Re: Making a mid-range custom guitar company(?)
I'm a big believer in the "5 fingers" of surviving as a musician. That is, you need to have about five revenue flows, because none of them will be big or reliable. So I play, give lessons, do setups & repairs, and have part time contract work teaching.
If this is the spirit in which the proposition lives, then I'm not sure it would be a bad thing to be looking at something that keeps costs low for an accessible product for modest gains.
Brainstorming:
My inclination would be to do something like this: they would be budget-boutique. I'd charge like a mechanic: describe your guitar, I'll source the parts and charge you directly, then I'll bill for my time and that summed up is the cost of your guitar. Could be $300 or $2000. If I bill $15/hour and it takes me x hours to assemble and test, then x*15 is my take. (Of course you'll need to get a tax ID and pay taxes, so you don't keep it all.) This is assuming a one-man enterprise. Anything more and it's much more sophisticated to do right. Also, forming an LLC so a disaster doesn't sink you personally is a good idea.
Also, having capital up front to work with is important. You may need more or better tools. It might be good to have a few common models pre-made for sale. Beyond this, if you can prove any kind of interest (which you'd need for a loan or to convince investors anyways) you might want to get B2B arrangements with suppliers. Passing on retail costs to customers kills the low-cost incentive. And clearly some things like pots you'd want to just buy in bulk. Anything that takes $1 off the guitar but doesn't sacrifice your standards is something you have to do.
Know your competition. It's easy to know Squier and Epiphone. Know HardLuck Kings, Oscar Schmidt, Rogue, etc. etc etc. This way you know what quality level you need to meet. Also, there's a saying that if you want to know what's wrong with a product, ask their competitor. Nobody will tell you what's wrong with IBM faster and in more detail than Microsoft. Do LOTS of industry research.
Finally, know your customers--and find them. I don't know if most people on gear boards I visit would be your customers. Odds are, if we got to the place where we can do it, we want to do it so we can get exactly what we want. On the other hand, there are young players, collectors, recently starting players, who might want something other than the basic 4+ guitars that most people buy.
But here, I think, lies your challenges: First, how to be known. How do people find you? Second, how do you distinguish yourself from all the budget companies with bad reputations. Third, despite how much I loathe bankers, try to put together a business plan and get a loan--even if you don't want one. If a bank won't give you a loan, they will say why. So many people take this to mean they just need to borrow money elsewhere, but consider that they want you to pay back your loan; hence they want businesses that succeed. They see business proposals all day, every day. If they think there's a problem, don't drag your cousin down with you; fix the problem and try again.
It really sounds like a challenging but fun kind of business. Whatever you decide to do, I wish you the best.
