On October 20^th 2016, Gabriel Goldstein, Chief Product Designer of Anidea Engineering, the expert in product development, had a great talk with David Alexander, the President of BaySource Global, the expert in business process outsourcing and offshoring, to discuss preparation steps and common issues when outsourcing in Asia, especially China.

Hi David, Thanks for taking the time to speak with me today and share what you learned about outsourcing manufacturing work to Asia, specifically China. Please tell us a little bit about yourself and BaySource, and how you got started?

I was in the consumer products industry and I’m going back to before the year 2000. We owned some brands that went to the value-price-point category and we needed to develop the new brands, new packaging and we were over a hundred-million-dollar company, but we had very limited expertise in our purchasing and procurement department. Really China was just coming on board. It was really all the Fortune 500 companies that had the resources to send people to China. We didn’t. So we struggled getting some packaging done the right way. We were challenged with that, and it dawned on me that there was no enterprise set up for serving small and medium size businesses. To help them navigate China, to become a bridge to doing business in China and you know having a trusted resource to mitigate the usual anxiety, which are costs and quality. And so, around 2004 I put a business plan together to kind of take a look at how we can serve small-middle sized companies in the United States having a trusted bridge to China setting up offices over there, and I kind of felt the opportunities would be enormous. That is how I got started. I left that position to start what is BaySource now. That was 2005.

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Wow. Okay. That is a good history you have there, so when someone’s considering offshoring their manufacturing to either China or other Asian countries, what are the things they should consider?

They have to consider the potential volume of the product they are looking to source. And, more importantly than that, they need to understand how much of their cost of goods labor makes up in term of the total landed costs. So,  if labor is not at least around 25% of your cost of goods, it generally doesn’t make sense to go to China because until you start adding labor vis-à-vis secondary processes, manual processes, finishing, handwork, anything with labor…assembly, that’s when it makes sense for China. And, they should also look at their design. Are they making or designing products, which keep costs, whether involving labor or not…are they keeping the costs of their products to the minimum when designing their products?

All right, very good, so things kind of need to be designed for China and have a good fit for Asian manufacturing.

Not even designed for China. I am just talking in general, you know? Whenever you’re designing or creating or developing a new product, you want to design a product that is going to be suitable to the market you’re serving or you’re selling in, right? That you are not going to out-cost yourself based on either what is currently available or where the costs are going to out-weigh the value.

Sure! Right! Thanks for the clarification there. So, what are some other advantages beside costs to offshoring the manufacturing?

The other advantages we see, mostly now for offshore manufacturing is that there is infrastructure in place, particularly in China. So, China’s benefited from a steep learning curve in the past 15 years. Their efficiencies are up. There’s infrastructure in place, plant property and equipment. The municipalities infrastructures are there, highway systems, rail, obviously shipping. So really startup costs are a huge advantage, when offshoring because you don’t have to invest in assets: equipment, plants, facilities, people, training, all of that kind of overhead.

Well, they really have built quite a system over there and I can really see that if you had the volume to warrant it, they can really turn out a lot very quickly for you. What about some of the pitfalls or disadvantages of outsourcing your manufacturing?

Sure. So, what I like to say is whether you’re making a product in Chicago or China, the product has to be managed: the life cycle, the development, the quality. You have to manage new product development, and so the obvious disadvantages are time and distance. Not to mention the built-in disadvantages which are communication and translation, so a lot of details can get lost in translation. Another disadvantage is that the Chinese are often making products that they have no idea what the applications for those products are. They’re making just literal widgets based on drawings, designs, specifications, but don’t always necessarily know what these product are being used for in the U.S. So there isn’t that proactive nature for somebody at the factory level to say: Hey! We can make this product a little bit better or wouldn’t it work better if we did this? Whereas, you know, locally there is probably more common knowledge built-in around: Hey why are they doing it this way? If they made it this way, we could fit it in a box better or it would be more efficient or it would show up on the shelves better or something like that.  You’re not going to get that sort of proactive participation when you are offshoring.

