with a good business plan and model for the company you wish to start. Business plans are not easy since a good part of it, especially the "financials" are sometime based on speculation and ideal business conditions. Entering the rocket market could be difficult, but if you have a good plan in place with some cool, different designs and other different product offerings then it could be possible. Also, you wouldn't have to have all of the capital start up money - with a good plan it is possible to find potential investors to help offset costs in the beginning, including startup costs.

Marketing would take a BIG chunk of your fund in the beginning. Surveys and other information gathering would have to take place in order to see if a new rocket company would be worth starting up. I dont' think that you would need a board or anything for such a small company, but I would have the minimum of a President, VP-marketing and sales, VP-operations, office manager, administrative staff, and warehousing/shipping. Design engineers and manufacturing could be handled in-house or contracted out, especially the manufacturing.

There are numerous other things to consider but these are the top things I could think of off the top of my head.......

[Rocket Doctor]

How much money do you think we have, to start a company with a board of directors and department heads in place at the very beginning?

I don't think even the larger hobbyist-oriented model rocket companies have all of those positions.

What I am curious about is, if anyone, wanted to start a new venture in this 21st centruy, how would you go about it, who would you have and what would your objectives be.

[CPMcGraw]

I am curious, if you were to start your own model rocket company, what would you do? Who would be on your board of directors ? Who would be your department heads?

In today marketplace, in what direction would you take your new company.

Keeping in mind, this has nothing to do with any past or present companies, this is a totally new company, of your own, in the 21st century.

None of the above, actually. The first course of action is to seek out a niche within a given market, where there is a measure of demand but no one filling that demand. Figure out what is required to fill that need. Determine what portion(s) you can easily handle, as well as what you still need to "farm out". Seek out suppliers and pricing schedules for a "ballpark figure" on regular per-unit costs. Also seek out whatever capital equipment you will need to produce any special parts to get your "one-time" investments. Add into this mix the costs for legal work, accounting, shipping, advertising, and "contengency funds" (having enough money in reserve to cover the first months of operation, before you start to see real sales). Now you can start working out your "business plan" to take to the bank (or other SBA lender). There may be additional things that are needed before you can get funding.

Listen to the lender for any suggestions to smooth out the process, and to avoid the pitfalls that other would-be SBOs have fallen into...

The first big mistake is in trying to fill too many niches at one time. The second big mistake is trying to become a big business before you become a small business.

[sandman]

None of the above, actually. The first course of action is to seek out a niche within a given market, where there is a measure of demand but no one filling that demand. Figure out what is required to fill that need. Determine what portion(s) you can easily handle, as well as what you still need to "farm out". Seek out suppliers and pricing schedules for a "ballpark figure" on regular per-unit costs. Also seek out whatever capital equipment you will need to produce any special parts to get your "one-time" investments. Add into this mix the costs for legal work, accounting, shipping, advertising, and "contengency funds" (having enough money in reserve to cover the first months of operation, before you start to see real sales). Now you can start working out your "business plan" to take to the bank (or other SBA lender). There may be additional things that are needed before you can get funding.

Listen to the lender for any suggestions to smooth out the process, and to avoid the pitfalls that other would-be SBOs have fallen into...

The first big mistake is in trying to fill too many niches at one time. The second big mistake is trying to become a big business before you become a small business.

I agree with that but...none of the niches in this hobby are large enough for you to make a decent living.

Possible niche catagories;

Scale models

Super Scale (very accurate very expensive)

Futuristic Sci-Fi. There's a niche with a lot of existing players.

School market (everybody does that. BMS, SEMROC, Flis, Estes...)

Competition engines, Man, that will take a conciderable investment with little return.

Big box stores (Wal-mart, K-Mart) good luck getting in that door with a start up company.

Export market...forget that, too much paperwork! No big profit there. :rolleyes:

Competition models. How many NAR members compete compared to the total membership. Face it, when you are talking competition you are talking NAR. No other organization has a rocketry competition.

Sorry, I can't see any niche large enough to justify a corperate structure.

Four cheifs and one or two minimum wage indians stuffing kits in bags.

Don't quit your day job! ;)

[Rocket Doctor]

What do you think the future of the hobby will be, maybe that would be a better approach. Will the market be there to support a new venture?

[CPMcGraw]

What do you think the future of the hobby will be, maybe that would be a better approach. Will the market be there to support a new venture?

The prospects for any new model rocket company depend on the growth the hobby is seeing. That may really be the first question to ask: Is this hobby growing, shrinking, or stagnant?

