Learning how to start a manufacturing business is easy when you understand the basic timeline from concept to launch. Designing a startup for long-term success requires a solid foundation and continuous learning. How can entrepreneurs get started developing a unique, resilient business idea?
How to Create Your Business Concept
The first step to starting a manufacturing business is figuring out your concept. This includes your niche in the manufacturing industry, the products you’ll sell and the customers you’re targeting.
Analyze the Market
Start your research by analyzing the current manufacturing market. You can focus on a specific sector of the industry if there’s one you’re interested in, such as auto manufacturing. Look at market trends, industry leaders and big investment news. What projects are getting funding? What types of businesses are doing well?
Take notes on recent successes in the industry, but also look at businesses or products that failed. Understanding what isn’t working is just as important as understanding what is.
Match Needs With Ideas
In your market research, you may have gotten a few ideas for products your manufacturing business could sell. Before settling on one, closely examine what already exists in the market.
One of the first rules of entrepreneurship is to have a unique value proposition. A specific product or service might be doing well in the market already. It can be tempting to jump on that bandwagon, but popularity can be a sign to focus your attention elsewhere.
Connect With Your Target Segment
Your target market or segment is the population you design your business to serve. For example, you might start a manufacturing business to create construction safety equipment designed to fit women. This fills a need for proper gear and targets a specific customer segment — women working in construction.
Choose a specific target segment without being so narrow that you don’t have many customers to appeal to. For instance, over 1 million women are working in construction today, so that’s a viable customer base. However, attempting to target women working in construction who only work on skyscrapers and earn over $70,000 per year might be too specific to support a business.
How to Prepare to Launch Your Business
After researching the current market, unfilled niches and the needs of your target segment, you will probably have a rough idea for your startup. The next step is to flesh out your manufacturing business concept and prepare to make it a reality.
Create a Detailed Business Plan
By creating a business plan, you will develop and clarify your understanding of your idea and provide valuable information for investors. Writing your first business plan is more straightforward than you think.
There is a standard business plan format most investors prefer entrepreneurs to use. This format includes your company description, market analysis, organizational structure, product or service, marketing research, funding needs and projected sales. As a startup, you can also use a more bare-bones business plan, although investors may request more information if they’re interested.
Outline Equipment, Logistics and Workforce Needs
At this stage, creating a mockup of your product is helpful. This will help you understand what tools and systems you’ll need to produce your product on a large scale. This research may also be part of your business plan — specifically, the organizational structure and funding needs sections.
Remember to balance price with quality when determining your equipment and facility costs. Cutting costs by using worn-out equipment can be tempting, but accidents and breakdowns can cost more in the long run. For example, a transformer failure can cost you over $1 million in downtime on top of repairs because it prevents employees from using tools and equipment in the plant.
Additionally, consider how many employees you will need and what skills would be necessary. Most startups run with just a few employees, so seek candidates with versatile skill sets who can fill multiple roles.
Design a Clear Manufacturing Process
Designing your manufacturing process includes outlining the assembly steps, when different equipment is used, what materials are necessary and your quality standards. Do plenty of supply chain research at this stage.
Your manufacturing process will have a significant impact on your pricing. So, consider how much your customers will be willing to pay for your products. Can your product be more affordable? How tight can your quality standards be? Are your materials too expensive or not durable enough?
Consider Your Location
Where will your base of operations be? It might be worth relocating to another area to take advantage of thriving manufacturing hubs and state tax benefits. Research shows Texas and California are the most prosperous states for manufacturing today, followed by Ohio.
How to Start a Manufacturing Business’s Operations
By this stage, you should have a clear idea of your product, how your startup will run, what you need to get started and how you will sell your products. Now it’s time to get the ball rolling and start operating your company.
Fundraise and Meet With Investors
To start a manufacturing business, you need funding. You may already have some money saved up or maybe you’re starting from zero. Either way, investors can help you get your organization off the ground with some initial capital.
Connect with investors at industry events and online. Share your business plan and set up times for meetings where you can pitch your product. Get as many investors on board as you can. You can also try running fundraising events to bring in some extra money and draw attention to your new business.
Verify Compliance and Complete Paperwork
Before operating your business, you must complete all the necessary paperwork, such as applying for a business license. Unfortunately, there can be a lot of regulations and restrictions entrepreneurs have to navigate before they can open their doors. These vary significantly from one state to another, as well.
For example, California has the third most regulatory barriers in the U.S. It’s a good idea to contact local government agencies and business legal consultants for guidance on complying with all appropriate regulations.
Create Prototypes and First-Generation Products
After you’ve acquired a space or building to operate out of and have your first few employees, you can make your first round of products. It’s a good idea to start with small batches.
Make sure investors get a first look at your operations and prototypes. Use online and local marketing to connect with your first customers. Consider offering product demos or pilot programs to seed some initial interest.
Building a Manufacturing Startup for Long-Term Success
Learning how to start a manufacturing business is an ongoing process. However, you should keep educating yourself once you know the basics. Manufacturing is a fast-paced industry that’s constantly evolving, leading to plenty of new opportunities for your startup to thrive over the years.