So I guess in that example, it’s kind of like you get exactly what you asked for, and not much else, which is very interesting… uncounted costs or advantages, which I think is a pretty interesting aspect there. As far as, the kind of person or business… I mean at what scale or where should a personal or entity be at when they consider their outsourcing manufacturing? Kind of like size, volumes, financial, capability and where should someone really to be at when they start approaching manufacturing in China?

Wherever you are going to manufacture something, you need funding. I don’t mean to state the obvious, but a lot of people don’t take into consideration once that product is developed, once you’ve gone through your first article of inspection, your prototypes, your samples….now you’ve got to place a purchase order. So people have been able to float their ideas, their business, their startup up to a certain point but if you don’t have the right finances and resources in place…to place orders, literally just place the first orders, to cash flow those orders, you’re at a loss there, right? So, a person or business should consider creating a budget, you know, startup budget, and understanding what their cash flow needs are going to be when they’re manufacturing, I didn’t even mention the tooling and startup costs that need to be built into the equation.

So let’s be a little more pointed about that. I mean minimum order quantity. It would be easier if you said you had an order of 100 or maybe a 1000 of the product but is that realistic when outsourcing to Asia?

Everybody always asks us, so what is your minimum order quantities, but they’re really not our minimum order quantities? They are a factory’s minimum order quantities. We have a sporting goods client that just placed their first order for a new product. We’ve done several orders for them before but it is a new product for them, and they are going to order 700 of these products, and they are going to order 700 at $40 each. Now, you know now it is a $30,000 order, and that is not a huge order, but their resale on the items, the margin of the resale on that item supports getting into that business, watching that product. The next order will be doubled that or triple that, and also we have found a manufacturer suitable, who is pleased with…..you know who is not stopping at those lower sub 1000 unit orders because they’re a family owned factory, and they have capacity and so they are delighted to help these guys get into the business, because the guys have already proven on other products that they are making, that they’re doing with us. They are proven that they have ability to capture the market. They have already been successful with their other products. There is no one size fits all on the minimum order quantity. The other thing that I’ll mention to you is that freight…any good business decision maker understands that your freight whether in Chicago or China, freight should not eat into any more than 10% of your costs of good. So a container is a container is a container, so a 40-foot container all-in, let’s just call that $5000. So, if you don’t have $50,000 of value on that container, you really should be looking for something else. Likewise, a 20-foot container is generally…you know with taxes and import fees, tariffs, $3500. So if you do not have $35,000 worth of value on that container, you might want to reconsider. We should still do “Less Than Container Loads”, LCL but the trade value at cost of the products on those containers support the exercise.

Very good. That’s good metrics and numbers there. For that one example that you gave about that product, can you give a general category of that kind of product as far as you know, was it a soft good, was it engineering intensive, or would something that ….

Yeah, it’s engineering, it’s sports training equipment and it’s got good margin over here, so they will sell it for double what they pay for it, but they have to work in distributor margins and things like that. For me to say okay that $30,000 order doesn’t make sense even though it is going to cost them $3500 dollars to get it in. The margin on that $30000 of product supports the little bit of overage over that 10% of costs of good.

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Very interesting. You mentioned that there was engineering involved with that, so let’s talk about design work. What should be designed offshore? What should not be designed offshore? And what is available in turnkey design services?

We’re seeing more and more Chinese firms pop up to say we’ll do your design and development work, help you get into prototypes, things like that. Generally, the cost, the managerial cost or the salary of the designer over there, the CAD designers would still be less than over here. However, going back to the original translation issue and application issue, where they can help you design something, but if they don’t know the literal use or the practical everyday use of the product, they are not going to be suited to design nearly as well as the U.S. designer. So, you get what you paid for, right? And also, when dealing with a designer offshore, just the translation, the back and forth, the product revisions, their understanding of what you’re asking them to do, and how you are asking them to change things. When you start meshing creativity with practical services and design work, it’s definitely an advantage to stay local.

Yes. Very good. Thank you. So, wrapping up! if someone has an idea and they have their finances in place and they’re confident they want to go offshore with their design, their product. What is the next step for them to get started?

