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Start Your Business Startup Basics

How to Find a Factory to Manufacture Your Product

How to Find a Factory to Manufacture Your Product
Credit: Fernando Blanco Calzada/Shutterstock

Erika Kerekes took her sons cherry-picking in 2013 and didn't know what to do with all the cherries she brought home. Her sons don't eat jam. So, she thought, "What else can I make?" The answer was ketchup. 

The ketchup was such a hit that Kerekes, a food blogger, started doing some research. She learned that fruit-based ketchups were all the rage on the food scene, but they were not being commercially produced. The question wasn't whether to bottle and sell her ketchup to the masses, but how. 

"You can make it at home in some states, but I purposely didn't want to go that route because it limits where you can sell," said Kerekes, whose Not Ketchup company is based in Santa Monica, California. "The second way is to rent a commercial kitchen, but I had a family and a day job, and I didn't want to be up at 4 a.m. cooking. So I needed to find a factory."

Like many other new entrepreneurs, Kerekes had no previous experience getting a product to market. She faced the same problem as many inventors, from clothing designers to gadget makers: How do I go about this, and where do I begin? Then, how do I find the right factory? 

Getting a product from an idea to production is a complex process. It involves significant research, time, planning and patience. But with the right information, the right resources and the right product, it's possible.  [See Related Story: How to Turn Your Idea Into a Product and Launch It]

All great products start with a great idea, but an idea alone doesn't guarantee success. 

The first step for any budding entrepreneur should be market research, said Dave Savage, an Atlanta-based mentor to investors. Whether you do that research yourself or hire someone else to do it, you should be sure to find out two things: if the product already exists, and if people will pay for it. 

"You need the testing, the market research to show that there are enough people to buy the product," said Savage, former president of the nonprofit Inventor Associates of Georgia. "How many people are going to buy a $10,000 surfboard? Maybe some, but not enough to make a viable business for you or a licensing company."

Savage suggested talking to people who use that type of product. Would your design or idea solve challenges they have? If so, would they pay $80 for the product? If not, would they pay $60?

The next step is to decide whether you want to produce and sell the product yourself or license the idea to a company with the means and experience to handle it. Licensing is sort of like renting your idea. The company handles everything — the manufacturing, marketing, distribution — and then pays you royalties based on sales. No upfront investment is required. Many large corporations license ideas, as do designated licensing companies. 

But be warned: Savage said the process in real life is not as easy as it's depicted on popular TV shows like "Shark Tank." Companies have people lined up to license all kinds of products. The competition is fierce, and your product has to stand out. 

If you go the solo route, you'll need a sample or prototype to make sure the product can be made to your specifications in a factory. Experts' opinions on how to go about this vary. You can make your own, if that's possible. Or, you can hire out, locally or overseas. 

In the apparel industry, for example, there's no agreement on the right choice. 

Tanya Menendez, chief marketing officer and co-founder of Maker's Row — a company that helps apparel, accessories, furniture and home decor designers find U.S. factories — said the process usually involves sketching a design; buying similar inspiration pieces; creating a technical design; bringing your work to a sample maker, who can advise on fit, trimmings and the like; and then finding a factory to produce a small batch to start. All of that work can be done within the United States, she said.

Arlene Battishill, CEO of Los Angeles-based Scooter Girls, which sells protective wear for motorcycle and scooter riders called GoGo Gear, strongly advocates having samples and prototypes made overseas. While she agrees that buying inspiration pieces and putting together technical specifications are important, she said entrepreneurs often spend way too much money up front by having samples or prototypes made with no guarantee that they will sell.

"They'll spend all kinds of money learning as they go, and the thing is still never right," said Battishill, who is working on a book to help entrepreneurs navigate the process. "The factory can't figure out what to do with it."

Instead, the process can be as simple as buying a piece of clothing you like — say, yoga pants — and telling the overseas factory what changes to make. The whole process could cost as little as $40, she said.

For hard goods, 3D printing is playing an increasingly large role in helping entrepreneurs and inventors create prototypes. Companies like Shapeways and Stratasys specialize in creating prototype or product samples or very small batches of products.

After you're satisfied with a sample or prototype — which can take many iterations and many, many months to complete — it's time to find a factory. There's no right answer for everyone on whether it's better to manufacture in the U.S. or overseas. The decision comes down to personal preference, budget, the type of product and your patience. 

"If your marketing is built around 'Made in the USA,' that's an easy decision," said Edward Hertzman, a New York City-based sourcing and supply-chain consultant for apparel and retail brands. "But nine times out of 10, manufacturing is going to be cheaper overseas."

Both options come with logistical challenges, said Hertzman, founder of Hertzman Media Group, which publishes online resources to help people in the apparel and textile industry make business decisions. Due to globalization and a diminishing American factory base, it's not always possible to find a U.S. factory that is capable of making the type of product you want, he said.

Going overseas gets more complicated. There's no direct oversight of the process, and once the product leaves the factory, you'll have to figure out how to get it to the port and then to a warehouse, Hertzman said. You'll have to pay a duty and then have the shipment cleared through customs. If you do go overseas, he recommends hiring a reliable agent in the region — who understands your product and your market — to handle the process. 

