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Small-scale manufacturing involves creating a good, such as textiles, food, hardware, and more. When you hear the word ‘manufacturing,’ your mind might jump to a large-scale factory with complex machinery. But the reality is that manufacturing can happen on a small scale. In fact, 98% of American manufacturing companies are considered small businesses.
- According to the Small Business Administration, a small business has less than 1,500 employees and a maximum of $41.5 million in average annual receipts.
- A recent SCORE study determined that 98.6% of American manufacturing companies are small businesses.
- Of these small businesses, 75.3% have fewer than 20 employees.
- According to the Small Business Administration, over 350,000 manufacturing companies have no employees.
Understanding a Small-Scale Manufacturing Business
Small-scale manufacturing is a type of business that makes products or goods. As the name suggests, small-scale manufacturers have a small number of employees.
Types of Small-Scale Manufacturing
Small-scale manufacturing comes in a few different flavors. The distinction tends to lie in the number of employees:
- Artisan manufacturing: Sometimes referred to as micro-manufacturing, these businesses tend to have between one and five employees. Many operate from the business owner’s home. Goods are often sold through local venues and online platforms.
- Small batch production: Small batch productions tend to have between six and 20 employees. Some use the owner’s home as a base of operation, while others use a commercial space. Many sell products through local stores, other physical retail space, and online platforms.
- Moderate production: A moderate production company tends to have less than 50 employees and often operates from a commercial space. Companies of this size usually have several distribution pathways, including onsite, external vendors, and more.
Characteristics of a Small-Scale Manufacturing Business
A small-scale manufacturing business has different features that set it apart from other types of businesses.
- Products: As a manufacturing business of any scale, the company produces a product or good for sale.
- Revenue: Based on the SBA definition, the cap on revenue for a small business is $41.5 million.
- Employees: Based on the SBA definition, a small business has up to 1,5000 employees
- Presence: In most cases, this style of manufacturing doesn’t emit foul odors or loud noises for the neighbors to complain about.
- Market: Many small-scale manufacturers serve a particular region.
- Owner: The owner of a small-scale manufacturing business tends to be involved in the day-to-day functions of the business.
- Machinery: The types of machinery found at a small-scale manufacturer tend to be simple. In contrast, larger manufacturers might have more complex machines.
Small-Scale vs Large-Scale Industries
On the surface, the most obvious difference between small-scale and large-scale industries is the size of the company. But understanding the more subtle differences is helpful. Below is a breakdown:
- Investments: Large-scale industries tend to require big investments in industrial equipment. Small-scale industries can get started with fewer upfront equipment costs.
- Labor vs. capital: In general, large-scale industries tend to require more capital investments. In contrast, small-scale industries tend to require more labor to complete a final project.
- Footprint: Small-scale industries often have a more constrained reach than large-scale industries, which might have distribution channels around the world.
- Skills: Both industries require skilled labor. But large-scale industries tend to require a workforce with a finely tuned skill set.
- Technology: While large-scale industries often invest in state-of-the-art equipment, small-scale industries tend to use less sophisticated equipment.
- Material sources: Most small-scale industries rely on local suppliers, while large-scale industries source materials from around the world.
Examples of Small-Scale Manufacturing Businesses
Small-scale manufacturing businesses offer a wide variety of products. Below are some examples:
- Face masks: A home-based entrepreneur sewing high-quality face masks to sell at local markets and on Etsy.
- Brewing company: A local brewery that offers an in-person drinking experience and distributes canned beer to other locations.
Why Small-Scale Manufacturing Matters
Every small business matters. But when you look at the numbers, small-scale manufacturing is especially important to the United States.
- A recent SCORE study determined that 98.6% of American manufacturing companies are small businesses.
- Small-scale manufacturing can provide jobs to communities across the country.
“Failure is an option here. If things are not failing, you are not innovating enough.” — Elon Musk
Why You Should Consider a Small-Scale Manufacturing Business
Every type of business comes with advantages and disadvantages. Here’s what to consider when starting a small-scale manufacturing business.
Pros of a Small-Scale Manufacturing Business
- Scale at your own pace: You can build a small-scale manufacturing business by adding employees and equipment on an as-needed basis.
- Cultivate employment opportunities: Many small-scale manufacturers create worthwhile employment opportunities for the local community.
- Sustainable business model: With the right choices, a small-scale manufacturing business can be a sustainable option.
Cons of a Small-Scale Manufacturing Business
- Lack of flexibility: As you invest in employees and equipment, your business can lose flexibility over time.
- Labor shortages: Help wanted advertisements seem to be everywhere. It can be hard to find the right employees.
Top Small-Scale Manufacturing Business Ideas
Small-scale manufacturing businesses aren’t one size fits all. You’ll need to find the perfect fit for your interests and location. But below are some ideas to help you start brainstorming:
- Craft making: Crafty people can turn their unique skill set into a booming manufacturing business. Don’t be afraid to think outside the box.
- Jewelry manufacturing: If you have a knack for creating beautiful jewelry, this might be the right fit. You can create the jewelry, then sell it through local vendors and online platforms.
- Bakery: Baked goods can be a hot seller through local vendors. Safe and high-quality products should be a top priority.
- Clothing manufacturer: You can turn fabric into showstopping pieces. An ability to create clothes that match fashion trends can help your business stay open.
- Textiles: You can manufacture the textiles that clothing manufacturers need to create products. Specifically, knitwear is a good opportunity.
- Furniture manufacturer: Chairs, tables, beds, and picture frames are just a few examples of what you could produce.
- Soap manufacturer: Many home-based entrepreneurs create beautiful soaps to sell at markets and online.
- Candle manufacturer: Candlemaking is a relatively entry-level manufacturing opportunity. You can get started in your own kitchen.
