Small Business Brief


How to Start a Small Scale Manufacturing Company

Manufacturing is the cornerstone of the American economy. Employing over 12 million people, generating over $2 trillion every year, and providing crucial support to other industries, it’s significance to the economy cannot be overstated.

As an entrepreneur, you have every reason to start a small manufacturing business. Your business will not only make a great contribution to the economy but also give you an opportunity to make good money.

The question is: how do you start a small scale manufacturing business? Just because the sector is vast and turning trillions of dollars doesn’t necessarily mean every entrepreneur is primed to make a killing. You have to get the basics right.

Continue reading to learn how to start your small manufacturing company.

Find an Ideal Small Business Manufacturing Idea

The first step to starting a small manufacturing business is to find a good manufacturing idea. What product do you want to manufacture and sell?

Choosing a good idea isn’t a thing of chance. You just don’t look at a product that’s popular or doing well in the market and settle on it. You must invest in market research.

First, look at the market conditions.

What does the market need? What problem is the market facing? As an entrepreneur, your job is to solve a problem. You achieve this by inventing a product that solves a specific problem.

Second, what are your interests?

Ideally, you want to manufacture a product that you’re passionate about. For instance, if you’re a motoring aficionado, you might want to enter the motor manufacturing niche. And no, you don’t have to manufacture an entire car. It can be a small car component that has good demand.

Third, consider capital availability.

Remember, your goal is to set up a small scale manufacturing business. You don’t want to settle on a capital-intensive venture that will overwhelm your finances.

That being said, there are manufacturing niches that are doing well right now. They include:

  • Toy manufacturing
  • Smartphone accessories manufacturing
  • Bread and candy manufacturing
  • Hair products
  • Electrical fittings.

Draw a Business Plan

After settling on a solid manufacturing idea, the next step is to draw a business plan.

Any kind of manufacturing business requires an elaborate business plan. If you’ve got no experience starting and running a manufacturing business, you probably don’t have the expertise to write a good business plan. It’s advisable to hire a small manufacturing business consultant to help you draw up the plan.

Ensure the plan fleshes out the following details:

  • Executive summary (business name, location, purpose)
  • Company description (legal and organization structure)
  • Products being manufactured
  • Market analysis (nature of the manufacturing niche, supply chain)
  • Sales and marketing strategy
  • Capital requirements
  • Financial projections.

A manufacturing business, however small, has many moving parts. These parts need to move seamlessly; otherwise, the entire business will grind to a halt. This is why you must focus on drawing a detailed business plan.

Your consultant will also help you choose the right legal structure for your upcoming business. In most instances, you will end up with a limited liability company or an S corporation.

Get Adequate Funding

Even a small manufacturing business can burn through bucketloads of cash before it becomes sustainably profitable. It’s vital to secure adequate funding before you start manufacturing operations.

From the business plan, you already know the amount of money you need to start the business. Do you have it?

If you’re self-funding the venture, thumbs up!

But if you don’t have the funds, there are ways to raise it. You can take out a business loan or seek out an equity investor. A crowdfunding campaign can also suffice, especially if you’ll be manufacturing a product that solves a social problem in your community.

Regardless of the funding model you chose, ensure you raise adequate capital. Don’t assume that the company will start making a profit soon after opening up.

Secure the Necessary Permits and Licenses

The manufacturing industry is highly regulated. However, these regulations vary from niche to niche. For instance, the legal requirements for opening an auto parts manufacturing company are different from those of a food manufacturing business.

As such, do your research and identify the permits and licenses you need to secure before moving forward. Depending on the nature of your manufacturing business, you might need to get approval from a federal agency as well as state and local agencies.

To secure a permit or license, you’ll typically need to provide a copy of your business plan and pay licensing fees.

In some cases, though, inspectors might need to visit your manufacturing facility and ensure it meets the set standards. If this is the case with you, then you have to set up your facility before applying for the relevant permits and licenses.

Set Up Your Plant

A manufacturing plant is the heart of any manufacturing operation. Without it, there’s no business.

Setting up a plant is a highly technical job. You need to hire experts to map out the facility and install the manufacturing equipment.

When setting up your plant, focus on automating most processes. This will save you money because you won’t need to hire as many people.

A manufacturing expert can assess your plan and identify ways to automate the various processes, including plant receiving operations. Read more now to get a deeper insight into a system that can help you automate receiving operations.

Build Your Team

Although you’re starting a small scale manufacturing business, it’s unlikely that you’ll be able to take care of every operation on your own. You need to build a team.

For the start, you need skilled people to handle the various specialized tasks in your plant. You can also hire one or two managers to supervise operations and keep an eye quality control.

As the operation gets bigger, you can then add more staff.

Start a Small Scale Manufacturing Business

If you’re looking to start a small scale manufacturing business, you’re making the right decision. However, starting a successful manufacturing business requires intricate planning. With this guide on how to start the business, you’re now in a better position to make the right moves.

Keep reading our blog for more tips on how to run a small manufacturing business.