Menendez and her business partner launched Maker's Row after realizing how difficult it was for clothing makers to find American factories. The process was taking designers as long as six months, she said. One of the advantages of American factories, according to Menendez, is that they let you order small batches of a product, whereas overseas factories require large orders. 

However, Battishill said overseas logistics aren't as complicated as some people think. She recommends using Alibaba, the Chinese online commerce giant that offers data and information for nearly every factory in the world. Search the directory for overseas factories that make products very similar to yours, and then contact them to request a sample, she said. 

Battishill doesn't pretend that negotiating with foreign factories is always easy. Indeed, there are language and cultural barriers to overcome. But you just have to know how to play the game, and that means sounding like you know exactly what you're doing, even if you don't, she said. Some of her tips include the following: 

  • In initial conversations, use language such as, "We want to have a long-term communication" and "As we have never done business together before, I must see the quality of your work before I place an order." This will indicate to the factory that you intend to make a large purchase, even if you're just requesting a sample to start. 
  • Tell the factory that once you see the quality of the work, you will place a small order for 100 pieces, and if you're satisfied with that, you will place a large order for 1,000 pieces. In order to make a sample, they want to believe there will be a long-term commitment. 
  • Be ready to negotiate. Foreign factories may charge American companies more because they expect American companies will pay it. When they come back with a price for an order, offer two-thirds of the cost. When they reject that price, offer three-quarters. 
  • In email communications, ask the factory representatives to repeat back to you their understanding of exactly what you're trying to do. Better yet, create a video that shows and explains exactly what you're trying to do. Clear and frequent communication is the best way to avoid misunderstandings.

Battishill said most foreign factories will handle all of the shipping arrangements for you, and will send tracking information. Because they manufacture in such large volume, they have the routine down. For the shipment's arrival in the United States, she recommends hiring a customs broker who is licensed and bonded to clear the shipment. They can handle all of the paperwork and logistics. 

Kerekes knew she wanted a local factory, so she took to Google to do some research. She found a list of California factories — or co-packers, as they're called in the food world — on the Specialty Food Association website. The site described the type of products each factory produced. 

"I called every co-packer in California that does sauces and marinades," Kerekes said. 

Marco Perry, founder of the New York-based strategy, design and engineering firm Pensa, advised looking for a factory that not only has the tools you need, but also operates as a partner to help you make a great product. 

"More often than not, the factory is going to assist in many other aspects of production than just making and assembling parts," said Perry, who has more than 20 years of experience as an inventor. "For that reason, as much as possible, you should look for a factory that makes products in the same category. General-purpose factories are not as knowledgeable in the nuances of what makes a product great."

The factory Kerekes chose had several attributes that made it stand out. During the first call, the factory owner talked to her for more than an hour to explain the process, Kerekes said. The factory had significant experience with startups and was willing to produce small quantities to start, she added. 

Kerekes was lucky — her experience with the factory has been great, and her product is now sold at Whole Foods and on Amazon, among other retailers. However, Kerekes knows of other entrepreneurs who have had nightmare experiences: upside-down labels, factories making mistakes and refusing to reimburse for expensive ingredients, and factories charging for their own mistakes.

Because so much can go wrong, the vetting process is crucial when you're choosing a factory. Here are some important questions to ask: 

  • What kind of experience do you have in this industry?
  • Who are the clients you're currently working for?
  • What is the turnaround time to produce my product?
  • What are your minimum order requirements?
  • Can you provide recent proof of inspections or third-party audits? 
  • Do you subcontract work to other factories, or is all of the work done in-house? 
  • What are my payment options? Is a deposit required?
  • Do you make materials in-house or outsource?
  • Can you handle the sourcing of materials, or do I need to provide my own?

Perry recommended filing a provisional patent application and requiring the factory to sign a nondisclosure agreement before the first meeting. 

"Intellectual property can still be ripped off despite these measures, although, frankly, it's not as typical as you may think," he said. "So you should always ask for recommendations for trustworthy factories." 

Provisional patent applications, which allow you to say that a patent is pending, cost less than $100 for very small businesses, compared to the thousands or tens of thousands it costs to hire an attorney to file a regular patent. Paying many thousands for a patent initially doesn't make sense because if you have to make changes to the product as you work with the factory, you'll need to pay for another patent. 

Battishill also said stealing ideas is much less common than most people think, even with overseas factories. 

"If it's a super-revolutionary tech idea, that's one thing," she said. "But if you're sending yoga pants to a factory in China, they do not care about your idea. They are not interested in the next doggie door or the next squatty potty."

According to the experts we interviewed, when choosing a factory to partner with, you should look for the following attributes:

  • A partner - Yes, this is a business relationship. But you want a factory that answers all of your questions and guides you through the process. If you're making a food product, can the factory recommend a good food chemist? For clothing, can it offer advice on the sourcing of materials?
  • Technical capabilities - The factory should already be producing goods or products that are very similar to your own. This ensures that they understand your market and what it takes to succeed. 
  • Reputation - Does the factory do work for major brands or retailers? Does it have any sort of regulatory fines or infractions? If it's overseas, what are its labor policies, and how high is the turnover rate? It's paramount to find a factory you can trust. 

Maker's Row Academy - a free, six-day course for apparel makers who want to get a production project off the ground. 

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