- Pharmaceutical manufacturer: If you are willing to invest in the appropriate space and equipment, manufacturing pharmaceuticals can be lucrative.
- Microbrewery: Breweries have popped up across the nation. If you have a passion for the perfect brew, a microbrewery could be the right choice.
- Leather goods: Leather can be used to make everything from belts to furniture. You’ll likely need to invest in highly trained employees.
- Chemical production: Manufacturing chemicals can be a dangerous process. But under the right conditions and regulations, you can build a booming business.
- Toys: Toy manufacturing comes with some room for creative endeavors. Start with a prototype and go from there.
- Coffee roasting: Roasting and packaging coffee beans offer the chance to share your love of coffee with the world.
- Pet supplies: The pet industry is growing. You can capitalize on this opportunity by manufacturing pet accessories like leashes, beds, and toys.
- Cosmetics: If you can create a desirable formula, your product might take off in the cosmetics industry. Be sure to consider all government regulations before getting started.
- Electronics manufacturing: Within the electronics industry, you could manufacture necessary components or a user-focused product.
- Woodworking: With the right skills and tools, you can fabricate wood-based products.
- Customized parts via 3D printing: If you are willing to invest in a 3D printer, you could create customized components for customers.
- Bicycle manufacturing: You can use pre-made parts to build customized bikes that buyers crave.
“Unlike the objective of far too many companies, manufacturing is not about a quick 'exit.' It is centered on long-term value creation.” —Hamdi Ulukaya, a Turkish billionaire, philanthropist, activist and the owner, founder, chairman, and CEO of Chobani yogurt.
How to Find the Right Small-Scale Manufacturing Business for You
If you want to start a small-scale manufacturing business, it’s important to consider all of your options. Below are some questions to ask yourself as you nail down the right small-scale manufacturing business for your situation.
What Small Manufacturing Businesses Are Most Profitable?
- Do your homework: Look at the numbers surrounding an opportunity. Find out if the industry has room to grow.
- Consider your profits: It’s not enough to project revenue, you’ll also need to consider your costs.
What Manufacturing Business Is Best For A New Entrepreneur?
- Interests: Many successful entrepreneurs follow their interests to build a successful business.
- Start-up costs: If you want to keep your startup costs limited, look for manufacturing businesses with a low barrier to entry. For example, candlemaking is less involved than chemical manufacturing.
What Is The Easiest Manufacturing Business Idea To Start?
- Natural inclination: If you have no skills surrounding woodworking, then it might not be the right fit for you. Play to your strengths. For example, if you have the skills of a seamstress, consider clothing manufacturing.
- Regulations: Some industries are more regulated than others. While a little red tape shouldn’t stand in your way, it’s often easier to get started in an industry with minimal regulation. For example, making candles has fewer regulations than making pharmaceuticals.
What Manufactured Products Are In The Most Demand?
- Research trends: You want to build out a business that revolves around in-demand products.
- Consider the future: If something seems like a fad, it might not be the right choice. Look for products with staying power.
What Product Has The Simplest Manufacturing Process?
- Equipment: The right equipment can get expensive. Choosing a process with minimal equipment will keep your startup costs lower.
- Labor: If you need skilled labor, that might be hard to come by in some areas.
How to Fund Your Small-scale Manufacturing Business Idea?
- Build out a manufacturing business plan: Use a business plan to determine how much you’ll need to spend to get your business off the ground.
- Consider your own resources: Some entrepreneurs come to the table with funds on-hand to build the business.
- Look for outside funding: You can often find external funding opportunities through grants, manufacturing loans, equipment loans, and investors.
The Impact of Small-Scale Manufacturing on Local Economies
Small-scale manufacturers can make a big impact on local communities. Here are some of the impacts:
- Employment: Small-scale manufacturers can bring plenty of jobs to a local economy.
- Less reliance on outside companies: Local companies may be more likely to stay in an area, which reduces a community’s reliance on larger corporations.
- Entrepreneurship inspiration: Local business leaders can inspire the next generation of a community to make an impact and pursue innovation in the area.
Small Scale Manufacturing Case Studies: Inspiring Stories of Entrepreneurship
Success stories are always inspiring. Here are some to spark inspiration:
- Grace & Lace: Grace & Lace manufacturers women’s clothing, specifically focused on socks. It’s a big success story, and was even featured on Shark Tank.
- The Woobles: The Woobles is a manufacturer that creates and sells crochet kits for beginners. Customers learn how to crochet cute animals from a kit, which is created by The Woobles.
The Future of Small-Scale Manufacturing: Opportunities and Challenges
The economic landscape is constantly shifting. It’s helpful to consider the opportunities and challenges coming down the pipe.
- Technology advancements: As technology improves, small-scale manufacturers can operate more efficiently.
- Consumers want local goods: Many consumers are choosing to buy locally-made products, especially if sustainable manufacturing practices are in place.
- E-commerce: Manufacturers can more easily connect directly to their consumers.
- Collaboration: As small businesses grow, owners can network to overcome obstacles together.
- Competition: Larger corporations can make for tough competition in any industry.
- Cost of materials: Sourcing affordable materials necessary for the manufacturing process isn’t always easy. With costs rising, manufacturers might feel the pinch.
- Labor shortages: In some areas, it’s difficult to find labor to run the operation.
- Regulatory requirements: Tedious regulatory and legal requirements can be an issue for new manufacturers.
“Never before in the history of mankind has the pace of innovation and technological acceleration been faster than it is today.” — Yannick Schilly, CEO, Altix Consulting
A small-scale manufacturing business can present an exciting opportunity to build a business that fuels your local economy. The great thing is that you can start small and grow at your own pace. Focus on building an excellent product in an efficient way that customers can afford.