I saw how skis work and immediately invested 97 million in this business

Disclaimer: the article was written by the author of the blog based on an interview with the founders of the production of all-terrain vehicles, A. Klimovich and N. Alikin.

Do you know how skis work? Why doesn't a ski sink into a snowdrift when a boot sinks in?

Let's consider a section of a snowdrift with an area of So. It is acted upon by the downward pressure force of a boot or ski, and is pushed upward by the reaction force of the snowdrift support (the remaining parts of the snowdrift “support” the area of So up to a certain limiting moment).

How a boot presses: the boot pressure force is the boot pressure multiplied by the area So. And the boot pressure at each point on the surface is its weight divided by the boot area. So for the boot pressure force we have the formula:

For skis the formula will be similar:

Since the area of the boot is smaller than the area of the ski, the pressure force of the boot is greater than the pressure force of the ski.

Therefore, walking through snowdrifts in boots is not very comfortable.

Transporting geologists and shift workers to sites hundreds of kilometers away in the northern wilderness at minus 60 on skis is inhumane, so special equipment is used for these purposes – all-terrain vehicles and snow and swamp vehicles.

The snow and swamp vehicle will take you to your shift and help you escape into the forest, away from your wife.

All-terrain vehicles, thanks to their larger area, but now with wheels instead of skis, can travel through any wilderness.

We developed and assembled one of these machines in Krasnoyarsk from scratch.

Since the all-terrain vehicle can carry 20 people, it is often compared to a loaf of bread, but in fact it is closer to the army Kamaz.

On the left is the army armored Kamaz Typhoon-K, on the right is our snow and swamp vehicle Varyag, inspired by it.

When we drive on public roads, we catch the loving glances of our fellow countrymen, and in this article I will tell you what it cost us.

I already had a tent-making business, but I always wanted to make cars. At that time, my future production manager was developing satellite and tropospheric communication stations for the defense industry and wanted to change his field of activity.

Nikolai listened to the instructions of the Supreme Commander-in-Chief and delved into the problems of northern delivery – the delivery of goods and people in the conditions of the Far North, and thus found himself in the production of all-terrain vehicles.

We met through mutual friends. He with the idea of starting his own production, I with the money saved from the existing business.

Kolya described the idea on an A4 sheet of paper, and 2 days after he realized that I was fired up, he brought a detailed business plan. We estimated the costs, rented space at a wagon repair plant and started.

It took 4 months for the prototype, which was sized on an A4 sheet, to leave the factory and ford a mountain river.

We have now sold 6 all-terrain vehicles, but spent 97 million ₽ on this.

Business plan

There is only one company that sells all-terrain vehicles seriously. Its turnover is 2 billion per year.

I learned from their clients that they are being coy: they won’t sell less than 10 units of equipment, and in the opinion of the plant, almost any case is not covered by the warranty.

I thought: they take a low-quality product for 2 billion a year, that is, if we do it well, we can bite off part of the pie. In addition, we have a tendency to develop the Arctic, a port is being built in the Arctic zone of the Krasnoyarsk Territory, there are no roads there, so such equipment will be used.

We planned to outperform our competitor in terms of characteristics.

Among the features we have added are independent suspension and modularity.

In an independent wheel, the wheels are not connected by a bridge.

This suspension allows the wheels to move separately from each other. And reduces shaking in the cabin.

Not every all-terrain vehicle will allow you to do this while driving.

Modularity was introduced to increase the scope of tasks that all-terrain vehicles can solve, and, consequently, the number of potential buyers.

Thus, the all-terrain vehicle can be transformed into a manipulator, a tractor, a drilling rig, or a command and staff vehicle.

But the excessively wide model range also had a negative impact on the overall estimate, although it gave us a competitive advantage. Yes, now our all-terrain vehicle can turn into a fire engine and a minibus through impassable swamps, but it cost us a lot.

Investments in the production of an all-terrain vehicle

Expectation

Initially, we calculated 10 million investments, then we waited for a queue of orders, and planned to continue equipping the production at the expense of customers' money. We agreed to use the capacities of the Krasnoyarsk wagon repair plant, so there was no need to buy some of the machines.

