As a hardware guy I often see this one. "But the parts only cost one third of what companies are charging for it", they say and a particular type then believes that must mean they can make a fortune by being cheaper than the companies. Then over the course of a few years they figure out why the price was what it was.

If you sell something at 3× the bill of materials (BOM) cost, that just means you will break even on that bill when you have sold a third of the product. And that does not include wages and other fixed costs like e.g. running your website, customer service, rent, cleaning, RND budget for future products, ...

Meaning that very often if you know everything that is involved, you realize that the product is not actually expensive, it is just as expensive as it needs to be to operate at that scale. If it is a small company selling to a small market that scale will of course be different.

E.g. if we talk audio equipment, you totally will not be able to build yourself a cheaper mixer than Behringer (assuming the same features and specs) — even if we assume you work for free — just for the simple reason that Behringer builds audio equipment at such a scale, they get the parts for a fraction of the price you would have to pay.

On the other hand if you want to build that boutique fuzz pedal sold by one guy in his shed in Minnesota, you can easily go cheaper than him simply for the reason that he has to pay the bills and you don't (and because the electronic parts of the pedal amount to pocket change in a fuzz pedal). His market aren't people who are being economical about fuzz pedals. His market are guitar afficionados with deep pockets that love to have something a bit more special and less off the shelve.

So I am always a bit careful when I see people with the knee jerk reaction of "I could do that cheaper". Yeah sure, but you can also jump of a bridge like a cliff jumper, the tricky part is not the jumping, the tricky part is to walk away unharmed every time. Similarly the tricky part when running a business like that is not to be cheaper than the competition, the tricky part is to be cheaper and be able to grow the business in a sustainable way.