How to find a manufacturer for your product idea
Your business idea is now starting to take shape. Now you have an idea for a product that you can sell in your online shop. How do you actually make your product?
It is not always easy to make the transition from an idea into a physical product. It takes a lot of research to find the right product manufacturer in today’s global market. Many entrepreneurs give up on their business ideas because they lose momentum. But we can help.
This article will explain how to make a product and how to ensure high-quality products that are profitable.
What Are You Looking For
A clear mockup of your product is essential before you begin looking for manufacturers. A clear idea of the product you want to sell is essential.
Your product should be already designed if possible. The proper design should include all the dimensions, materials and functionality that you want. You can hire an engineer or designer to help you develop your idea.
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A lack of a well-thought-out design can lead to poor products and ultimately loss of money.
Domestic Vs. Overseas Manufacturers
When producing your product, one of the most important decisions that you will make is whether to produce it locally in the United States or overseas.
Manufacturing overseas is typically done in Asia, like China and India. These countries have low manufacturing costs. Low-cost manufacturing isn’t just for Asia. Entrepreneurs who are savvy can also find low-cost international manufacturers in Latin America and Eastern Europe, as well as Africa.
The type of product you are manufacturing can have an impact on your options for location. Depending on the source raw materials and expertise, certain products might be more cost-effective or easier to manufacture in certain areas.
There are many things to consider when choosing between domestic and overseas manufacturing. Each option has its pros and cons.
- Low manufacturing costs
- There are many manufacturers to choose from
- It is possible for products to be of lower quality or harder to verify before purchase
- Communication is affected by language, time zone, and cultural barriers
- It is difficult and costly to visit a manufacturing site
- Shipping can be more costly and take longer.
- Weaker security and less legal recourse in relation to payments and intellectual property
- It can be difficult to import and comply with customs laws.
- Lower standards for labor, ethics and the environment
- There is less overall oversight
- Manufacturing with higher quality
- It’s easier to communicate
- It is possible to visit more often on-site
- It is easy to verify the manufacturers
- Shipping is cheaper and quicker
- Standardized labor, ethics and environmental standards
- Increased security for payments and intellectual property
- Products made locally have a greater marketing appeal
- The manufacturing costs are often higher
- There are fewer manufacturers to choose from
- Limited product options (Some products can’t be manufactured in North America).
Types Of Suppliers
It’s important to remember that not all suppliers can be considered manufacturers. However, they are often grouped together. This is especially true when looking for overseas manufacturing. Let’s look at some common terms so we can all be on the same page.
Factories are the place where products are actually manufactured and what you are most likely looking for.
You can negotiate directly with factories to get the lowest possible manufacturing price. The downside is that it can be difficult to contact and make deals with factories in other countries where there is greater potential for profit.
Wholesalers don’t manufacture products. Wholesalers don’t manufacture products. They simply buy and sell bulk products.
There are many benefits to dealing with a wholesaler rather than a factory. One of the most important benefits is that you will likely be able deal with a domestic business, which makes communication much easier. You may also find local warehouses, which could make shipping easier and more affordable.
A local wholesaler can give you some security in your venture. Instead of communicating directly with the factory owner in China you might be able deal with Western companies. Your legal recourse is also greater if anything goes wrong.
wholesale has its downsides. Because wholesalers will take a cut, the unit price is bound to rise.
The biggest problem with working with wholesalers is the fact that products already exist. You will need a factory if you are looking to create a product unlike anything on the market.
Although trading companies look similar to wholesalers in that they deal with smaller quantities of product and offer a wider range of products, they are more flexible than wholesalers. This is their greatest strength.
These middlemen are similar to wholesalers and can drive up the price per unit. This is where the biggest problem lies. Trading companies are often not responsible for defective products. This will reduce your security as you won’t be able to identify the manufacturer.
How to Locate Manufacturers for Your Product
After you have decided whether to manufacture your product locally or internationally, it is time to find a manufacturer.
This can be done in five ways:
- Online Manufacturer Directories
- Search using NAICS Code
- Forums and Social Media
01. Online manufacturer directories
Online supplier directories are a great way to locate a factory that can manufacture your product. You can search and select from thousands of profiles in the top directories.
