Bringing a product from an idea to reality is exciting, but it’s also expensive. Without a solid understanding of costs, even the best ideas can run over budget, stall, or fail entirely. For engineers, inventors, and product managers, accurate cost estimation is more than just accounting. It’s a critical part of strategy, risk management, and decision-making.
In this blog, we’ll break down how to approach cost estimation in product development, share real-world examples, and highlight the steps you can take to budget effectively before you build.
Why Cost Estimation Matters
Imagine designing a new wearable health monitor without knowing the cost of sensors, casing, assembly, and testing. You might assume it can be made for $50 per unit, but early prototypes reveal it’s closer to $150. That gap can derail your business plan and scare investors.
Cost estimation helps you:
It’s not just about numbers; it’s about making informed decisions throughout the product lifecycle.
Step 1: Break Down Costs Into Categories
The first step in budgeting is knowing what you’re budgeting for. Typical product development costs include:
Step 2: Decide Between Rough vs. Detailed Estimates
Not every estimate needs the same level of precision.
Example: Early on, an engineer designing a new insulin pump may estimate $20-$30 per device in materials for concept prototypes. Later, as the design stabilizes, the cost per unit may be refined to $75-$85, including production tooling and FDA testing.
Step 3: Account for Design Complexity
The more complex your design, the higher the cost. Complexity can come from:
Example: Consider two medical devices:
Even if both serve similar purposes, the second device requires more materials, assembly, testing, and regulatory scrutiny, significantly increasing cost.
Step 4: Consider Manufacturing Methods
Different manufacturing methods come with very different cost structures:
Example: A prototype casing for a handheld ultrasound device may start as a 3D-printed model for $300-$500. When scaling to 1,000 units via injection molding, the per-unit cost drops to $25-$30, but the mold itself may have cost $12,000 upfront.
Step 5: Include Risk Buffers
Every estimate should include a contingency for unknowns. Development rarely goes exactly as planned. Factors like design changes, regulatory delays, supplier cost increases, or material shortages can add unexpected costs.
Example: If the projected prototype cost is $50,000, budgeting $10,000-$12,500 extra ensures you can respond to design changes or supplier delays without derailing the project.
Step 6: Factor in Time
Time is money. Extended design cycles or multiple prototype iterations increase costs, not just through labor, but also delayed market entry.
Example: A medical device that takes six months longer than expected to prototype may incur additional engineering hours, regulatory fees, and capital costs for lab space. Accurate cost estimation considers time-dependent expenses alongside raw material costs.
Step 7: Use Tools and Benchmarks
There are many tools to help with cost estimation:
Example: Engineers designing a portable nebulizer might use Protolabs’ online quoting tool to estimate machining or injection molding costs for a prototype run.
Step 8: Communicate and Iterate
Cost estimation isn’t a one-and-done process. As design, materials, and testing requirements evolve, revisit your estimates. Clear communication with engineers, product managers, and investors ensures everyone is aligned.
Example: When a cardiac monitoring device prototype required extra biocompatible coatings, the cost estimate was updated and presented to stakeholders, preventing surprises down the road.
Step 9: Include Regulatory and Certification Costs
Medical devices often have significant regulatory costs. These may include:
Example: A surgical instrument may require $20,000-$40,000 for initial regulatory testing, which is separate from prototyping and materials. Including these costs upfront avoids budget shortfalls.
Step 10: Don’t Forget Post-Launch Costs
Development costs don’t stop once a device is built. Production scaling, warranty support, repairs, and updates all require planning.
Example: A new wearable ECG monitor may cost $100 per device to manufacture initially, but post-launch customer support, software updates, and replacement parts can add an additional $15-$20 per unit.
Bringing It All Together
Accurate cost estimation in product development is both an art and a science. By understanding materials, labor, manufacturing methods, regulatory requirements, and potential risks, inventors and engineers can budget strategically, avoid surprises, and make smarter decisions.
Failing to plan costs early isn’t just expensive. It can derail a project, leading to delays in innovation, or worse, prevent a life-saving device from reaching patients.
By breaking down costs, iterating estimates, and keeping communication clear, you can transform a concept into a well-planned, financially feasible product. After all, innovation isn’t just about ideas; it’s about turning ideas into reality.
If you have questions about the development process, feel free to reach out for help. We do hundreds of free consults every year to help guide innovators along their path of device development.