Curiosity

[choirbass]

Just deleted thread because it was asking questions about speaker cost overhead, etc that I really didn't need to know the answer to.

Works better to simply put, 'business is business'

:)

[davef]

I know there are real reasons, such as complexity, internal components, importing various parts, time and labor inolved, covering all the workers, management etc, research involved, wherehouse/office costs, other fees, and expected profits which it seems arent much. But simply, why would something like the RAAL Sierra Horizon cost what it does, compared to something of lower cost, such as a random $100 center? (I know that's really not a balanced comparison in itself, but it is more of the 'common' HTIB speaker that most people own).

Don't get me wrong, every speaker here is definitely worth it to me. I'm really just wondering more specifics. Dave might be the only one who knows the why's, maybe not the only one. I just didn't want to derail a thread to ask.

Thank You,
Brandon

Hi Brandon,

I am not sure if I fully understand your question so please forgive me in advance.

The reason the Horizon Ribbon center costs what it does is really quite simple, it is the same reason why a Corvette costs more than a Mustang... It all comes down to what it costs us to build the unit. To give you an idea, the ribbon tweeter alone costs us more than what it costs us to build a single 340SE center, and we purchase the tweeters in bulk.

We determine our retail pricing based on the final BOM (bill of materials) and then add in some profit. In the case of the towers and horizon, these are our lowest profit margin products and that is without even factoring in our labor and R&D costs.

I have learned that most ID speaker companies try to maintain a 60% profit margin on their products... The same holds true for brick and mortar based manufacturers. We don't have a single product in our entire line up that has that high of a profit margin. I truly wish we did as that would allow me to hire 2 more employees which *might* allow me to work less than an 80 hour work week :o

I really can't speak for other loudspeakers out there, I know some manufacturers determine retail pricing based on the market they intend to sell to regardless of what it costs to build, but our pricing is strictly based on our component costs. And I should mention that our component costs are based on significant volume discounting -- other than the ribbons, we purchase our tweeters and woofers by the thousands.

I hope this answers your question :)

[choirbass]

Thanks Dave, that actually helps a lot :)

and 80 hours?? that's just too much, lol

[davef]

Hi Choirbass,

I wanted to further elaborate on this discussion, just to show how far off your relative is with regard to component costs (COGS, costs of goods sold) vs operational expenses. There seems to be some general misunderstandings / stereotypes of the loudspeaker industry with regard to expenses / costs etc.

I certainly can not give out our actual component costs, that would be equivalent to you (or anyone else) publicly releasing their salary. However, I try to run as transparent a business as we can and I am happy to share some info so that you can get a basic idea of just how much something like our ribbon STC costs us to manufacture.

A single 4’ x 8’ sheet of the bamboo we use for the Horizon costs $225 in bulk quantities (not including freight). We use ¾ of a sheet to build just one Horizon. Of course, this does not include the labor costs to perform the actual cabinet assembly, or the costs of the dyes and finishing substrates used. I will say this, the labor costs to build just one of these cabinets exceeds the cabinet material costs.

I will give you a brief rundown of various costs I am willing to share. All prices below are close estimates to give you an overall idea and all prices are in bulk quantities.

Finished bamboo STC loudspeaker cabinet = $500

High quality binding posts we use = $35 per set in 1000 pc quantities

Packaging (box + molded EPE foam) = $45 each (bulk quantities, price does not include the rather high tooling costs and artwork costs that we had to pay just to develop the packaging)

Crossover = est $110 in bulk pricing (includes 4 air-core inductors, 4 metallized polypropylene caps, 4 resistors, 1 electrolytic cap, 8 heavy gauge wires + terminations, epoxy resin custom designed and tooled electronic circuit board + printed artwork and standoffs) Note that the price I quoted does not include tooling costs, layout costs or my design time.

(2) custom designed cast frame woofers = check retailers to estimate costs of a high quality similar featured woofer

(1) custom designed neodymium mid-woofer = check retailers for estimates

(1) Customized RAAL 70-20XR ribbon tweeter with Amorphous core = the lower priced 70-10 model retails for $484 each. The version we use is a step up and is customized for us (which we pay for).

Damping materials / various labels & logos / screws = est $60…

Add up the costs above and we are already at over $1200 and our speaker is wooferless and unassembled :eek:

Your relative can come to any conclusions they wish, however, when we come up with our retail pricing – it is strictly based on actual component costs (fixed costs) + a profit margin % (which on many products is now extremely low.) Our labor costs and any operational overhead are not even factored into our retail pricing at all. Instead, we need to sell a specific quantity of each product each month to cover the remaining costs.

Our operational overhead is actually quite low, basically just rent + payroll + utilities + R&D. My salary is purely based on annual profitability. The # 1 expense for loudspeaker manufacturers is usually marketing. It costs a fortune for full page color layouts in magazines etc, renting space at shows, banner ads, sales reps… Our marketing expenses are less than what we pay for drinking water at our office. This combined with excellent products and friendly service is our formula for success and has allowed us to survive and even grow in a poor economy…

I have been a professional in this industry for almost 30 years now; I have yet to come across any loudspeaker where the per unit component costs were less than calculated per unit operational costs. It is certainly possible, but I would never associate myself with a product like this :cool:.