These directories often have manufacturers that have been vetted and re-evaluated. This gives you additional assurance that your supplier has been verified.
Some directories only focus on domestic manufacturing. These directories will help you locate a local manufacturing company. Others include international suppliers. You can filter your search by region in many directories.
The right referral can help you get on the right track quickly. Don’t be afraid of asking your network for referrals if you have contacts in the field, or someone who may have insight.
You can start conversations with professionals via Linkedin, if you don’t have the right connections.
Even manufacturers that don’t provide the exact service you require may be able refer you to other manufacturers. Ask.
03. Search using the NAICS code
You can also identify a similar product on the market to locate the manufacturer that created it. This can be done by using the NAICS code of an already-made product.
The federal standard for business classification is NAICS (North American Industry Classification System). NAICS’s purpose is to gather, analyze, and publish statistical data about the U.S. economy.
Nearly every product in America has a NAICS number. To search for any product as an entrepreneur, use the NAICS Directory or Google the NAICS code.
This will allow you to identify the manufacturers of products that you know. It will also ensure the product’s quality and professionalism. These manufacturers can be reached to request a quote on the product you are interested in creating.
04. Forums and social media
Forums can be a great place to get information in your field. Search engines can help you find forums that focus on the product type you are looking to make.
A forum is a great resource. There may be threads about manufacturers that you are able to locate, or you could start your own. Although not all experts are eager to share their knowledge, most are open to helping a novice. You can start by looking at the startups subreddit and The Manufacturer Community.
Although forums and social media may not be as easy as online supplier directories or online suppliers directories, they can provide some surprising gems.
Google can find almost anything these days.
It may prove more challenging to find good manufacturers. Many factories, especially those located overseas, will have old websites that aren’t optimized for search engines. This makes them more difficult to find using Google’s algorithm.
Try to search for different terms, such as “manufacturer”, supplier, or factory, in addition to the name of your product and its source materials.
Verify the Quality of Your Manufacturer
Small business owners are often concerned about the credibility and quality of their factory, particularly when they are manufacturing a new product. It is understandable that working with a nonprofessional manufacturer can prove to be very detrimental for your business.
After you have compiled a list of potential suppliers, you need to verify their reliability to make sure you are in the right place to manufacture. Before making a final decision, ensure that you thoroughly vet every option. Any red flags should be enough to disqualify the manufacturer.
The Better Business Bureau is a good place to start.
The Better Business Bureau is an organization that aims to build trust between buyers, sellers and vendors. The BBB is the place to report any fraud or maltreatment on the market.
Their website allows you to search for any business, and view their accreditation, rating, customer reviews, and customer complaints.
The BBB operates only in North America so manufacturers from outside the U.S., Canada, or Mexico will need to be vetted.
Although reviews are a great way of finding out about the reputation of a company, they can be difficult to find.
Start by searching for the supplier in various directories. Although the BBB is the most prominent in North America, there are many other similar organizations. Using Google Translate may help navigate foreign websites.
You may find reviews on the factory website. Although they are likely to be positive, you might be able reach other customers to inquire about their experiences.
Last but not least, search for the manufacturer on social media. There may be reviews, or random posts that shed more light on the supplier.
Ask about the experience you have with your product type
Now it’s time for you to contact manufacturers after doing your online research.
You’ll first need to confirm that they are capable of manufacturing your product. Ask about their past experience with similar products, and ensure they fully understand your requirements.
You might be able to ask potential suppliers for referrals to customers who are already satisfied. Ask questions, don’t be afraid to ask questions, and talk to as many people possible to get a better idea of the capabilities of the manufacturer.
Ask for a copy the manufacturer’s business licence
A copy of the manufacturer’s business licence will provide you with important information.
- This will allow you to verify that the business is legitimate and has proper credentials. Although it may seem extreme, this is crucial for overseas businesses.
- A scope of operation is a requirement for most business licenses. This describes the activities that the business can legally participate in.
- Additional information about the manufacturer such as a license number will be included in a business license. This information can be used to conduct more detailed online research.
Ask for product samples
You need to be sure that the quality of the product is guaranteed even after you have chosen a reliable manufacturer. Ask for a sample.
