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A manufacturing startup can bring your product idea into a physical object for sale. While building out a manufacturing business is a challenge, entrepreneurs overcome the hidden hurdles every day. If you want to learn how to start a manufacturing business, you are in the right place.
- Manufacturing startups bring the idea for a physical product to life.
- It’s not enough to have a great idea. You’ll also need to execute the idea well.
- Many manufacturing startups outsource the actual product-making to an established factory.
Understanding Manufacturing Startups
Manufacturing startups can be lucrative.
Manufacturing Industry Definition
At the most basic level, manufacturing involves making a product.
According to the Encyclopedia Britannica, manufacturing is “any industry that makes products from raw materials by the use of manual labor or machinery and that is usually carried out systematically with a division of labor.”
The end result is turning raw materials into a product available for sale to other businesses or directly to consumers.
The value of an idea lies in the using of it. – Thomas Edison, General Electric Co-founder
How Is a Manufacturing Startup Different from a Traditional Startup?
Manufacturing startups involve specific characteristics.
Like traditional startups, manufacturing startups have the goal of growing their business quickly to reach a wide audience.
Unlike traditional startups, which might provide a combination of products and services, manufacturing startups are focused on creating a physical product or line of products.
With technology advancements pushing the envelope, investing in manufacturing startups now could be a good choice.
Are Manufacturing Startups Profitable?
As with every business, some manufacturing startups are profitable. But others aren’t. Below are some reasons that can make or break the profitability of a manufacturer:
Raw material costs: You’ll need to find affordable raw materials to create room for profit. With inflationary pressure, this can be a challenge for investors.
Labor: Depending on the manufacturing process, you may need skilled employees. Unfortunately, it can be difficult to attract the right talent in some areas.
Demand: Without a demand for the product your manufacture, it can be impossible to see a profit.
Is Setting Up a Manufacturing Startup a Good Idea?
A manufacturing startup isn’t the right business opportunity for everyone. The choice boils down to your goals.
Flexibility: As you invest in equipment and employees, you may lose some location flexibility.
Innovation is preferred: A creative approach to manufacturing could lead to the best results.
Ideas are easy. Implementation is hard. - Guy Kawasaki, AllTop Co-founder
What’s the Outlook for the Manufacturing Industry?
According to a Deloitte report, the manufacturing industry has recently seen some high peaks. While the future is bright, the report also warns of challenges:
Sourcing issues: Inflation and economic uncertainty may put pressure on manufacturers in the near term.
Exceeding expectations: As of 2023, the manufacturing industry has been exceeding previous expectations. With surging growth, it could be a good time to jump into the manufacturing industry.
Best Manufacturing Startup Examples
A look at some of the best manufacturing startups can help you chart a course toward success. Below is a look at some of the top manufacturers in various parts of the economy.
Electric Hydrogen: Electric Hydrogen is working on a way to reduce the carbon footprint of transportation through hydrogen-electric solutions.
EquipmentShare: EquipmentShare is a company that helps contractors make the most efficient use of on-site machinery.
Tulip: Tulip connects systems, machines, people, and devices within the manufacturing process.
FORT Robotics: FORT Robotics offers systems to create safer operating environments in manufacturing settings.
Digital Manufacturing Tech Companies
Hexagon: Hexagon is a company focused on creating digital reality solutions. In recent years, the company has grown considerably.
Drishti: Drishti is focused on improving operational efficiency by helping manufacturers reduce human errors
Benefits of Setting Up a Manufacturing Startup
If you are considering setting up a manufacturing startup, the benefits are appealing:
Address unmet needs: Niche markets have unmet needs, which you could fulfill.
Build relationships: You’ll have the opportunity to collaborate with established manufacturing companies and industry partners.
Technology advancements: Leverage advanced technologies such as automation, artificial intelligence, and 3D printing.
Develop sustainable manufacturing practices: When you build the business, you can make sustainability a priority.
Small businesses have access to specialized funding sources: Specifically, you can access funding and support from government programs and venture capital firms.
Challenges Faced by Manufacturing Startups
Of course, there are also some challenges to consider before jumping in.
High capital requirements: When setting up manufacturing operations, you might need to make significant financial investments.
Complex supply chain management: Efficient supply chain management is a key part of a successful manufacturing business.
Compliance with regulations and quality standards: Some industries have specific rules and regulations that you may need to comply with.
Finding skilled labor and talent: Depending on your location, it can be difficult to find the skilled workforce you need.
Market competition from established manufacturing companies: You won’t be the biggest fish in the sea, which can lead to stiff competition.
How to Set Up a Manufacturing Startup
If you want to set up a manufacturing startup, consider following the steps below:
Start with a prototype: If you want to manufacture an innovative product, the first step is to build out a prototype. While a prototype won’t be perfect, it serves as a good starting point.
Seek advice: If possible, find a mentor who has successfully built a manufacturing startup. Their insight can be invaluable.
Research the materials: The right materials can make all the difference in your finished product. Do your homework before you commit to a particular material.
Find the right manufacturer: You might decide to build out your own manufacturing facilities. But at first, most choose to work with an established manufacturer. Read all of the reviews before learning more about a company.
Get multiple quotes: When you find some possible manufacturers, get quotes from multiple options. While price isn’t the only consideration, you’ll need to work with a company you can afford.
It’s not about ideas. It’s about making ideas happen. – Scott Belsky, Behance Co-founder
Financing for Manufacturing Startups
As a manufacturing startup, it’s often more difficult to lock in financing than other types of businesses. However, it’s still possible to get your hands on the funds you need. Below are some of your best options:
- Manufacturing business loans: Some lenders have loan options specifically for manufacturing businesses. Make sure you are able to afford the financing before committing.
- Manufacturing equipment financing: If you are building out your own manufacturing process, you might be able to get financing for some of the equipment.
- Manufacturing grants: Small business grants offer funding solutions, but you won’t have to repay the funds.
- Crowdfunding: Crowdfunding involves pitching your product to potential consumers who back the project. If you have a product that solves a pressing need, your campaign might get funded quickly.
- Family and friends: It never hurts to ask for an investment from your family members and friends. But don’t be disappointed if they aren’t convinced that your business idea is the next unicorn startup.
Tips for Building a Successful Manufacturing Startup
Use the tips below to chart your course to business success:
- Be flexible: Building a successful manufacturing startup will likely require many pivots along the way. Don’t be afraid to get creative when things don’t go exactly according to plan.
- Start with a test: A small batch can help you work on anything that needs improvement.
- Communicate effectively: Be clear on what you need from employees and contractors at every point in the process.
Manufacturing startups present a lucrative opportunity for budding entrepreneurs. If you are willing to get creative, this type of business might be the right fit for your goals. If possible, seek out a mentor in the manufacturing space who can guide you on your journey to success.