Is it possible to sell car parts online as a micro business?
Discussion
My day job is a Mechanical Design Engineer. As an inveterate tinkerer I've designed various bits and pieces for myself which I have fitted to previous cars just as a bit of fun and to keep myself from going mad from powerpoint (sorry, slide decks).
There has been commercial potential in various of these widgets over the years but I've actually recently leant into getting one of these parts ready for production. As part of the day job I conceive, design, test, create drawings, prototype and get quotes for various bits, most of which have got to market with a high degree of success. These have been in the lighting, cycling and firearms industries.
I've got a quote to produce enough parts for 50pcs of this widget which I would assemble myself. I would be looking at a decent margin and would handily undercut other similar offerings currently in the market. I'd hope to increase the output but this initial offering would be testing the market.
The only thing stopping me is product liability insurance which has become a complete blocker. The quotes I have received would mean I would be paying the same for insurance as I would for components. This seems excessive. These quotes are from specialist brokers. Clearly the risk appetite from some guy making bits for cars not high.
I am wondering if these parts are best pitched as 'motorsport use only' which would place the burden of responsibility on the user if they were to use it on the public road opposed to me, the manufacturer.
Does anyone have any experience they can share with selling parts like this online? I suspect the majority of parts sold similar to mine are simply done without PLI which is not a route I am happy to take, even if the risk of any problem is microscopic.
There has been commercial potential in various of these widgets over the years but I've actually recently leant into getting one of these parts ready for production. As part of the day job I conceive, design, test, create drawings, prototype and get quotes for various bits, most of which have got to market with a high degree of success. These have been in the lighting, cycling and firearms industries.
I've got a quote to produce enough parts for 50pcs of this widget which I would assemble myself. I would be looking at a decent margin and would handily undercut other similar offerings currently in the market. I'd hope to increase the output but this initial offering would be testing the market.
The only thing stopping me is product liability insurance which has become a complete blocker. The quotes I have received would mean I would be paying the same for insurance as I would for components. This seems excessive. These quotes are from specialist brokers. Clearly the risk appetite from some guy making bits for cars not high.
I am wondering if these parts are best pitched as 'motorsport use only' which would place the burden of responsibility on the user if they were to use it on the public road opposed to me, the manufacturer.
Does anyone have any experience they can share with selling parts like this online? I suspect the majority of parts sold similar to mine are simply done without PLI which is not a route I am happy to take, even if the risk of any problem is microscopic.
Well, you've discovered why you can undercut the competition - and possibly why when you take into account the insurance, that undercut may not be as compelling, maybe not even possible.
Is there a way you can go the other way and sell it as a premium product? Selling something cheaper isn't always what the market wants so if you can find a way to offer something premium, it might make it more viable.
To me, I think your biggest hurdle will be one bloke selling one thing of which there are only 50. Is it something you can offer exclusively via a retailer. It may be that they take the insurance responsibility themselves. You won't make as much but you've stated you've got high margins and avoiding the insurance costs may make this route a viable test of concept if nothing else.
If not, I believe there is a way you can sell something in 'beta' form which lessens liability providing you are transparent on buyer responsibility at the point of purchase. On this, the motorsport idea might work.
Is there a way you can go the other way and sell it as a premium product? Selling something cheaper isn't always what the market wants so if you can find a way to offer something premium, it might make it more viable.
To me, I think your biggest hurdle will be one bloke selling one thing of which there are only 50. Is it something you can offer exclusively via a retailer. It may be that they take the insurance responsibility themselves. You won't make as much but you've stated you've got high margins and avoiding the insurance costs may make this route a viable test of concept if nothing else.
If not, I believe there is a way you can sell something in 'beta' form which lessens liability providing you are transparent on buyer responsibility at the point of purchase. On this, the motorsport idea might work.
StevieBee said:
Well, you've discovered why you can undercut the competition - and possibly why when you take into account the insurance, that undercut may not be as compelling, maybe not even possible.
Is there a way you can go the other way and sell it as a premium product? Selling something cheaper isn't always what the market wants so if you can find a way to offer something premium, it might make it more viable.
