Each component sale must pay for the below (just a quick list off the top of my head).
Cost of Research and development
Design (Includes hundreds of hours of listening and swapping out different parts and breaking them in). By very talented and expensive engineers.
Manufacturing set-up: Setting up a line, developing testing stations along the way.
Design packaging —- pay for set up
Cost of Manufacturing:
Cost of Materials
Cost of ordering dozens or hundreds of parts with different lead times (this takes time and if you are missing one piece… your dead in the water).
Cost of holding the inventoried parts and finished goods
Cost of holding large quantities of repair sub components for sometimes decades.
Cost of packaging
Labor (health insurance, time off, taxes)
Utilities: Rent, electricity, warehousing
Cost of IT. Computers, software to run the business, networking.
Returns / repair processing
Cost of selling:
Sales force… if even only one or two .
Advertising - pages in mags, Google searches… etc.
Coordinating add purchasing,
Developing and managing a global network of retailers.
Road trips to manage retailers / distributors. Pressesce at Audio Show all over the world.
Order entry, inventory management.
Customer support line / technical support.
manage accounts that do not pay, make sure accounts receivable do not grow faster than accounts payable or you go bankrupt.
Cost of Manage employees and operation
Periodic accounting cycles, annual tax returns… W2 for all employees
The above must be paid for by the sale of each high end component. The higher the price, the lower the sales number… the more each unit must cover it’s development, manufacturing cost and the cost of ongoing operations.