If it is growing, it means there is an increasing customer base to sell to. Find what a large enough fraction of the whole wants, but is not getting, from the established companies, and serve that need. As more people join the hobby, you'll likely have more customers over time.

If it is stagnant, then with each new company, you have smaller and smaller slices of a fixed-size pie. You have to do what no one else wants to do to get a larger slice. This is also when you need to determine if starting a rocket company is worth the effort. Can you, as an individual, stimulate growth in the hobby when the "big box companies" cannot?

If it is shrinking, it may simply be time to cut bait. If the "big box companies" cannot hold on to an existing customer base, let alone generate new customers, you almost certainly won't, either.

...none of the niches in this hobby are large enough for you to make a decent living...

Which makes the above question more important. Are we in a shrinking hobby, with fewer potential customers each month? Are we in a stagnant hobby, and would we be trying to fight for a smaller share of this pie instead of just offering something unique? Are we seeing growth in the numbers of first-timers?

Does anyone have good numbers to show?

[Doug Sams]

Competition engines, Man, that will take a conciderable investment with little return. I was talking this over with some rockets buds at lunch today. Actually, we were talking about odd-ball sport motors, not competition, but it sort of still applies.

One key problem with the boutique motor market is longevity. Given the present supplier base - essentially Estes and Held - a vendor has to order a significant quantity, then sit on the inventory for years until it's low enough to re-order. And this is done under the threat of having the motors declared OOP since they're not actually being produced, but merely being warehoused.

A key to protecting the investment is for the motors to be certified for a much longer period of time. The NAR seems to be moving in the right direction in this regard. The window has been extended to 5 years past end of production, up from the previous 3 years, as I understand it. And they have a program to study the feasibility of certifying OOP motors. Both these measures would protect the makers and users of boutique motors.

I'd buy a crate of B14-0's (hypothetical example) if I knew I could fly them at club launches for years to come. Knowing this, a potential supplier of those should be more willing to make them. So fringe motors - high thrust, low thrust, long delay, etc - would be made more viable by these longer cert periods.

In a nutshell, certification policies seem to be a key to us getting niche motors.

As for competition, a similar situation exists - small volumes and fringe characteristics. But the added requirement of ready availability will not be met, except during the period right after a production run.

Nevertheless, I'm hopeful that the slowly evolving OOP rules will ultimately enable us to get motors that aren't otherwise available.

Doug

[snaquin]

What I am curious about is, if anyone, wanted to start a new venture in this 21st centruy, how would you go about it .....

It would take a while to build capital so I'd be forced to start off small. I'd try to purchase a small stock of tubes from Euclid or other supplier in a few sizes and try to custom make as many of the other rocket parts myself as possible. Sell via mail order through an internet store front. Any money from parts & kit sales would be dumped back into the company. I've thought from time to time of doing a few limited kit runs of projects I've built but purchasing all the parts would price the kit well out of reach of what most would be willing to spend, even for a really nice rocket so having the ability to custom make some parts would seem necessary.

who would you have.....

My dad. He expressed interest in what he could do after retirement and he is considering purchasing some new tools and building a small workshop at his house. We discussed a custom parts business for rocketry scratch builders and he seemed interested.

and what would your objectives be.....

I'd want to build a few model rocket & mid power kits but like LOC with their novice kit series and SEMROC with there SLS kit series, I'd be sure to allow flights on Estes D and E motors on at least a couple of the larger dia. kits. I'd try to cater to the guy that doesn't have a table saw that needs his own fins cut from plywood, G-10, basswood or perhaps the guy that needs custom centering rings. Perhaps a basic rocket kit for dual deployment with everything included, even the altimeter sled pre-drilled for the altimeter of your choice with vent holes sized & pre-drilled in the airframe.

I'm laid up recovering from surgery right now and both Carl & Cheryl at SEMROC made me custom fins from basswood that are normally only supplied in balsa. It was a custom order, a terrific price and I couldn't have done them better myself even if I tried to. I also sent Barry at LOC an order for three sets of fins ..... one for a 2.6" dia. mid power design that he cut from 1/8" plywood and he figured the thru the wall tabs and cut for me. Both SEMROC and LOC did a fantastic job of supplying custom parts to my specifications, when I wasn't able to make them myself.

Supplying custom parts to the scratch builder with a few kits for sale to the rocketeer that wants a complete package would be my main objective. There is a market, albeit small for this type of business. Just look at the great job Sandman does with his nose cones. He has turned me some of the best hardwood, basswood and walnut cones you could ever lay eyes one. I've been able to recreate early 80's sounding rockets from SSRS/Crown that featured these cones and FSI clones with real hardwood HNC-101 Sandman cones to fit Carl's SLS grade LT-125 tubing. His prices are reasonable and his products are high quality and unique.

