5 Ways to Take Your Startup to Manufacturing
Perhaps you have an Etsy shop for those fantastic pieces of jewelry you hand-craft. Or maybe you are a quilter who’s been selling online for a few years. At some point, you have thought about what it would take for your successful startup into manufacturing. It may be because you have grown enough that it takes a team of people to produce your wares. Or it may be that you are having to turn work away because you are too overwhelmed with what you have. Whatever the reason, let’s talk candidly about what it takes to manufacture.
Creating a Partnership
It’s more than likely that you will outsource to a manufacturer rather than build your own manufacturing plant. It’s simply more affordable to work with someone who already manufacturers, especially if you are manufacturing piece goods!
Work with the Right Software
Whatever software you are working with as a startup, you will need a more comprehensive software for manufacturing. ERP manufacturing software is the software that will help take your business to the next level. This software covers every aspect and department in your entire company, no need for multiple software systems for each department. By utilizing one software program, you can see the entire picture of how well you are functioning.
As your company grows you will find that being a Jack-of-all-trades type owner becomes more difficult and you will need to integrate several departments like:
- Human Resources
- Accounts Billable/Receivable
Taking into consideration your cost and a reasonable profit margin is one of the toughest strategies for any company, startup or otherwise. It’s imperative that you take the time to review your pricing and make sure that your model will create a profit of some kind, then grow on that for maximization. There will be bumps and roadblocks along the way, but careful planning and some trial and error will get you to finding your groove.
Some of the things you might need to consider:
- Price Point—What are your competitors charging for comparable products? You don’t want to be too high (won’t get sales) or too low (potential customers might think “cheap!”)
- Scalability—Will the per unit cost come down the higher the production volume? How much?
- Shipping—Will you up the price to cover “free shipping,” or will you have the customer pay?
Talk to the Legal Eagles
No matter what, there is some legality to your new venture. Take the time to brush up on local business laws, requirements, and even zoning laws to be sure you are complying. There is nothing worse than starting an upgrade and you are shut down due to a legal misunderstanding. There are plenty of lawyers that can help you. In some cities, you can find small business incubators that will help you test the viability and give you some assistance in finding legal advice for your venture. Use whatever resource you can find!
Things you need help answering include:
- Contract Law—What kind of contracts (written or implied) could exist between you and your manufacturer, or your customers or your workers?
- Real Estate Law—Can you work from your residence or do you need a commercial/industrial property? Which kind of lease do you need?
- Labor Law—Will you or your manufacturer be dealing with labor unions? What’s the difference between an employee, an independent contractor and spot labor?
- Tax Law—The single most complex field in law involves the U.S. Tax Code and you may find yourself in need of a professional to help answer that most basic of questions, now what?
Look to the IRS
It’s important to consider the tax implications of your business and how that is affected by new growth. Many startups begin as a Sole Proprietorship. But, if you are looking to grow into manufacturing, that Sole Proprietorship can be a dangerous entity. It’s best to start researching the different types of entities and how they affect you and your business. Look for local, statewide, and federal tax breaks for creating a manufacturing business for each entity option. And lastly, consult with an accountant overall about which direction your business should go. A good CPA can help you navigate changing your entity, obtaining all the appropriate paperwork, and get you going in the correct direction.
Moving from startup to manufacturing can be overwhelming and daunting at times. But remember, that startup also felt overwhelming and daunting in the very beginning too! If you are successful now, you can be an even bigger success by moving into manufacturing. Go for the gold!