To me, I think your biggest hurdle will be one bloke selling one thing of which there are only 50. Is it something you can offer exclusively via a retailer. It may be that they take the insurance responsibility themselves. You won't make as much but you've stated you've got high margins and avoiding the insurance costs may make this route a viable test of concept if nothing else.
If not, I believe there is a way you can sell something in 'beta' form which lessens liability providing you are transparent on buyer responsibility at the point of purchase. On this, the motorsport idea might work.
You are quite right that I have indeed discovered what many would call a "Cost of Doing Business". I guess I was initially surprised at the size of the quote - when I've submitted Bills of Materials for products I have developed there hasn't been a line item for insurance even though that would have been part of the calculation down in the bowels of the company somewhere.Is there a way you can go the other way and sell it as a premium product? Selling something cheaper isn't always what the market wants so if you can find a way to offer something premium, it might make it more viable.
To me, I think your biggest hurdle will be one bloke selling one thing of which there are only 50. Is it something you can offer exclusively via a retailer. It may be that they take the insurance responsibility themselves. You won't make as much but you've stated you've got high margins and avoiding the insurance costs may make this route a viable test of concept if nothing else.
If not, I believe there is a way you can sell something in 'beta' form which lessens liability providing you are transparent on buyer responsibility at the point of purchase. On this, the motorsport idea might work.
Selling via retailer would be attractive but I'm hedging my bets at this point as I don't know how successful the product will be so looking to minimise my financial exposure.
It may well be this is an attractive pipe dream I just want to make sure that I've not missed anything along the way. I'll discuss with some brokers the motorsport aspect.
shalmaneser said:
StevieBee said:
Well, you've discovered why you can undercut the competition - and possibly why when you take into account the insurance, that undercut may not be as compelling, maybe not even possible.
Is there a way you can go the other way and sell it as a premium product? Selling something cheaper isn't always what the market wants so if you can find a way to offer something premium, it might make it more viable.
To me, I think your biggest hurdle will be one bloke selling one thing of which there are only 50. Is it something you can offer exclusively via a retailer. It may be that they take the insurance responsibility themselves. You won't make as much but you've stated you've got high margins and avoiding the insurance costs may make this route a viable test of concept if nothing else.
If not, I believe there is a way you can sell something in 'beta' form which lessens liability providing you are transparent on buyer responsibility at the point of purchase. On this, the motorsport idea might work.
You are quite right that I have indeed discovered what many would call a "Cost of Doing Business". I guess I was initially surprised at the size of the quote - when I've submitted Bills of Materials for products I have developed there hasn't been a line item for insurance even though that would have been part of the calculation down in the bowels of the company somewhere.Is there a way you can go the other way and sell it as a premium product? Selling something cheaper isn't always what the market wants so if you can find a way to offer something premium, it might make it more viable.
To me, I think your biggest hurdle will be one bloke selling one thing of which there are only 50. Is it something you can offer exclusively via a retailer. It may be that they take the insurance responsibility themselves. You won't make as much but you've stated you've got high margins and avoiding the insurance costs may make this route a viable test of concept if nothing else.
If not, I believe there is a way you can sell something in 'beta' form which lessens liability providing you are transparent on buyer responsibility at the point of purchase. On this, the motorsport idea might work.
Selling via retailer would be attractive but I'm hedging my bets at this point as I don't know how successful the product will be so looking to minimise my financial exposure.
I think that having a stock of just 50 puts it out of the realms of any conventional marketing / sales type approach. You're really still in the proof of concept stage so why not go to race meets, car meets and see if you can find customers that way - face to face. If you can get some to take it and write a review then you've got your concept proven and some powerful marketing content ready go when you're ready to scale up.
I wouldn't get too fixated on insurance.
If you're confident in the product, which it sounds like you are, then why do you feel you need it?
Obviously the caveat here is whatever you do, don't sell them personally! Set up a ltd co to trade through, it sounds daunting but very easy to DIY for a small business.
If anything happens it's the company liable, but whilst you're testing the waters worst case is the company gets forced into administration.