Carl @ SEMROC, Barry @ LOC/Precision, Gordon/Sandman @ Roachworks these are the go to guys for custom parts and there are many other possibilities of custom work / parts that could be offered.

.

[Bohica]

I have sold every kit I have ever offered and did not make a dime. And I am not complaining a bit. :D I really enjoyed the experience and managed to break even. I consider it a success.

Considering past experience...to earn a living doing this would require a very LARGE infusion of cash to be invested in marketing, research, and huge quantity buys of components.

[sandman]

I have sold every kit I have ever offered and did not make a dime. And I am not complaining a bit. :D I really enjoyed the experience and managed to break even. I consider it a success.

Considering past experience...to earn a living doing this would require a very LARGE infusion of cash to be invested in marketing, research, and huge quantity buys of components.

We're supposed to make a profit???? :eek:

On my last batch of scale kits this is what I went through;

The initial planning, laying in bed at night designing the parts (yea, some people count sheep, I design stuff) computer CAD time, redesigns, time on the phone finding parts, time and travel to laser cut parts (the laser cutter I use is a 2hr drive away), changes in the laser cut parts, more trips to the laser cutter, finding the material to laser cut, finding & ordering tubes, shock cords, making metal motor hooks...then finding balsa, turning the balsa, misc. additional machining on the turned parts (drilling holes for nose weight, making plugs, making another trip to Home Depot to get screw eyes), pouring lead or weighing out bags of bb's, printing patterns and cardstock parts, running out of ink for my printer in the middle of a job and having to run and get more ink ,

WRITING THE INSTRUCTION!!! :mad:

More time on the computer...computer crashes in the middle of the job...OK I backed everything up...have to buy a new computer! Oh,so now I get to spend a day and a half loading all of my programs and backed up data into the new computer. :o

Finally got the kits finished...start to sell, get the orders write shipping labels, everybody pays with Paypal...they get their cut of the money up front! :rolleyes: Wrap boxes with craft paper before shipping (people get mad if you just slap an address label on the kit box ).

Did I mention the price of gas?

My latest calculation is I make about $0.12/ hr. :(

Member Gus and I talked about this and he says I should raise my prices 'cause, "Gordy, you're worth TWICE that!"

BTW I love doing it! :)

[Bohica]

We're supposed to make a profit???? :eek:

On my last batch of scale kits this is what I went through;

The initial planning, laying in bed at night designing the parts (yea, some people count sheep, I design stuff) computer CAD time, redesigns, time on the phone finding parts, time and travel to laser cut parts (the laser cutter I use is a 2hr drive away), changes in the laser cut parts, more trips to the laser cutter, finding the material to laser cut, finding & ordering tubes, shock cords, making metal motor hooks...then finding balsa, turning the balsa, misc. additional machining on the turned parts (drilling holes for nose weight, making plugs, making another trip to Home Depot to get screw eyes), pouring lead or weighing out bags of bb's, printing patterns and cardstock parts, running out of ink for my printer in the middle of a job and having to run and get more ink ,

WRITING THE INSTRUCTION!!! :mad:

More time on the computer...computer crashes in the middle of the job...OK I backed everything up...have to buy a new computer! Oh,so now I get to spend a day and a half loading all of my programs and backed up data into the new computer. :o

Finally got the kits finished...start to sell, get the orders write shipping labels, everybody pays with Paypal...they get their cut of the money up front! :rolleyes: Wrap boxes with craft paper before shipping (people get mad if you just slap an address label on the kit box ).

Did I mention the price of gas?

My latest calculation is I make about $0.12/ hr. :(

Member Gus and I talked about this and he says I should raise my prices 'cause, "Gordy, you're worth TWICE that!"

BTW I love doing it! :)

I think you summed it up quite well! :D

[Rocketflyer]

We're supposed to make a profit???? :eek:

On my last batch of scale kits this is what I went through;

My latest calculation is I make about $0.12/ hr. :(

Member Gus and I talked about this and he says I should raise my prices 'cause, "Gordy, you're worth TWICE that!"

