A manufacturing company has the potential to be one of the most lucrative business models you can follow, but it is also one of the most risk-intensive. This is because you will be required to commit a lot of capital up front, in order to pay for tooling, staff and the premises of your factory. 

Furthermore, it is unlikely that you will be able to hit the ground running with sales, because any business takes time to find its feet and, more importantly, find its customers. 

Unfortunately, time will be of the essence because the longer you are producing products that are left unsold on shelves, the more money is being flushed down the drain.

Despite these challenges, however, you should not be deterred if you believe a manufacturing business is the right path for you. If you can get past the difficult start-up phase, owning your own manufacturing plant can be highly lucrative, because you will be able to develop relationships with parts suppliers and even other companies looking to have their products produced.

This is the core information that you should know before starting a manufacturing business:

You will need a lot of up-front capital

One of the toughest challenges when starting a manufacturing business from scratch is that you will need to invest a lot up front in the form of manufacturing equipment, tooling, staff and the location itself. 

It is best not to cut corners with your manufacturing processes, even if money is tight. Investing in the latest equipment, such as conveyors, up front will help you establish an efficient production line from the start. 

With a manufacturing business, you cannot afford to make any mistakes, for the sake of safety and for your reputation, which will depend on the quality of your finished products. 

Decide what you want to produce

It sounds obvious, but you need to nail down exactly what it is you want to produce, and why. This stage should take you a good deal of time to complete, because you need to be thorough.

Dedicate time to completing market research on industries you are interested in supplying. Work out how much it will cost you to manufacture the products, how difficult it will be to establish working relationships with existing parts suppliers (who may be unwilling to work with a start-up), and how much space you will need for your production line.

Look five to 10 years down the road

When choosing a product and industry to focus on, look five or 10 years down the road. Once you have the equipment set up and are ready to start production, you won’t want to have to stop in a decade when the products you create just aren’t used anymore.

Although this is hard to predict, do a detailed study of your chosen industry and find out what the outlook is on the future. It may just make or break your manufacturing start-up.

Be prepared to scale

Manufacturing businesses are designed to scale. If you suddenly experience a sharp uptake in demand, you need to have the spare resources to be able to deal with it. While it is not sensible to produce way more products than you need, you should also keep enough money in reserve to scale up when you need to. 

To this end, it may also be wise to have sufficient spare capacity in your factory to accommodate the additional scaling.

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