A further example, a full years supply of just our tweeters costs us more than a year of our rent. A single container load of Sierra-1 cabinets (just the empty cabinets) costs us more than an entire year of our total operational costs (again, not including my salary – if I should even take a salary). It would be an interesting ratio to determine, but I would estimate that in a typical year, our total component costs would average 5-7 times more than our actual operational costs.

A loudspeaker company simply could not survive if they spent more on operational costs than their component costs. They would be selling garbage products and as soon as the typical slow down occurs during late spring and summer months, when sales are very slow – their operational costs would cripple them. We survive these downturns because during these slower months, we keep less inventory on hand thus dramatically reducing our expenditures on components.

I truly hope this helps to clarify our business model a bit more.

[Jonnyozero3]

Dave,

I am amazed you would share this much info. Just sayin'...it's always a pleasure to do business with you folks :)

[dougand]

I have very recently stumbled upon Ascend. Such uncommon tranparency. This is a company I want to support.

[DougMac]

I have very recently stumbled upon Ascend. Such uncommon tranparency. This is a company I want to support.
Welcome dougand! Operators are standing by just waiting to assist you in your desire to support Ascend!

You'll find this a friendly community and willing to help with any questions.

I've been extremely satisfied with my experience with Ascend. Before I made my purchase, Dave personally answered my questions. Most importantly, they make well crafted, excellent sounding speakers.

My wife recently summed it up. We went to the movies for the first time in a long time (to see "The Descendents"). On the way home she looked thoughtful, then remarked: "Really, I don't see any reason to go to the theater anymore. The picture quality in our home theater is much better and there's absolutely no comparison when it comes to sound!"

Regards,
Doug
340's, 170's, 200's in 7.1

[Gov]

Welcome dougand! Operators are standing by just waiting to assist you in your desire to support Ascend!

You'll find this a friendly community and willing to help with any questions.

I've been extremely satisfied with my experience with Ascend. Before I made my purchase, Dave personally answered my questions. Most importantly, they make well crafted, excellent sounding speakers.

My wife recently summed it up. We went to the movies for the first time in a long time (to see "The Descendents"). On the way home she looked thoughtful, then remarked: "Really, I don't see any reason to go to the theater anymore. The picture quality in our home theater is much better and there's absolutely no comparison when it comes to sound!"

Regards,
Doug
340's, 170's, 200's in 7.1


My wife and I feel the same way!

[Dark Ranger]

Wow.

And my friends and family wonder why I am so fanatical about Ascend. You just don't see this kind of transparency and customer focus in most businesses today.

I was actually talking to my father recently about customer service trends. We had both expressed frustration with one particular company due to poor CS he received on multiple occasions. After ordering several hundred dollar's worth of product, it took several months for him to actually receive his order due to website inaccuracies, lack of follow-through, and general misrepresentation. Trying to speak with CS was extremely difficult. On top of that, the order contained the wrong product when he finally received it, prompting more follow-up calls and e-mails with CS. :(

Of course, no one is perfect and I'm not claiming Dave/Ascend is perfect either, but quality and CS is definitely a consistent trend. In addition, I find it refreshing that Dave is so open regarding company details, even divulging information that many would consider to be quite sensitive and potentially damaging to the company. I have taken a couple of accounting courses as part of my IT degree, so what Dave wrote above makes complete sense. There are so many factors involved that it can make your head spin sometimes. I have no doubt that Dave would rather being working "in the lab" doing what he loves instead of updating the books, analyzing costs, and dealing with the BS in the audio industry. Nevertheless, his strive for excellence has borne fruit in the form of reputation and customer loyalty, among other things.

I am proud to support Ascend Acoustics. The benefits of doing so bring me more than just a great sonic experience. :)

[davef]

I have no doubt that Dave would rather being working "in the lab" doing what he loves instead of updating the books, analyzing costs, and dealing with the BS in the audio industry. Nevertheless, his strive for excellence has borne fruit in the form of reputation and customer loyalty, among other things.

Oh my, you could not possible be any more correct. I will tell you that this is not an industry where one can generate personal wealth... Those of us who do this professionally, do it as a means to support our passion. At least most of us start off that way as things can turn sour when a company owner starts to chase dollars. I have seen that end of the industry more than I care to remember.


I am proud to support Ascend Acoustics. The benefits of doing so bring me more than just a great sonic experience. :)

Thank you -- that really means a lot to me :)

[HiroPro]

Hi Choirbass,

I wanted to further elaborate on this discussion, just to show how far off your relative is with regard to component costs (COGS, costs of goods sold) vs operational expenses. There seems to be some general misunderstandings / stereotypes of the loudspeaker industry with regard to expenses / costs etc.

I certainly can not give out our actual component costs, that would be equivalent to you (or anyone else) publicly releasing their salary. However, I try to run as transparent a business as we can and I am happy to share some info so that you can get a basic idea of just how much something like our ribbon STC costs us to manufacture.