BTW I love doing it! :)




You mean $0.24/hr?? :p :)

My boss thinks I make too much at that rate. :eek:

Lots of work, but from what I hear about you, Sir, you are Top Rate!! :D

[sandman]

You mean $0.24/hr?? :p :)

My boss thinks I make too much at that rate. :eek:

Lots of work, but from what I hear about you, Sir, you are Top Rate!! :D

My point is if you are doing it for the money...you made a really big mistake! :D

[Rocketflyer]

My point is if you are doing it for the money...you made a really big mistake! :D

Agree. :)

I know your reputation, and have a hardwood nose cone from Snaquin. Top shelf work. As for me, I'm so talented I need a ruler to draw a straight line. :o

Jack

[Mikus]

What do you think the future of the hobby will be, maybe that would be a better approach. Will the market be there to support a new venture?


There needs to be a watershed event that focuses the spotlight on rocketry and makes it "cool" to the masses. For example, where would this hobby be if Sputnik had been kept a secret to the masses?

The BATF needs to be restrained as all their rules and regulations have a dampening effect on the hobby. Easier accessibility will only help the hobby grow.

One thing is for sure, it will be interesting to see what happens to the hobby as all the Sputnik/Mercury/Gemini/Apollo-inspired rocketeers die off. :eek:

[Phred]

My concern about starting a model rocket company is market size.

I believe that the market is too small for a third "big" player in the US. Model rockets that sell in high volume are sold at chains like Walmart/K-mart/Target. These are toys and not hobbiest directed model rockets. Even QUEST is having a tough time breaking in here.

Hobby Rockets are very well represented by Semroc, Fliskits, and a host of smaller companies. I wish them all the best, but there is a limit to how large they will be able to get, due to market size: How many rocketeers are there?

Excelsior Rocketry basically pays its expenses, but almost nothing more. If I had to add in drawing and development time into the price of decals, they would be $30 a sheet. No one would buy them. I make no complaints as I love to draw, and I love rocketry. I also get a great kick out of seeing others be able to finish their models with my decals.

I would start a real, national player model rocket company only if I won millions the lottery. I would buy property in the correct state, and produce model rocket motors. I realize that this would be a larger version of what I do now: A labor of love, that will need to write off a ton of overhead, maybe to the tune of 1/2 to a full million to get going. After that, unless the machines are running 24/7, the business would most probably still lose money...

Phred

[moonzero2]

Excelsior Rocketry basically pays its expenses, but almost nothing more. If I had to add in drawing and development time into the price of decals, they would be $30 a sheet. No one would buy them. I make no complaints as I love to draw, and I love rocketry. I also get a great kick out of seeing others be able to finish their models with my decals.

Are there any real tax saving benefits for owning your own business?

[Carl@Semroc]

Are there any real tax saving benefits for owning your own business?WE sure don't have to pay as much taxes! :eek:

[sandman]

Are there any real tax saving benefits for owning your own business?

Yes that...but it depends. Some things are deductable.

I own another business so I've been doing this for a while...

Most computer hardware, software, paper ink, office expenses, millage...heck even meals are deductable.

Technically Phred and my trip to NARAM are deductable as well as NAR dues and believe it or not the subscription to Launch magazine.

Esentially anything related to the business or if it somehow helps your business is probably deductable but I always check with a professional first.

This is all from my tax accountant so I'm not making this up as I go.

The best part is being your own boss.

[sandman]

WE sure don't have to pay as much taxes! :eek:

Carl, It's not all that great...you have to have a profit before you pay any taxes! :rolleyes:

[tome0]

If you were starting a model rocket company the best thing to do is to start small. If I was starting a company I would first decide what your niche would be (as other posts have said). You could keep your normal job and with a small loan start making models in your off hours. Also it would be good to get a web site. There are numerous inexpensive web site builders that come with domain names. From there you could advertise in rocketry magazines such as Sport Rocketry. If it begins to work out you could slowly expand and hire various workers. If it did not work out you could try again at another time and you would not have lost all that much. :)

[Solomoriah]

tome0, I think you have the right idea... start small, and remain "agile" (ready to change as demanded by your customer base).

As for competition, a similar situation exists - small volumes and fringe characteristics. But the added requirement of ready availability will not be met, except during the period right after a production run.
This is exactly the thing I was speaking against in the other thread. Making engines in production runs, then warehousing them. I think it should easily be possible to build a machine able to prepare a variety of engines on demand; the engine wouldn't be made until the customer ordered it. Certification rules might need to be amended (it ought to be possible to make and test some of each thrust/nozzle combo and then consider the machine certified to make those engines) but I think it could be a very viable business model.

Make one machine, a relatively small unit, capable of MABEL-1 output levels perhaps (but with all the added flexibility I've mentioned). If the business really takes off, build another.

This is the wave of the future... fabrication on demand. Already I sell a book that is made that way (on a non-rocketry subject) as well as T-shirts and other promo items.

