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.
One of the biggest challenges of product manufacturing is finding a factory to create it. You'll need to find one that fits your needs and budgets, and still turns out a quality product. This article will guide you through the process of finding and working with a factory as a small business.
Preparing for manufacturing
Before you hire a factory and start producing your product, you need to take care of a few beginning steps.
- Market research. 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. Read our article on market intelligence to learn more about this important step in starting your business.
- Licensing. 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. For more information about licensing, read this article on licensing.
- Build and test a prototype. 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. This step may take several iterations and many, many months to complete. Learn more about producing a product and testing it here.
- Protect intellectual property. You might also want to look into protecting your intellectual property. You can register for a patent, copyright your work or buy a trademark.
Once those basics are taken care of, you can begin the search for a factory to bring your product to life.
U.S. factories versus overseas factories
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.
Both U.S. and overseas options come with logistical challenges, said Edward Hertzman, founder of Hertzman Media Group. Due to globalization and a diminishing American factory base, it's not always possible to find a U.S. factory that can make the type of product you want, he said.
If your product can be made in the U.S., something to consider is the fact that some audiences will respond better to products made wholly in the U.S. Another advantage of American factories is that they let you order small batches of a product, whereas overseas factories require large orders, said Tanya Menendez, co-founder of Maker's Row.
If you're thinking of going the overseas route, Arlene Battishill, director of digital marketing at MediaMark Spotlight, noted that working with overseas factories isn't as complicated as some people think – but she acknowledges that negotiating with foreign factories isn't 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.
Battishill offered the following tips to help you decide if a foreign factory is right for your manufacturing needs.
- Pre-screen your potential factory. 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.
- 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.
- Confirm understanding and communicate clearly. 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 the paperwork and logistics.
Resources for finding a factory
Once you're ready to hire a factory, start with these online sources to help you find a good match for your product.
- Maker's Row. If you're looking to hire a factory in the United States, you may want to investigate Marker's Row. Menendez and her business partner launched Maker's Row after realizing how difficult it was for clothing makers to find American factories. This service connects you with state-side manufacturers. You can also pay for one-on-one guidance through the manufacturing process.
- Global Sourcing Specialists (GSS). This website can match you with an ideal factory or manufacturer from anywhere in the world. GSS works with startups that need mass production or that need smaller-scaled manufacturing. This is a great resource if you want to hire a factory overseas.
- Alibaba. Alibaba is another excellent resource if you're looking for factories overseas. You can navigate through the website by industry to find a match that's best for your business.
- MFG.com. You can use this resource to not only find a factory anywhere in the world, but also to track the progress of your projects, make lists of parts to use with CAD files and more.
What to look for in a factory
According to the experts we interviewed, when choosing a factory to partner with, you should look for the following attributes:
- Demonstration of knowledge and experience. 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.
Marco Perry, founder of 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."
Questions to ask a potential partner
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 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?
Additional reporting by Ashley Smith. Some source interviews were conducted for a previous version of this article.