When it comes to manufacturing, there are often misunderstandings. Sometimes your product design is incomplete, or the factory may make certain design decisions.
It is better to discover these issues with a sample of the product than with a whole batch.
Request a quote
Once you have made contact with a few manufacturers, it is time to request formal quotations.
Here are some vital pieces of information that you should ensure you get:
- Minimum order quantity
- Price per unit
- Turnaround time
- Modalities of payment
Minimum order quantity
It may seem that the price of manufacturing is the most important. It’s much more important to know the minimum order quantity.
This number can vary from manufacturer to manufacturer, so you might find that some factories have a minimum order that is too high for your needs.
You can either handle the minimum quantity or you can move on to other suppliers.
Price per unit
It is very important to know the price per unit. This is your base and can have a significant impact on your profit margins.
Ask about the prices for different order sizes. Prices for 100 units or 10,000 units are likely to be very different. Your products will need to be manufactured in the most efficient manner possible.
The turnaround time refers to the time taken to make your order. Ask about the turnaround time for bulk sizes. This will allow you to better manage your stock for seasonal shifts on the market.
Modalities of payment
The terms of your payment may have an effect on how large you order.
You’ll often only begin generating income once your products arrive. Some manufacturers will allow you to pay in small increments while others require that you pay full upfront.
Before placing an order, make sure you know what your payment will be.
Keep Your Profitability
Although it may seem obvious, you must ensure that your business is profitable. It is best to calculate the numbers before choosing your manufacturer.
These are the five things you need to do before you partner with a manufacturer.
01. Compare Quotes
Ask for quotes from multiple manufacturers to get the best deal. This will allow you to make an informed decision and prevent you from being overcharged.
Unsolicited quotes that are lower than others could also be a red flag. It’s important to ensure that it is not a misinterpretation or a product with a different quality.
02. Calculate Manufacturing and Shipping Prices
It’s not what you want to do.
Be sure to include every cost involved in the manufacturing process. You should also consider additional costs such as shipping, handling, insurance, and customs taxes.
03. Find the market price of your product and determine your quantities
Calculating your potential income is an important step in ensuring you don’t lose money.
Make sure you do market research for the product that you are planning to make. Determine the market average price of the product and determine the number of units that you can sell.
Researching your competitors and target audience is a smart idea, especially before you start a new venture.
04. Dropshipping is an option
Dropshipping is a great way to reduce costs and increase profits.
Dropshipping is when a manufacturer will take care of shipping, fulfillment and storage. This is particularly useful for startups. Dropshipping allows you to start your business with minimal overhead and investment. You don’t have to worry about storage space nor a distribution plan.
These services can be found on platforms such as Modalyst.
Dropshipping is a new concept. To get started with dropshipping, check out our dropshipping guide.
05. Calculate your Profit Margin
Once you have determined your costs and potential revenue, you will be able to calculate your profit margin.
After deducting all costs and expenses, the profit margin is the remaining percentage of your revenue for each unit of your product.
Here is the formula to calculate your profit margin.
[ (Selling price – Cost per unit) / Selling price ] * 100
If your selling price is $50, and your unit cost is $20, this would be an example. Your profit margin would then be:
(50-$20) / $50 = 0.6% or 60%
The profit margin is the percentage of sales income that converts to profit. This is a common metric that can be used to assess the financial health of a company. Higher profit margins mean more profit and lower risk.
It is easy to calculate your profit margin. It is possible to keep a positive bottom line if you consider all expenses.
How to approach product manufacturer
If you have never approached a manufacturer before, it can be difficult. A supplier may also respond generically or not at all.
Professionalism is key to ensuring that the factory you are contacting takes your business seriously. Make sure they know what you mean. This can be done by providing a professionally eCommerce website that you can point them to.
Your email should be clear and concise. Your email should be focused.
Make your request clear and simple. Ask for pricing for multiple quantities relevant to your business. Ask for pricing for quantities that are too small or too large to be handled by you.
Do not hesitate to negotiate
It is difficult for new entrepreneurs to negotiate with manufacturers and suppliers.
Negotiating is acceptable when you are executing a business plan and manufacturing products. Do not accept the first quote you get. You may be able to negotiate a better deal.