[Royatl]

This is the wave of the future... fabrication on demand. Already I sell a book that is made that way (on a non-rocketry subject) as well as T-shirts and other promo items.

Even bookstores are looking at this as a possible model. One copy of a book upstairs on display. Customer takes it (or a barcode slip) to checkout, customer waits a few minutes while book is printed/bound downstairs. Busier stores can print popular books in advance, but only as needed.

[InFlight]

If you were starting a model rocket company the best thing to do is to start small. If I was starting a company I would first decide what your niche would be (as other posts have said). You could keep your normal job and with a small loan start making models in your off hours. Also it would be good to get a web site. There are numerous inexpensive web site builders that come with domain names. From there you could advertise in rocketry magazines such as Sport Rocketry. If it begins to work out you could slowly expand and hire various workers. If it did not work out you could try again at another time and you would not have lost all that much. :)

I agree with this idea. :D

I believe that this is how Vern and Gleda started out in the beginning of what we all know as Estes. ;)

I don't know where all the... you need a VP and marking dept. came from as that is overkill when starting a company from scratch. Set realistic goals and know your limits. And don't be afraid to make mistakes. You will make mistakes :eek: oh, you will.

Profits should not be a concern at first. Your system or process will help you create a profit if you stick to your goals.

What do I mean by a system... Henry Ford developed the first assembly line for cars. This is now used to make TV's, toasters, pop cans, etc... you get the idea.

Create a system to keep track of everything down to the nickel. Yep, I said nickel.

Example: Can I cut these body tubes and use the left over 5 inch's for another kit?
sure you can. What were you going to do... throw it out?

That is the mind set that you need to have.
Good luck!

[Solomoriah]

When starting any small business, I believe you must:

Be very good at your job. Understand the work before you worry about the business, because if you aren't good at the work the business can't be built (or saved) in the first place.

Know what you can, and cannot do. Admit what you cannot do to your customers up front, and direct them to someone who can.

Don't expand into new areas while your core business is still growing; and don't expand unless you are sure you can handle the additional business.

When you do expand, make sure you hire competent managers, and then let them manage. Don't second guess everything they do, or make them bring every little piddly decision to you. Make sure they know what you expect, and then let them do it. And fire them if they can't.

Focus on the customer. Understand what they want or need. Give it to them.

And for Heaven's sake, do NOT call them "consumers." Consumers are a sort of creature just slightly above a cow, because, unlike a cow, a consumer can carry money around. Corporations compete to herd the consumers into their pens to milk them for money. Cater to a higher form of life... the customer.

[Carl@Semroc]

When starting any small business, I believe you must:... (long snip)Good advice! We have not gotten to the part about hiring managers yet. :D I did during the first life of Semroc in the 60's. I did not follow your advice. :o
... Cater to a higher form of life... the customer.We call them friends.

Side story... When I was 16 and worked at my Dad's tractor dealership and repair shop, I was trying to learn how to charge customers for various jobs. When a customer came in and wanted a new point welded on a plow, my Dad worked on it for about a half hour and when the customer came to pick it up he asked how much. My Dad wiped his hads, thought a bit and said, " about a dollar." That sounded cheap, but now I knew how much to charge to replace a plow point. Since a new one was about $30, it was a good deal. About a week later, another customer came in with the same job. My Dad worked on it just as hard and put it aside. When the customer came to pick it up and asked how much for the job, I KNEW what my Dad would say! He surprised me, however, by telling the customer it was $5. That seemed closer to what I thought it should be. When the customer left, I asked my Dad why one job was one dollar and the other was five dollars. He said Mr. Worthington had three acres and had to feed his family from his farm. He said, "I would have done it for free, but his pride would have been hurt, so I charged him a dollar." Then he told me that Mr. Moye owned a thousand acres and was in farming as a business and he expected to pay a fair price, so he was happy to pay five dollars. I told my Dad that I would never figure out how much to charge people if the prices kept changing. He said,"Get to know your customers and their family and make them your friends, then it will be easy to figure out how much to charge." He died last November with thousands of friends, but very little money. He might not have been the best businessman, but he had business figured out.

[Solomoriah]

Excellent story, Carl. My father would have been a customer... or perhaps, as your Dad said, a friend... since he was a farmer.

I like the word "customer." In the old days they spoke of someone "giving you their custom" or even "bringing you their custom" as if it were a thing. A valuable thing. Of course, it simply meant that it was their "custom" to do business with you.

Notice one thing... that puts the true control in the hands of the customer. They decide, and calling them "customers" emphasizes that. Perhaps that's why corporations call them "consumers." No decision-making is really implied by the latter term.