So that goes kind of to a question you have, it says: How should a person prepare to outsource their manufacturing? I gave a talk out at a tradeshow in Las Vegas last year, which was essentially how to do business in China. The thesis or the main argument of my discussion was sort of from the garbage in…garbage out. You will be received to the degree that you are prepared, meaning you need to have a…it’s not a business plan but a formal product document, product briefing. A little bit of background about you, the business, you know…. where you are selling to. Not that you have to devolve the whole business plan to the Chinese factory, but you want to put a very professional request of proposal together, because the more thorough and detailed that package of information is, the more creditable you will be with the factory and the greater sense of urgency that they are going to share around helping you with manufacturing your product. So we talked about a budget. You shouldn’t even be near China, until you’ve done a budget, and what I meant by a budget is sort of a breakeven analysis that if you’ve identified what percentage of the potential market, whether that would be one percent or one tenth of one percent of the market here. And that should extrapolate into top line numbers. And then what your margin needs to be on those numbers to support the business and help you cash flow the business. So having a budget in place and particularly including those startup costs, those purchase order costs, and then a lot of people don’t even work in the selling and marketing expense. They just think it’s their time but there’s time, there’s travel, the opportunity costs, right? Having a good budget and a sound game plan and a professionally presented package of information around your product.

Very good! So, that last question prompted me to ask something else here. How do you handle IP and licensing issues when you’re working oversea?

So, that is a great question, and you know kind of tongue in cheek I tell people if the Chinese factory or somebody that works in China tells you not to worry about IP…run from that person! That’s just not viable advice. How we help mitigate that is we work two ways. One, we work with reputable people, reputable suppliers that are owned by decent people, and have worked with Western companies before. So, it is kind of on the coattails of other businesses that have come before them and they have had a good track record with supporting the manufacturing businesses, and not running off with their IP. That’s one way to mitigate it. So if ‘Black & Decker’ has been working with the factory for a while, you know that they’ve audited and scrutinized and challenged that factory’s willingness to protect their IP. One is really reputation and experience and knowing where to go, having sort of that extra sense in instinct to understand if the factory is reputable or not. Two is really working with somebody in China that coordinates the manufacturing from a supply chain perspective, and doesn’t necessarily tell the right hand what the left hand is doing. So, we are making injection molded parts over here. We’re doing our SMT technology and our circuitry over here. We’ve got metal parts and components over here. We select the final assembly point which can usually be one of those factories, but the factories we are going to choose are not the ones that are already participating. Meaning, they’re not vertical, which means they are not manufacturing and marketing companies. They were not already at all the tradeshows in those respective industries over here in U.S, right? So, we work with really pure contract manufactures. We seldom work with companies that are already marketing their own products. Another thing I’ll tell you that we don’t work with anybody that doesn’t have a patent.

Got it! So, it helps protect you on the US sale side too. That is very handy.

That protects us, and protects them. We just don’t want to work with someone who doesn’t have a patent because we can get well in the process and find out that our customer has no right to launch the product because somebody else has a patent.

Oh interesting. I wasn’t thinking about that originally. David, very good. This is a wealth of information. I appreciate your time and thank you very much.

Yeah! Thank you, Gabriel.

This book was a serious wakeup call for me and I wish I had discovered it 15 years ago.  It is an incredibly easy read and packed with very tangible concepts.  It’s not usually in the standard list of books people have read and posted on Facebook. It’s not like a Good to Great or 4-Hour Work Week that every entrepreneur grins at the mention of, however, as I spoke to some seasoned entrepreneurs (read older) they gave the grin.

It’s funny how I happened to come across this book.  I was listening to a podcast and they were ripping on the 4-Hour Work Week. I had decided not to read the book a while ago, as I had heard so many negative things about it, but the podcast ultimately inspired me to give it a shot.

So, I asked around to borrow a copy, and one of my friends obliged. It  took a few months before I scheduled lunch with my friend and he showed up with a stack of books.  He started out saying something like, “Here is the book you asked for, but this is the book you need to read [The E Myth Revisited].” He gave me an overview and I was hooked. I started reading it immediately.

