Setting up a successful manufacturing business takes a lot more than a clear business plan. It requires substantial financial outlay to outfit your business and specialized facilities along with advanced equipment and raw materials. These steps will help you build a profitable manufacturing business:
Get a third-party evaluation of your product in the development stage
Get your final product approved or evaluated by technical experts right in the development stage. This allows you to make changes or improvements right when you are investing in machinery and staffing. This keeps you from introducing an inferior product to the market and then going back to the development stage. You can conduct a product sampling exercise to ensure that you have market feedback before launching your product. Getting customer opinions will help you adjust the manufacturing process and establish firm quality management techniques if necessary.
Arrange for adequate working capital for production
Once you have finalized your product, arrange for sufficient working capital to ensure that your daily operations proceed without a hitch. Some costs to account for are – raw materials, employee salaries, and electricity. Since a manufacturing business is cash-intensive, start making arrangements for future needs for working capital. Identify an affordable source of external finance like a working capital loan, so your company’s working capital account is flush.
Price your product after thorough market analysis
Market research is a crucial part of pricing your product. First, analyse your competitors in the industry and measure your products against theirs to arrive at a reasonable price. The price should justify your manufacturing cost, market price, and quality. Next, identify who your target audience is and what they can pay for your product to finalize your pricing. You can then use various pricing strategies like penetration pricing, competitor pricing, or cost-based pricing.
Keep an eye on evolving technology and new machinery for production
Technology improves the speed at which production occurs, and as a result, improves your productivity per unit. The better your technology and machinery, the better your quality and the easier it is for you to match the expected demand. Mechanising your production process may even help you lower your price and stay competitive. Think about how you can finance the latest technology by raising money from revenues or borrowing a machinery loan.
Additional Read: Role of GST in India’s manufacturing growth story
Learn how the supply-demand chain works
The supply chain consists of purchasing raw materials, manufacturing, and then distributing your finished product. The demand chain includes marketing, sales, and servicing. Therefore, it is essential to know how the supply and demand chain works to achieve a coordinated and synchronized cycle. Getting these dynamics right ensures that you can manufacture products that are in sync with the demand chain. Timely sourcing of raw materials, for example, can ensure that you can produce and distribute your products at the right time to increase your sales revenue.
Have a clear marketing plan to reach your consumer
Develop your marketing methodology based on the nature of your business, your product, and the size of the market. For example, if you are manufacturing consumer products, decide if you want to market in the retail or wholesale sector. If your target market is wide, then you may want to hire marketers on contract. If it is narrow, you may want to create an in-house sales force. If you want to focus on manufacturing, selling to wholesalers, or hiring contractors who will market for you may be a better idea.
Additional Read: Should you lease or buy equipment for manufacturing business
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