Obviously if it takes off you'll have to balance the risk of purchasing insurance or not.
If you're confident in the product, which it sounds like you are, then why do you feel you need it?
Obviously the caveat here is whatever you do, don't sell them personally! Set up a ltd co to trade through, it sounds daunting but very easy to DIY for a small business.
If anything happens it's the company liable, but whilst you're testing the waters worst case is the company gets forced into administration.
Obviously if it takes off you'll have to balance the risk of purchasing insurance or not.
I work on the railway but we've got a few Mech Eng graduates that have drifted away from the industry.
One of them sells quick-shifters that he designed at uni on the side.
Don't think he could live off it but there's definitely a market.
Likewise there was a guy who knocked up alloy gear knobs for Transporters. He was selling them for about £50 a pop 10 years ago and I got the impression he sold quite a few and from a machining perspective they didn't look too hard to make.
One of them sells quick-shifters that he designed at uni on the side.
Don't think he could live off it but there's definitely a market.
Likewise there was a guy who knocked up alloy gear knobs for Transporters. He was selling them for about £50 a pop 10 years ago and I got the impression he sold quite a few and from a machining perspective they didn't look too hard to make.
Following !
I too have a product , it's super-niche ; definitely more decorative than functional , although it could be used on the road.
I was thinking a sales contract with disclaimers such as 'this product is purely for static / decorative use only' and 'not to be used on the public highway' would absolve liability, but AI seems to think not ...
I too have a product , it's super-niche ; definitely more decorative than functional , although it could be used on the road.
I was thinking a sales contract with disclaimers such as 'this product is purely for static / decorative use only' and 'not to be used on the public highway' would absolve liability, but AI seems to think not ...
Edited by zedmtrappe on Tuesday 19th May 18:01
grumbas said:
I wouldn't get too fixated on insurance.
If you're confident in the product, which it sounds like you are, then why do you feel you need it?
It's a good question. I suppose that if the widget is part of a car's essential function like brakes or steering then you can't have it failing and causing an accident. But if it's some sort of non-essential accessory, I do wonder if you need insurance. If the widget should fail inside 12 months, just replace or refund.If you're confident in the product, which it sounds like you are, then why do you feel you need it?
ETA Ordering 100 rather than 50 could help your margin a lot, but you may end up with a garage-full of them unsold. Calculated risk.
Edited by Simpo Two on Tuesday 19th May 18:40
Thanks for all the responses guys, some interesting points.
ETA Ordering 100 rather than 50 could help your margin a lot, but you may end up with a garage-full of them unsold. Calculated risk.
I guess I should clarify it is indeed revised shifting mechanism; I'm extremely confident in it but clearly it's safety critical to some extent - you won't lose wheels or steering if it fails but you might lose thrust hence the concern about liability if someone were to crash and blame me; frankly my bigger concern is someone chasing me for a gearbox rebuild if they're a bit hamfisted.
The numbers obviously improve as the volumes increase - why buy 100 when I could buy 200? At the end of the day I have been using it myself for some time now and I think it's an excellent product but I need to balance the risk. Buying and selling 50pcs means I can make the numbers work for me at this state, I'd hope to drop my costs if volume were to improve.
This would be done alongside the day job but as I work 4 days a week I can dedicate a fair amount to time to it as a side hustle vs. someone working 5 days.
Simpo Two said:
grumbas said:
I wouldn't get too fixated on insurance.
If you're confident in the product, which it sounds like you are, then why do you feel you need it?
It's a good question. I suppose that if the widget is part of a car's essential function like brakes or steering then you can't have it failing and causing an accident. But if it's some sort of non-essential accessory, I do wonder if you need insurance. If the widget should fail inside 12 months, just replace or refund.If you're confident in the product, which it sounds like you are, then why do you feel you need it?
ETA Ordering 100 rather than 50 could help your margin a lot, but you may end up with a garage-full of them unsold. Calculated risk.