The Problem

So, have you ever been sitting there at your desk, knowing you are more capable, skilled, and talented than those around you, and you just know that you could do this job better than your incompetent boss? If so, this book is for you.  It details the struggle between the Technician, the Entrepreneur, and the Manager.

You are a skilled technician. You live in the present. You have work, you do work, you deliver work, you move on.  This is a valuable skill, but you want something bigger; now you’ve added the entrepreneur.  This person lives in the future.  He is what got you to leave the comfort of your old company and start out on your own.  He is the one that sees the vision of what your business could be.  You need him to go out and get the work, because without him the technician has nothing to do.  Now you balance your time between two jobs.  You spend some of your time selling/growing and some of your time performing the work you sold.  For you this led to an undesirable boom bust cycle.

As it turns out, the technician has a lack of appreciation for the other aspects that make your former company run, and if you continue to overlook these details, you will perfectly craft yourself a career dungeon.  As the book outlines, you start your company for the independence and flexibility, but those overlooked details will start to be required, and you’ll need to react.  So you hire another technician.  They may be as skilled as you, but they won’t quite do things the same way.  When you have just one or two, you can handle that and things get done.  You get a few more and the cracks in the system get bigger. Then, thinking to yourself, I need a manager to keep these guys in line!  The manager lives in the past trying to clean up messes.

So, now you have all of these people working for you, and you are working harder and you still aren’t making any more money than you made working for your former company. Additionally, the quality of your product or service drops due to a lack of systems and defined expectations. Furthermore, you didn’t start a company, you just made yourself a job! This place would fall apart without you.

Franchise Model

No one is suggesting that your shop should be the next McDonalds, however what Gerber and I are suggesting is that you run it like a franchise.  I can envision a company that is represented by a large stack of documents:  How you do everything in XYZ Co.  If you can document how your entire company operates, then you don’t have a job, you have a business, and a business should be an asset.  It should work for you.  You may have a job, but it shouldn’t be any more critical than other jobs there. When you want to open a McDonalds franchise, you get a large stack of documents and go through a lot of training that effectively says, “this is how we do it here.”  How do you do it at XYZ Co.?  If it’s not written down and repeatable, only you know. Then only you can run the company, then you have a career dungeon.  Did you want to build a dungeon?

Vision and Goals

As Gerber points out, when starting a company you should really sit back and think about your goals.  Not your business goals, but your life goals.  What do you want your life to be like?  Do you want to work 40 hours a week, make a decent living, have benefits, paid vacation, and insurance?  Or do you want to work 60 to 80 for the rest of your life, struggling to keep your company together, with little benefits, sacrificing your family life with no vacation, and if you leave for a week, it all falls apart?  The first example is where many entrepreneurs start.  The latter is where most entrepreneurs end up.  So what are you going to do differently?  Create a vision for your life.  If it involves starting a company, build an asset.  From day one, you need to think about how you are going to build your business.  Yes, you need to do this while you are still figuring out what your business is and how it needs to operate.  You need to slowly and interactively document how your company will do things and train your employees to follow the process.

 Action Steps

So, you still want to start a company, or you are in the early stages of one, and you don’t want to build a dungeon.  Here are my suggestions:

• Create job descriptions for every position in your company.  Not one person, one position.  If there are just 3 of you, you each may have 5 positions.  This delegates and assigns responsibility and you get a great idea of everything that actually needs to get done.
• Document how important things get done.  There are many little things and big things that happen in a company every day.  I suggest doing this iteratively.  Being proactive would be great, but I personally find that problems are more quickly solved reactively.  Plug the holes as they come up. When you have focused on a problem, you can document the solution and hopefully prevent it from coming up again.  Most quality standard systems have a continuous improvement process.  It doesn’t need to be perfect the first time.  Something beats nothing and done is better than perfect.
• Iterate and grow.  These are living documents.  Early on they will change often and you need to have ways of keeping everyone updated.  Also, as you gain a broader vision for the overall system, you can begin to be proactive in your process documentation.  

I fully suggest you find this book and read it, ideally, before you start your own company.  I’ve found extreme value in it even 15 years into my Product Development and Design firm.

On Amazon: Click here!

