This article was written by Eric Najjar, the cofounder and CEO of ShopKetti.
Most large product-focused businesses have an experienced manufacturing director.
Why?
Because manufacturing is a tricky process to master. It’s even harder to get right!
Unfortunately, many small businesses simply don’t have have the funds to hire a dedicated leader on this front. No doubt, this can lead to critical manufacturing errors and defective products.
But, the good news is, I’ll show you how to avoid some of these costly mistakes below.
When I was looking to raise money for my startup, an experienced entrepreneur told me that it’s not difficult to raise the money. The hard part is knowing what to do with it once you have it. She couldn’t have been more right.
Once you’ve raised funds, you have one chance to get this ship off the ground. You have one chance to make something out of this business. Remember, your customers will judge you and your company on the first batch of products that you deliver.
Manufacturing is one area of business that’s filled with land mines. Like most complex tasks, manufacturing is made up of many processes and when one process goes wrong, it will threaten the entire system.
A well thought out plan can quickly disintegrate into a heap of useless products, a bank account that’s been drained to $0, and angry customers wondering when you’ll deliver that product that you promised.
I grew up around manufacturing and presently work with many small businesses involved in manufacturing. I’ve been lucky enough to talk with business owners and understand manufacturing from a small business perspective. Here’s what I’ve learned!
1. Start early (here’s why)
You might think that you’re too early in development to be thinking about manufacturing, but that’s like standing at the base of a mountain and ignoring the map you’ll need to get to the top. It’s scary to think about at first, but the earlier you start doing your research, the quicker it begins to make sense.
Like most businesses, you’re most likely working towards a deadline. Whether your product is crowdfunded or you’ve raised private capital, your investors want their return.
You need to contact manufacturers ahead of time to make sure you know exactly how long it’ll take for your product to go from design, to mold, to fabrication, to testing, to shipping. This is important information. Don’t rely on third party research.
Don’t just read about production times for similar products, or take industry standards at face value. It’s like using a random person’s map to get up that mountain standing before you. It has no bearing on your situation and more likely than not, your inputs can and will be very different from what worked for others.
2. Know your manufacturing needs.
It sounds silly, but most people don’t know or understand the full breadth of their needs. Let’s say you’re working out of a small space and there’s no way to run a shipping and logistics operation out of your office.
Do you need a full service manufacturer with their own distribution center or with ties to one?
Do you have a designer or engineer that can adequately design your product with the tolerances and material selection the manufacturer needs or do you need one that can handle the more technical aspect of the design for you?
If you know what you need, you’ll save yourself time and potentially a lot of money.
This is crucial to do before raising funds. You might raise $50,000 with $30,000 earmarked for production based on estimates provided by one manufacturer, and then realize only after you’ve closed your funding round that you need additional services. This could raise your total cost per product over the $30,000 you initially set aside!
A simple remedy to this situation, which I myself use, is to inflate your costs and set up an overrun fund. Figure out a proper percentage and add it to any variable costs, like manufacturing, you might have. In addition, set up an overrun fund that you can dip into should there be any discrepancies.
3. Break up the schedule.
Once you’ve had a few conversations, you’ll begin putting together a picture of everything that needs to be done. Manufacturers will tell you what they need before they can start working, and everything that is expected of you after.
Figuring out your before, during, and after will save you time, increase your confidence, and ensure your entire team is on the same page in respect to what needs to be done and by when.
4. Regulations can put you out of business.
This is so important and very easy to overlook. Ask yourself, what are you making, who are you making it for, what goes into it, and what’s covering it?
Certain plastics and metals can only be used in specific situations and in predefined quantities. Some paints are not suitable for children or pet products. This is also true of the materials that go into making them. If you’re developing clothing, there are flammability regulations and some products need to be certified and tested before they can be sold.
You need to know every regulation and rule you might come up against. It’s not the job of the manufacturer to notify their clients of every regulation.
The best thing you can do is spend the money on a lawyer that will lay out and explain all the regulations to you. It’s better to spend a little more in the beginning than to run the risk of having every item pulled from the shelf and tossed into the garbage, because they’re unsuitable for sale.
5. Be patient. You’ll get it right in time.
Manufacturing is a complicated process, so give yourself the time to get it right. You never want to be in a position where you’re asking the manufacturer to speed things up because the moment you hang up from that call your costs are going to skyrocket.
Giving yourself time is not just about meeting a deadline, it’s about setting it. Every industry has a busy season for sales which translates to a busy season for production.
You don’t want to be sending in your order at the same time as everyone else. If you plan for it accordingly, you can get your products produced before everyone else and avoid the inflated costs that come during those busy times.
6. What comes next
Just because you’ve gotten your product manufactured doesn’t mean you’re out of the woods. You have to think about how you’re getting your products to the consumer.
Are you using a manufacturer that utilizes dropshipping?
Will you be using a distributor?
Will you be taking taking over shipping and logistics yourself?
There is no right answer, it depends on each company’s needs, resources, and constraints. Don’t assume every manufacturer can meet your needs in this respect, logistics is an entirely different ball game, one that works best not to take for granted.
I hope these tips help bridge the gap between concept and production. Although these topics cover a lot of the important steps, there’s much more to learn and research before you get started.
It might not be the sexiest part of starting a business (well, I think it is), but it’s definitely one of the most crucial. I’ve seen my fair share of businesses go under because they underestimated the size of the beast, so don’t become a statistic! The world needs more small businesses to shake things up!
About Eric
Eric Najjar has a background in design and is Co-Founder and CEO of ShopKetti.
ShopKetti is a full service B2B wholesale platform that allows small business creators to sell their products directly to retailers.
You can learn more at www.ShopKetti.com.