Reality

In reality, the investment amount was almost 10 times more than planned. As of today, the total investment amounted to 97,000,000 ₽.

Of these, 30.5 million are equipment.
And 60 million is the months we spent preparing and refining the prototype, and there were no orders.

Income from the production of all-terrain vehicles

Between understandable evil and incomprehensible good, they choose understandable evil

We made a new product for the market and thought that everyone should appreciate the obvious advantages of our all-terrain vehicle and, of course, start buying our innovative device immediately.

But we faced all the delights of switching to something new. It is difficult to fight a habit, even when it is a habit of buying bad all-terrain vehicles. Everyone has already adapted to bad all-terrain vehicles, everyone agrees that it is bad, but predictably bad. But with a new supplier, everything will have to be built anew, and this unpredictability is frightening. As a result, between the clear evil and the incomprehensible good, we often chose the clear evil.

And while our all-terrain vehicle is chasing the client

Even those customers who come for a test drive, see the production, still behave very cautiously, do not trust. Almost every call about the all-terrain vehicle ends with a request to give people who have been using the equipment for a long time. And this is problematic when there are very few of those who use the equipment.

We sold 6 all-terrain vehicles (for about 55 million ₽), apparently to the most courageous people and innovators. Now the sold all-terrain vehicles will start to appear in all-terrain vehicle circles and, I hope, orders will come in. Even those customers who have already bought one need not one all-terrain vehicle, but 10 units of equipment, they just bought them for testing.

Of course, we made a website and advertising in Yandex, and we took reviews from bloggers, but the market is conservative and everything is sold only by word of mouth. The best advertising is when your product is seen by someone else, and then:

What is this? Where did you get it? I'm writing it down.

And I didn't want to focus on individuals from the start. When buying for 1 million, such a client will turn your head more than a company will when buying for 100 million. It's just that an individual simply has more time than a company to deal with all this crap.

Sale of services

Additionally, we started making money on Avito on the prototype. We posted an ad and orders started coming in. So, having driven 40,000 km, it has almost paid for its production.

The all-terrain vehicle performs tasks in the most remote places. There are no roads, not even a hint of infrastructure - only pristine nature in all its glory. — The all-terrain vehicle performs tasks in the most remote places. There are no roads, not even a hint of infrastructure – only pristine nature in all its glory.

Fixed costs of producing all-terrain vehicles

This is the money we will be forced to part with, even if not a single all-terrain vehicle leaves us.

Rent – 490,000 ₽

To produce all-terrain vehicles, we rent 2,500 sq.m. from a wagon repair plant.

In the summer month for 490,000 ₽ with utilities.

In winter for 520,000 ₽ with utilities per month.

We use part of the area directly, and on the other part there are machines that make parts for us and for the cars.

That is, we have not only leased, but also partially contracted production. We order some parts from the wagon plant. And the management of the wagon plant invited our production manager to work part-time and to work for them. Such industrial collaboration.

Employees – 2,700,000 ₽

Currently, 23 people are involved in assembling the large hippopotamus with an aggressive muzzle.

Engineers - 8 people, employees of the planning and economic service - 3 people, production employees - 11 people. But not everyone likes to be photographed — Engineers – 8 people, employees of the planning and economic service – 3 people, production employees – 11 people. But not everyone likes to be photographed

Welders, mechanics, painters and electricians work in production. On the left is our own thermal chamber.

The production manager worked at another all-terrain vehicle plant, and part of the team came with him. Since it is difficult to find people with straight hands, and there is no flow of orders yet, all employees work on salaries.

Such production requires skilled personnel. The difficulty of production is that the all-terrain vehicle, in order not to sink in snow or a swamp, must be light. And light parts automatically mean less strength. And the right compromise must be found with the help of good engineers.

We have built in strength, but in case of miscalculations, these will be our warranty costs. But we decided that it is better to bear the warranty costs, but attract customers now.

In total, our production must pay out about 4 million rubles monthly, regardless of the number of all-terrain vehicles produced and sold.