Also I’d like to thank Jason Zook for the term ‘career dungeon’.

Printed wiring board (PWB) is an older term used for PCBs.  It was exactly what it sounds like, it was a way to print wiring.  This term could still be used for very simple PCBs where the function is more for mechanical wiring than active circuitry.

A look inside a modern cell phone is a PCB that reflects the ‘work of art’ side.  It’s a finely crafted network of wiring and components, flexible and rigid PCBs which all work together perfectly to provide the functionality we’ve come to take for granted in modern technology.

No matter what your needs are, it’s important to realize that all PCBs are a combination of at least 2, if not more engineering disciplines.  Understanding what these disciplines are and how to specify your requirements are important aspects of getting your PCB done right the first time.  The disciplines are:

Electrical engineering – this is the obvious one. The goal is to wire electronic circuits together.  Of course we’ll need some electrical engineering.

Mechanical engineering – while perhaps not so obvious, we live in the physical world. We are wiring in the physical world so there are mechanical requirements to consider.  Some PCBs have very few mechanical requirements like put 4 holes in the corners.  Others move towards the work of art level, but most are in between.

Software engineering – Almost all PCBs these days have some level of software in them. If there is a microcontroller, then there is software.

Thermal engineering – Many times grand assumptions are made about the environment something will operate in. The environment something will operate in can change the design drastically. Specialties – If there are lights, then perhaps there is an optical engineer involved.

Other specialties can be involved just depending on what needs to be done.

Below is a How-to guide to help you communicate details of the PCB to your engineer for design of your circuit board

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High Level Functionality – The first step is to write down what you want it to do.  You can start out with very broad definitions of your inputs and outputs and what it does.  Provide whatever level of detail you can.  Helpful aspects to think about are parameters like: 

Think about these types of questions and have an understanding about how it all goes together. Of course your engineer will be happy to fill in the gaps, but the more effectively you can communicate, the better chance of getting what you want and saving costs due to miscommunication. 

For more details on how to write a specification, please check out this article. 

Mechanical and Thermal Requirements – We know we need to understand the kind of space you want to put your PCB into.  Sometimes it’s as simple as ‘put it in this box’.  However, even that can lead to issues.  What about these questions:

Software Requirements – While many boards have very basic functionality like ‘turn this on when this happens’, other PCBs can have very complicated logic built into them.  In some cases, software can drive 75% of a PCBs design cost, and sometimes more.  Software is a double edge sword in modern day PCB design.  On the one hand, it offers extreme flexibility and capability to create complex functionality and control.  On the downside, all of the flexibility and control can lead to software never being finished.  If there is a new idea to implement, it’s likely you’ll be able to add it in to the software.  This is great if it means you can sell more of your product with a software change.  It’s not so great if changes are made haphazardly because software changes are ‘easy’.  A specification is very important for this phase.  Make sure you can answer these questions:

What does the software have to do in all cases? Not just in the main case, but in everything you want it to do.

Other Specialties – If other specialty engineering disciplines are required, specification and design can get more complicated.  Some companies, like ours, are familiar with LEDs where we can cover most of the requirements for a LED lighting project without an optical engineer.  However, there are other cases where complicated instrumentation may need to be researched or subcontracted for very specific design aspects.  Below are some examples of some non-standard engineering requirements.

In many of these cases, modules have been developed by 3rd parties that can help reduce the engineering requirements of the specialty work to the level of skilled engineer.  In some cases, it is the scientist who needs the PCB built and they can provide the first-hand expertise on how the other engineers need to interface to their specialty systems.

One more very important engineer that was not mentioned is the manufacturing engineer.  This isn’t necessarily a specific engineering discipline, but to consider how your PCB assembly will be produced.  Placing a surface mount component is cheaper than placing a through hole component.  (Machines do the surface mount work.)  There are scores of items to review to ensure high yield PCB development.  Many are standard practices, but the skill lies in the hands of the engineers building the board.
Printed circuit board development is a complex and highly skilled craft.  With all of the various skills involved, it is best completed by a team of engineers.  Sure, there are many design challenges that are small enough to be completed effectively by a single engineer in a reasonable amount of time.  However, as the saying goes, two heads are better than one.  Having an engineering team develop your PCB where there are design processes and reviews in place help ensure a high quality design for your product.

