Speaking as someone who is trying to make the transition from simply putting stuff together he wants to use to making something he can sell: It's not easy to come up with something that looks worth paying for, that can be made at a consistent quality and cost, will be reliable enough that your reputation won't take a hit because it's breaking down on the buyers, and so on.
Building a battery-puck Nico-Stick, pretty easy; Building the Janty Stick, not so easy. Turning a flashlight into a Magnum you can give to your friend, fairly easy; Turning out something as comparatively pretty as the Prodigy/Protege is a lot harder.
Beyond that: My first ePipe prototype had a materials cost of $20, but if you value the time I put into it at minimum wage, it cost me a couple of hundred dollars. The second had a materials cost of $40, and a manpower equivalent cost of about $30 (4 hours work, roughly). The next one, intended to be my last before starting to sell them, will probably have a materials cost of around $60, but require only an hour of labor, and it's essentially a wash (at minimum wage, I came out $2-3 ahead). Get the picture? I'm trading materials cost for labor cost, and I'm hitting the point of diminishing returns, there won't be much labor to be saved by spending more on materials or tools. To make the pipes better, I'll either have to charge more, or sell enough that my materials costs come down (because it's a lot cheaper per unit to order 100 switches than 5).
Beyond that, because it's just me in a garage, there's a bunch of overhead I don't need to worry about. Nobody is going to report my OSHA violations, so I don't need detailed safety plans. If I cut off a finger, I'm not going to file a Workman's Comp claim. I'm under the radar for zoning, so I don't have to pay rent on an industrial space. The list goes on. As soon as I actually start having employees, I have to deal with all of that stuff, and a couple of dozen others as well. Overhead costs go way up, I start needing to hire people to keep me inside of the regulations I'm required to follow with the other people. My profits on each unit I sell can go down (or even negative) simply because getting it made and sold incurs increases in overhead.
I also start looking like an attractive target to sue, if something goes wrong. I need lawyers, shrink-wrap liability waivers, my design will have to get rebuilt (more cost of materials) by real engineers (more overhead) and submitted to UL so I can get insurance, and so on.
Making mods is a fun way to scratch the DIY itch. Making money from mods is a whole different game.
--Dave