Cost price of a Russian-made all-terrain vehicle

We take ready-made: engine (800,000 ₽), gearbox (200,000 ₽), transfer case (90,000 ₽), cardans (236,000 ₽), hubs and wheels (740,000 ₽), the rest, including power and load-bearing structures, we make ourselves. The production of the remaining components of the all-terrain vehicle costs another 2.5 million ₽.

In total, the direct cost of a 4×4 vehicle, excluding fixed costs and salaries, is 4,566,000 ₽.

We sell this basic configuration for 6.9 million ₽.

If the all-terrain vehicle is three-axle, its cost is about 6.4 million ₽.

We try to take domestic parts. The Chinese engine was replaced with a Minsk one, and from Chinese we have only the radio and possibly the lighting, but we buy it in Moscow.

Replacing the Chinese engine was not only a patriotic step. Minsk engines are simpler, any mechanic can overhaul it on his knee in the field, but in the Chinese, for example, the injectors are electronic, and even if a little condensate gets inside, the equipment will give up its life.

All other units are GAZ, URAL, ZIL, that is, spare parts can be purchased with change from a loaf of bread and, by and large, in any vegetable store.

How much can you earn with an all-terrain vehicle?

If you look at the direct cost of 4,566,000 ₽ and the selling price of 6.9 million ₽, it might seem like we've found a gold mine. But the whole problem is in the volume of production.

A team of 23 people is capable of producing about 12 vehicles per month. And in this case, fixed costs (rent, salary) of 4 million ₽ will be divided by 12. And this is only +333,000 ₽ to the cost of 1 all-terrain vehicle.

Then the total cost of one all-terrain vehicle (4 by 4) in the basic configuration will be 4,899,000 ₽ and, having sold it for 6.9 million ₽, it will be possible to receive about 2 million ₽ in profit. Which means a profitability of about 29%. And also on this volume the purchase prices will improve, which will improve the profit by several percent.

But if you produce only 5 all-terrain vehicles per month, then now you will divide the fixed costs of 4 million ₽ by 5, and this is +800,000 ₽ to the cost of the all-terrain vehicle, due to fixed costs.

Then the total cost of one all-terrain vehicle will be 5,366,000 ₽ and, having sold it for 6.9 million ₽, it will be possible to get only 1,534,000 ₽ from 1 all-terrain vehicle. Which means a profitability of about 22%.

We are now at a stage of enterprise development where we sell 1 all-terrain vehicle per month or even every 1.5 months.

And in this case, our fixed costs of 4 million ₽ are mercilessly placed on just 1 all-terrain vehicle, and this is +4 million ₽ to the cost price.

Then the total cost of one all-terrain vehicle will be 8,566,000 ₽. Which means selling at a loss. And so from 1 all-terrain vehicle we get losses of 1,666,000 ₽. That is, it would be cheaper not to make and not sell the all-terrain vehicle at all than to sell only 1.

Approximately in this way, the general financial statement of our enterprise for almost 2 years shows minus 97 million ₽. Of these, 30.5 million are in equipment, 5 million in the first test all-terrain vehicle (but it paid off in services), and 61.5 million ₽ were sacrificed to domestic all-terrain vehicle construction.

All all-terrain vehicles have positive buoyancy with an optimal load of 1.5 tons at their weight.

I hope that, following the example of our all-terrain vehicle, positive buoyancy will work for our business, and we will soon emerge.

Disclaimer: the article was written by the author of the blog “fell, rose”based on an interview with the founders of the production of Varyag all-terrain vehicles, Andrey Klimovich and Nikolay Alikin.

I am blogging “fell, rose” with stories about real business, not this successful success of yours. Every week – a new story based on an interview with an entrepreneur.

You will read: how I earned 13 million a year from passive income lovers, how I glued cardboard and sold it on marketplaces for 50 million a year, why my taxi fleet with 300 drivers and 40 cars is no longer a business, how I make and sell stones on marketplaces for 1.35 million a month, why the production of dumplings in the provinces is dying, and how 1,000 workers work for me, although they think that they work for themselves and other stories.