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The costs of creating something. Engineers are generally the ones responsible for creating a product. Depending on what the product is, you could have industrial designers, mechanical engineers, electrical engineers, and software engineers. There are other specialties as well, but most products require these as the core.

Engineers are generally well educated and skilled individuals. People with this kind of expertise usually earn an excellent income. So there is a large human cost to product development. And it takes a lot of time, especially if you want it done right.

The costs of making it. Now that the design engineers have created and developed the product, it needs to be made, and you want it made in mass. While the engineers above could certainly make your product, it would not be cost effective.  Therefore, we need more engineers and resources to reduce the product cost by engineering the complexity out of the manufacturing process.  Only then can lesser skilled labor and machines manufacture your product and reduce overall costs. This can range from robot automation, to creating tools to stamp steel or injection molding plastic, to documentation for an assembly work station. This is all before you actually make the first production part. This is one of the single most misunderstood costs in product development. Then you have to actually produce it, which then requires additional raw materials (read costs) for your tools and your assemblers to actually produce the parts and products you need.

The cost of selling it. You’ve invested money into the engineering and the production. Now I am sure you did not want to fill your garage with copies of your product. You want to sell it. While there are many ways to sell your product, almost none are free. Whether it is traditional advertising, a pay per click campaign, or a crowdfunding platform, they all cost money. It will also take a lot of your time, or at least a lot of someone’s time. Factor that in.

The hidden costs. Ah, the unknown unknowns. This is why you go to experts. If you are starting a company, you may have regulations that you need to adhere to. For any electrical product you develop, you need to consider the FCC regulations. If you plan to sell into a big box store, you may need to adhere to a UL specification. Do you want to sell into Europe? You need CE specification. Does your product have Bluetooth? You’ll need to join their consortium. There are all sorts of hidden costs you may need to consider when selling and marketing your product. Some are governmentally mandated; some are industry specific. Research your industry and consult with experts to learn what these hidden costs are so you can plan for them.

The single biggest problem startups and inventors have is not understanding these costs. It is very common to look at a product on the market that costs $10 and expect that it can be designed and made for $1000. A single, simple plastic part can have a tooling cost of $5000 or more, and that is before the engineering or selling part. A good example is a home coffee maker you can buy for $100 (a nice one). It may have cost the company upwards of $500,000 to get the first one to the store shelves. They only make their money back because they are going sell 100,000 of them. You can see quickly here how volume plays a major role in what a product costs. Investigate and understand the costs of product development, then proceed accordingly.

Please check out my other blog posts Engineering Design Based on Volume and The Missing Link Between Prototype and Production for more information.

So just as the name states, the goal here is to prove the concept of the product you want to ultimately produce.  The goal is fairly clear, however, the way you define that goal gets a bit trickier.  The three things you want to accomplish at this stage are:

1. Lean startup mentality – fail fast, fail cheap.  You have the idea, now does anyone want it?  Having a POC that is cost effective to create is important here.  Assessing validation of the idea and product at every stage of prototyping is paramount.  You must avoid phrases like, “I just know this will be big.” 
2. Determine your next incremental step.  If you have X resources, what do you expect to accomplish after expending X resources?  For instance, if you are willing to put in 100 hours of time and $200, there should be a goal at the end of that stage.  It can be as simple as answering the question, does anyone like my product to determine if it is worth investing more time.  It could be more complex such as, I need to be able to raise $20,000 for my next step of development with this POC. 
3. Does it work?  This may seem obvious, and so many times ideas seem so clear in your head, but once you start working on it, you find details that just do not pan out. 

Building hardware isn’t cheap, but it is getting better all the time.  Here is where places like Spark Fun and products like the Raspberry Pi and Arduino come in.  You can mock up some hardware, display, some buttons, and show how your product can work.  Of course this is great if you are technical, but if you are not, then you have a few more challenges ahead of you, but you can still validate.  Perhaps you can make up some renderings and tell the story of your product visually.  Or, you can partner with someone technical.  In either case, technical or not, you should always build a team.  Techs need non-techs and vice versa, but this is another blog. 

