R&D and Manufacture costs

Dear All,

I am looking to get an opinion on what is a fair percentage to budget into a small footwear brand that will manufcature 40,000.00 units that roll out to retailers at £30 for sell through at £90.00 - £120 :

  1. What budget percentage should be factored for testing, developing, designing , prototyping?

  2. What budget percentage should be factored in for production and materials?

any help would be greatly appreciated, I have set amounts in mind but want to establish how competitive I am in the market.



hi greg,

it really depends on your business model.

normally, footwear development cost are taken as overhead and maybe only tooling costs are worked in an amortization into the FOB price as a guideline. i would say normally that if you can amortize your tooling costs over 3 years, its not too bad. usually about 1/2$ per pair could be OK. (ie. 10 TPU outsole molds at 6,000$ each for 10 size ranges = $60,000) which is 10,000prs per year at $2.00 added cost FOB).

hope this helps.

there really is to my knowledge any guidelines for added development, testing costs for a standard budiness model.

as for standard material cost per pair, i wold say given normal materials, something like 65-80% of FOB cost is normal depending on your product and materials.

labor cost is normally around 10% and developmentcost depening on the product and fty could be around 1%.

a lot depends on your qty. fty and product so it is hard to give firm numbers.