So you’ve had an amazing idea for a unique product and you’re super keen to get started. All great businesses start with incredible ideas, so you definitely need that creative juice. Harness it! But there’s also a whole lot of non-creative juice that’s needed to start a business too. Time, skills, money and a whole lot of planning!
I’m often asked how to go about starting the process of manufacturing a product so I thought I’d put my answers into a blog post. I’ve run a number of businesses over the past 16 years, the longest-running one being a cloth nappy company which still exists today and which I still run. We’ve made a lot of enormous mistakes over the years. From sinking huge sums of money into launching untested products and having them tank, to not pricing products correctly so that we made some pretty heavy losses, to not charging enough for freight, to neglecting to properly quality test a new manufacturer, to opening up paid pre-orders only to have the stock delayed by a further month.
Sometimes it’s felt like if it could go wrong, it would go wrong.
I’ve spent the greater part of my 20s and 30s building businesses while raising babies and it’s something I’ve thoroughly enjoyed, despite the plethora of mistakes. I’m an entrepreneur at heart and I love the flexibility of being able to work my businesses from home. If I had my time again, I’d change a lot of things. Mostly I’d avoid the mistakes!
Here is a list of things that I feel should be considered before diving in to starting a business manufacturing your own range. It’s by no means exhaustive and is very much tailored from my own experience running businesses online over the past 16 years. I don’t speak in detail to the overheads of running a brick and mortar store because that’s something I’ve never done. Also, this information is relevant to running a business in Australia while manufacturing offshore.
I’m not a “business expert”. But I know my business and I want to share the things that really stand out for me as being non-negotiable based on my experience. There are a probably a heap more! Definitely speak to a business expert to get a more comprehensive list and support for working through these things.
This list really only touches the surface, but I hope it’s a helpful starting place if you’re at the first stage of introducing a new product to market.
Before starting a business – even before throwing money at the structure (ie, company or partnership, etc), you want to make sure your product can be sold. So I always recommend:
- Check safety regulations for the product – a good place to start is a search or enquiry through https://www.productsafety.gov.au
- Understand your competition – choose top 5 closest competitors and research them like your capital depends on it
- Conduct a survey to find out if people want it
- Understand any compliance labelling and testing you may have to meet (ie, fire safety testing for kid’s pyjamas)
- Understand your pricing and make sure it will be profitable (even before you approach a manufacture, you should have some idea of an RRP for your product, usually based off what else is on the market: work backwards from there)
- Have some idea of how you will market the product (for example, paid ads, social media, word of mouth, retailers)
- Create a plan for how much you can invest in your business (time and capital) and how you will procure this
- Create a timeline for launch and specific sales goals required at various intervals (it would be helpful to speak with a small business adviser on this)
- Develop an exit strategy
Let’s assume you’ve found a manufacturer and you have had samples made and have come to a final design that you’re happy to bring to market. All the above is in place and you’re confident you have a ripper product, the capital to start (and continue for a specific period) and are ready to start the process of bulk manufacture.
Before committing to a large order, you definitely want to have a full budget of other costs for the business, for example:
- Import taxes and freight on cost of goods – ours is about 20%, so if we’re ordering 30k of stock, we can expect a custom’s broker bill of 5-6k – this is, of course, built into the cost of the product, but is super important to understand from the start – check with your local government for import tax rates for your product.
- Website running costs – we pay approximately $300 a month for what we use. There are cheaper options for $50-$100 but functionality will vary dramatically depending on what you pay/who you host with.
- Insurance – call a broker and get some quotes.
- Do you need to engage a manufacturing broker or can you deal directly with the factory? Similarly, do you need to engage an import broker to help get your product safely and promptly landed or can you do this yourself?
- Accounting – can you do it yourself or do you need to outsource? At a minimum, you’ll probably want to invest in accounting software such as MYOB or Xero. This will be another cost to factor in and depending on the software and the plan you’re on could be $20 – $100 a month for a start-up.
- Marketing – graphic design, product labelling/tagging, product photography, web design (unless you can do it yourself, but you still need to factor in your time and whether or not you need to be paid in this early period), newsletter, social media, ads, etc.
- Barcoding – if you intend to sell in bricks and mortar stores or through Amazon, you’ll need GS1 barcodes for the product, which is a minimum cost of $500 a year.
- If you’re running the business from home, you’ll have low overheads that would most likely be absorbed into the home running costs, which is great. If you intend to have a storefront, you’ll need to cost this in before you take out a lease.
- Warehousing and third party order processing if you’re not going to do it yourselves
- Any fees for industry associations that you might be required to be part of
- Wages and superannuation
- If the product is quite unique, you’ll want to get your patents/registrations set up here in Australia prior to sending the pattern/design overseas and have a contract drawn up to protect your design.
Some questions to ask a potential manufacturer:
- Their MOQ
- Payment policy
- Return/fault policy
- Privacy/confidentiality policy
- Shipment policy and process
- Lead time
- Quality testing process
Most small businesses fold within the first few years so it’s hugely imperative that you spend the time planning before you start to invest heavily in set-up and manufacture. We can invest a lot capital in to a new business so any time that you can set aside and information you can source now to help inform your choices and plans will be worth its weight in gold later on.
Don’t forget to have fun! A starting-your-business to-do list can feel incredibly onerous but learning new skills and implementing new ideas is a terrific part of the process.