Your POC needs to tell the story, show the story, and validate the product.  The definition of a POC is the goal.  It is defined by the early stages of accomplishing these goals.  Keep in mind that a POC is also typically limited in looks and function.  It is not a minimal viable product (MVP).  It’s just the first stages on your way to a functional prototype, and pilot run, and MVP.

Unless you have all of the resources you need to create and develop your product, you are more than likely interfacing with a technical consultant or engineering company.  The more effectively you can communicate with the technical team, the better your chances of getting what you want. 

Writing it down and describing all of your ideas and how they will work together will be a very effective task for moving your idea forward with your technical team.  You will begin to see holes in the logic, stumble upon new ideas, and begin to document what is in your head.  Writing it down will also alleviate the constant ruminating of an idea in your head.

But you say, “I’m not an engineer!  I don’t know how to write a specification!”.  Well, both statements may be true, but if you want to pave the way to a successful product development venture, you’ll need to learn to communicate your ideas effectively to the engineers who can write a specification.  And with a few helpful tips, you too can write a basic specification.

An item of note, this list is for a somewhat validated idea.  This list assumes you’ve already performed the basics like validated a market, created a tentative business model, and you have performed some level of prototyping.

1. Brainstorm.  Your first step is to just get all of your ideas down on paper.  White boards, drawings, and short lists are a good place to start.  You want to focus enough on this so it is all out of your head and on paper.  You can move things around later, but now you have your concept documented and you can begin to refine it.
2. Strong and weak words.  Inventors tend to get very tied to their ideas.  Try to break away from that and begin to describe what you need done using some special words.  If you use a phrase like, “The device shall be made from titanium,” then the reader will expect that you are the expert in this material and there is no room for variance.  Other strong phrases are: must have, required to, and will.  Does it need to be made from titanium or is it that weight to be minimized?  There are weak words to use like may or should or can.  Think about what is absolutely required and what would be nice, and the real goal you are hoping to achieve.  Then write that down.  Keep in mind that opposites can also be valuable in your writing.  Phrases like cannot, shall not, and should not are equally useful.
3. Sketch.  As you have heard, a picture is worth a thousand words.  You may be amazed at how effective a simple block diagram in Power Point can be.  Show how things are connected.  Show the logical flow of operation.  There are great mock-up tools for software/apps these days you can also use.  The more you think and articulate your idea, the more effective it will be conveyed and possibly become a better product.
4. Write what you know.  You are probably not an engineer if you are reading this, so don’t try to be.  Yes, you should educate yourself in the technical field of your idea.  You should not spend your days looking over websites for microcontrollers and then specify the use of one in your project.  Describe the features and functionality you require, don’t try to engineer the product unless you have that skillset (before you had this idea).  An experienced engineer will have just that, a lot more experience.  Take advantage of that and let them do what they are good at.
5. Iterate.  A specification is a living document.  It can change as the market and business input is uncovered.  As you learn more about your idea, do more research, and develop your product and business, it will constantly evolve.  Now with that being said, once you engage a technical team, there can be costs associated with change.  You will want to get close enough to start engaging your technical team, but once you hand it over to them you should have a good assurance it’s right, and only make changes that absolutely have to be done.  Inventors tend to like to ‘tinker’ with their ideas which can keep products from ever reaching the market, so iterate until you have something to sell, then stop.  Let the market drive your iterations.  This is a subject for another posting.

What I’ve described above is generally referred to as Functional Requirements Specification or a FRS.  The engineering team will then likely create several documents from this which could be a Design or Product Specification, Test and Validation Plans, etc.  Those are beyond the scope here. 

Don’t worry about making it perfect.  From a non-technical perspective, you should put down the things that you care about.  However technical and non-technical that is.  If you care about the color, put that down.  If you care about costs, put that down.  If you don’t care what material is used, let the engineer figure that out.  In any case, your technical team will start to ask you a lot of questions to help flesh out your specification.  After the ground work is laid, then everyone can be on the same page for what needs to be done.