Edited by Simpo Two on Tuesday 19th May 18:40
The numbers obviously improve as the volumes increase - why buy 100 when I could buy 200? At the end of the day I have been using it myself for some time now and I think it's an excellent product but I need to balance the risk. Buying and selling 50pcs means I can make the numbers work for me at this state, I'd hope to drop my costs if volume were to improve.
grumbas said:
I wouldn't get too fixated on insurance.
If you're confident in the product, which it sounds like you are, then why do you feel you need it?
Obviously the caveat here is whatever you do, don't sell them personally! Set up a ltd co to trade through, it sounds daunting but very easy to DIY for a small business.
If anything happens it's the company liable, but whilst you're testing the waters worst case is the company gets forced into administration.
Obviously if it takes off you'll have to balance the risk of purchasing insurance or not.
I would start a ltd co. for sure at this stage.If you're confident in the product, which it sounds like you are, then why do you feel you need it?
Obviously the caveat here is whatever you do, don't sell them personally! Set up a ltd co to trade through, it sounds daunting but very easy to DIY for a small business.
If anything happens it's the company liable, but whilst you're testing the waters worst case is the company gets forced into administration.
Obviously if it takes off you'll have to balance the risk of purchasing insurance or not.
This would be done alongside the day job but as I work 4 days a week I can dedicate a fair amount to time to it as a side hustle vs. someone working 5 days.
warninglight said:
Another Mechanical Engineer here - I've been producing and selling automotive parts and kits for 6 years now, happy to chat about your ideas and may be able to help test the water.
Thanks will DM youEdited by shalmaneser on Wednesday 20th May 07:48
shalmaneser said:
I would start a ltd co. for sure at this stage.
I'm not sure that's going to completely absolve you personally of all liability if the very worst should happen ...Just out of interest, what sort of a percentage price hike would you be looking at - retail - if the cost of PLI were to be factored in ? ( I guess must be very substantial if you say it's a complete blocker ?)
zedmtrappe said:
shalmaneser said:
I would start a ltd co. for sure at this stage.
I'm not sure that's going to completely absolve you personally of all liability if the very worst should happen ...Just out of interest, what sort of a percentage price hike would you be looking at - retail - if the cost of PLI were to be factored in ? ( I guess must be very substantial if you say it's a complete blocker ?)
At a high level initially I'd be looking to double my money at lower volumes to make it personally worthwhile, and the quotes I have had effectively equal the BOM cost completely wiping out my margin. Hence I'd be working for free (or rather, working for the insurance co!).
Edited by shalmaneser on Wednesday 20th May 09:13
shalmaneser said:
zedmtrappe said:
shalmaneser said:
I would start a ltd co. for sure at this stage.
I'm not sure that's going to completely absolve you personally of all liability if the very worst should happen ...Just out of interest, what sort of a percentage price hike would you be looking at - retail - if the cost of PLI were to be factored in ? ( I guess must be very substantial if you say it's a complete blocker ?)
At a high level initially I'd be looking to double my money at lower volumes to make it personally worthwhile, and the quotes I have had effectively equal the BOM cost completely wiping out my margin. Hence I'd be working for free (or rather, working for the insurance co!).
Edited by shalmaneser on Wednesday 20th May 09:13
As a director you can only be held personally liable if you've been negligent in your duties. It's very rare for action to be taken against directors.
You can get directors and officers insurance for this which would most likely be significantly cheaper.
Obviously that's my understanding, please get proper advice!
Not sure if anyone has covered this angle at all but if your day job is designing parts for manufacture you may want to check your contract as anything you decide to design even in your own time may well be the IP of the company that employ you.
I had something similar for a while in one of my contracts.
I had something similar for a while in one of my contracts.
simon_harris said:
Not sure if anyone has covered this angle at all but if your day job is designing parts for manufacture you may want to check your contract as anything you decide to design even in your own time may well be the IP of the company that employ you.
I had something similar for a while in one of my contracts.
I'll double check but that sounds pretty outrageous and I would probably quit if that was the case! There is a non-compete clause/conflict of interest stuff but I can't see how our worlds would overlap here.I had something similar for a while in one of my contracts.
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