HOBBY REFERENCE:
Production Costs

Disclaimer: Experiences between companies are probably different - while companies like Ral Partha or RAFM probably share costs, etc. on par with GHQ, some other companies are structured differently.

When I was working for GHQ, the major costs involved in producing microarmor were salaries and the cost of producing master models.

While most hobby manufacturers are relatively small operations run out of the owner's home or a smallish storefront, GHQ employed more than 20 casters, moldmakers, and support staff during the early 1990s in order to meet the massive demand for microarmor, both from the US Army and the hobby generally. More than half of the 20 employees were fulltime; although none of us had the usual array of benefits (i.e., no health insurance) you still have to consider that the company was required to cover at least $250,000 in payroll annually.

Just as with any company in a market economy, when demand for microarmor dropped-off in the aftermath of the Gulf War, GHQ laid off employees; still demand fell so sharply that the family that owns the company had to pay out a great deal from their personal resources in order to keep the skeleton crew left after the Gulf War in business -- they were finally forced to raise prices in 1995 in order to stay in business at all.

The other significant capital outlay required of GHQ to maintain the high quality that everyone expects from the company is in the design fees paid to the company's master modellers -- usually $800 to $4000 per model; back when the company was releasing 6 to 8 new releases per month that meant they were shelling out up to $20,000 per month in design fees for models.

Finally, everyone seems to ignore the cost of metal that goes into our favorite models. Before the New York state pewter scare, GHQ was using 60% tin/40% lead alloy that cost around $2.70 per pound for its models; after the scare we switched to Britannia pewter that ran about $4.50 per pound -- we went through about 400 pounds of metal in two weeks, so our production costs for metal alone were upwards of $3,600 per month. During slower periods, it probably took us three weeks or a month to go through 400 pounds - a safe annual figure would be between $32,000 and $40,000 per year in metal.

There are tons of other incidental costs involved in metal casting (mold blanks cost $14 per set, etc.) that most hobbyists don't consider -- metal casting is a very expensive proposition. The only way most companies can afford to stay in business is by staying small -- the owner of the company is frequently the master modeller and there are usually only a few other specialist employees -- or they are unable to maintain high quality over the long haul.