A single 4’ x 8’ sheet of the bamboo we use for the Horizon costs $225 in bulk quantities (not including freight). We use ¾ of a sheet to build just one Horizon. Of course, this does not include the labor costs to perform the actual cabinet assembly, or the costs of the dyes and finishing substrates used. I will say this, the labor costs to build just one of these cabinets exceeds the cabinet material costs.

I will give you a brief rundown of various costs I am willing to share. All prices below are close estimates to give you an overall idea and all prices are in bulk quantities.

Finished bamboo STC loudspeaker cabinet = $500

High quality binding posts we use = $35 per set in 1000 pc quantities

Packaging (box + molded EPE foam) = $45 each (bulk quantities, price does not include the rather high tooling costs and artwork costs that we had to pay just to develop the packaging)

Crossover = est $110 in bulk pricing (includes 4 air-core inductors, 4 metallized polypropylene caps, 4 resistors, 1 electrolytic cap, 8 heavy gauge wires + terminations, epoxy resin custom designed and tooled electronic circuit board + printed artwork and standoffs) Note that the price I quoted does not include tooling costs, layout costs or my design time.

(2) custom designed cast frame woofers = check retailers to estimate costs of a high quality similar featured woofer

(1) custom designed neodymium mid-woofer = check retailers for estimates

(1) Customized RAAL 70-20XR ribbon tweeter with Amorphous core = the lower priced 70-10 model retails for $484 each. The version we use is a step up and is customized for us (which we pay for).

Damping materials / various labels & logos / screws = est $60…

Add up the costs above and we are already at over $1200 and our speaker is wooferless and unassembled :eek:

Your relative can come to any conclusions they wish, however, when we come up with our retail pricing – it is strictly based on actual component costs (fixed costs) + a profit margin % (which on many products is now extremely low.) Our labor costs and any operational overhead are not even factored into our retail pricing at all. Instead, we need to sell a specific quantity of each product each month to cover the remaining costs.

Our operational overhead is actually quite low, basically just rent + payroll + utilities + R&D. My salary is purely based on annual profitability. The # 1 expense for loudspeaker manufacturers is usually marketing. It costs a fortune for full page color layouts in magazines etc, renting space at shows, banner ads, sales reps… Our marketing expenses are less than what we pay for drinking water at our office. This combined with excellent products and friendly service is our formula for success and has allowed us to survive and even grow in a poor economy…

I have been a professional in this industry for almost 30 years now; I have yet to come across any loudspeaker where the per unit component costs were less than calculated per unit operational costs. It is certainly possible, but I would never associate myself with a product like this :cool:.

A further example, a full years supply of just our tweeters costs us more than a year of our rent. A single container load of Sierra-1 cabinets (just the empty cabinets) costs us more than an entire year of our total operational costs (again, not including my salary – if I should even take a salary). It would be an interesting ratio to determine, but I would estimate that in a typical year, our total component costs would average 5-7 times more than our actual operational costs.

A loudspeaker company simply could not survive if they spent more on operational costs than their component costs. They would be selling garbage products and as soon as the typical slow down occurs during late spring and summer months, when sales are very slow – their operational costs would cripple them. We survive these downturns because during these slower months, we keep less inventory on hand thus dramatically reducing our expenditures on components.

I truly hope this helps to clarify our business model a bit more.

Dave you are the most HONEST FORTHRIGHT person in the audio biz I've ever known. You truly work, design and engineer these products with love in your heart not profit and a capitalist margin based agenda.

Your complete honesty and transparency is a testament to this and a VERY RARE THING in this business. Very few if any others that I know of in this business would be so outspoken about their operation and costs of manufacture.

Those of us in the community RESPECT YOU BIGTIME for this trait.

You're one CLASS ACT David Fabrikant in an industry full of con-artists and ripoffs.

You are truly as amazing and honest as your loudspeakers are for audio reproduction.

SALUTE

[Gov]

Dave you are the most HONEST FORTHRIGHT person in the audio biz I've ever known. You truly work, design and engineer these products with love in your heart not profit and a capitalist margin based agenda.

Your complete honesty and transparency is a testament to this and a VERY RARE THING in this business. Very few if any others that I know of in this business would be so outspoken about their operation and costs of manufacture.

Those of us in the community RESPECT YOU BIGTIME for this trait.

You're one CLASS ACT David Fabrikant in an industry full of con-artists and ripoffs.

You are truly as amazing and honest as your loudspeakers are for audio reproduction.

SALUTE

Lets raise a glass! Amen!

[surfcane]

+10000000000000000000000000

[choirbass]

wow :O lol, I completely missed Dave posting the update (I haven't been on much for the past 1-2 weeks).

But, what you provided definitely goes a long way in many respects.

Thank you Dave :)

Brandon

[arkiedan]

Wow! I'm a retired automotive engineer, having worked for GM my entire career, and I've never seen a manufacturer talk so openly about costs. Dave, you're quite a guy! Glad I bought my Sierras from you. You might have sold me on the towers over the Philharmonics, simply by posting so honestly and openly.

Now come on - really - how much do you make a year? Just Kidding! :D:eek::D

old arkiedan