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How To Start A Manufacturing Business

Wondering how to start a manufacturing business? Here are five tips you can use to assemble a manufacturing company from scratch.

Photo: Zac Johnson, Online Marketer and Creator of Zacjohnson.com; Source: Courtesy Photo

Richard Arkwright is credited with inventing the prototype of today’s modern factory after patenting his water frame in 1769. Manufacturing is an old industry, but it’s still just as lucrative. Globally, manufacturing and innovation continues to grow. It now accounts for approximately 16 percent of global GDP.

 

Starting a manufacturing business

Not so long ago, starting a manufacturing business was difficult due to a lack of innovation and costly capital expenditures. However, with advanced technologies and new niche products, it’s now possible for entrepreneurs to venture into the manufacturing industry.

The U.S. represents approximately a fifth of the manufacturing industry worldwide. China and Japan follow with a 15% and 12% representation respectively. The demand for innovation-based manufacturing is one of the factors that influences industry growth.

Developed markets are venturing into emerging markets for revenue expansion. These markets can enjoy technological manufacturing standards that are beginning to take shape.

With the growing opportunities, you might be wondering how to start a manufacturing business. Here are some tips you can use to assemble a manufacturing company from scratch.

 

1. Prioritize research

Starting a successful company is not possible if you do not understand the market. It’s important to know how various manufacturing sectors operate. Look at the requirements and the level of the competition.

 

Photo: Chris Ralston, Unsplash
Photo: Chris Ralston, YFS Magazine

Key manufacturing sectors include food, automotive, industrial, electronics, and pharmaceuticals. Manufacturing companies also produce materials like wood, paper, plastics, and packaging. Your research will guide you in deciding the sector for your venture. Trade journals and exhibitions are a good starting point for research, ideas, and market information.

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2. Consider location

As you plan to start a manufacturing business, location is a factor that is twofold. Determine where you will set up manufacturing operations. Secondarily, decide where you will sell your products.

In the initial stages of business, you might be able to operate from a home office. With time and if you need specialized equipment, you will need a larger commercial space.

Considering where to sell your products can be deciphered by researching various marketing channels. One common retail method is direct to consumer (i.e. direct selling) with the use of a professional website and advertise your goods.

You can also sell through intermediaries (existing online platforms like Amazon, eBay, Etsy or a B2B marketplace like Alibaba). Don’t limit yourself to local stores only. Meanwhile, you (or a wholesaler) can use more than one channel simultaneously to reach customers. It will take time find your footing and attract buyers, but it will be worthwhile once you start making sales.

 

3. Consider daily operations

As a manufacturing entrepreneur, your day-to-day activities depend on your level of involvement. You’re likely to spend time refining and managing on the actual manufacturing process or finding a market for your products. In the initial stages, you will facilitate many roles (e.g. operations, inventory management, sales, marketing, public relations, etc.).

 

Photo: Nabil Farook, Unsplash
Photo: Nabil Farook, YFS Magazine

After you raise enough revenue or you secure funding, you may delegate some of your tasks to outsourced third-parties, freelance project managers and eventually your own employees.

 

4. Start small and plan for a big future

Producing physical products can be expensive depending on the specifications, expertise required, capital expenditures etc. You can’t afford to make grievous mistakes. It’s important to run lean and mitigate all associated risks.

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For example, instead of buying expensive equipment start by leasing it. Make use of manual labor, revisit your bill of materials often to look for efficiencies and leverage tools that don’t cost much. The product will change during the initial stages so it may not cover high manufacturing costs initially.

For example, you can lease water jet cutting equipment to free up capital and benefit from tax advantages since an equipment lease is considered an overhead tax-deductible expense. You can discover more through researching how water jet technology if you’re in aerospace, automotive, energy, oil & gas, transportation, agriculture, architecture or artistic industries working with materials such as wood or rubber.

With this in mind, start small, consider equipment leasing options and expand with purchases once you have a solid footing.

 

5. Explore strategic partnerships

As a manufacturing startup you may not be able to withstand competition from bigger manufacturing companies. This can work to your advantage. Create incentives and partner with selected manufacturers to subcontract different phases of your operations.  Also you can outsource manufacturing overseas based on the varying degree of need on projects as you build your brand.

For example, the George Burciaga, CEO of Elevate Digital, started from the same position. He approached a touch-screen digital display assembler for a mutually beneficial partnership. However, the assembler did not specialize in products in George’s category. After a lot of persuasions, they agreed to a mutually beneficial partnership. This kind of strategy for growth is vital for business at every level.

 

Final thoughts

Starting a manufacturing business is no small initiative. It’s a challenge to start small, but it is not impossible.

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Avoid competing with the big companies from the start. Identify existing gaps in the overall manufacturing industry, create incentives for customers, reduce your logistics costs and leverage smart partnerships. Gather as much information as you can from manufacturing experts, and learn from your own process refinement.

 

Zac Johnson is an entrepreneur who blogs at ZacJohnson.com. Follow his journey as he documents more than 20 years of experience and success in the world of online marketing and branding. Connect with @zacjohnson on Twitter.

 

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