Starting a manufacturing business is risky. Very risky.
Why? Because there are so many pitfalls and challenges that can sink your chances of success. This guide will help you answer all the important questions related to starting your own manufacturing business in Australia – assisting you in making an informed decision under this field without all the confusion.
In a large country like Australia, starting a manufacturing business can really get one thinking. “Where will I set up shop?” – “How can I hope to afford all the expenses involved in this venture?” – “What if someone takes my idea and starts their own business?”
Well, don’t stress, it happens to most of us. We should put that fear behind us and build our business anyway. So, if you have always wanted to start a manufacturing business or want to know more about this field of business then this post is ideal for you. There are quite a few different strategies and approaches that one can take on the road to starting their own manufacturing business and chances are that you might already have at least a few of them covered. In any case, the steps below apply to any kind of manufacturing business you want to get into.
- Target Market Research
A lot is riding on the success of your new business. How will you ensure that it’s a financial success as a beginner?
- Ensure there is demand
- Specialize on a niche
You need to ensure there is a market out there for what you have in mind. You want to know if your new and unique idea can capture this market with aplomb, or if there are cheaper alternatives that could satisfy that need. Who are your ideal customers? What are their needs? Are there any barriers or difficulties for them? Researching your target market will increase your chances of success as you will have an opportunity to discover what their needs are.
There are multiple ways you can conduct this research, but as a starting point, think about your target market and specifically what they would need and want in order to purchase your products. So, do a market survey. Research your target market so you know what kind of things people talk about. Discounts? Products? Prices? People?
Choose a Niche
The manufacturing industry is broad. Niches include:
- Food processing and manufacturing
- Textiles, clothing, and fashion accessories
- Wood products
- Electronics and household appliances
- Health,Medical consumable
- Furniture manufacturing
- Household goods production
- Many more.
Finding a niche in business creation is the quickest way you can grow a successful business. It also gives you control over your focus. By narrowing your idea down to a single product class it becomes easier to compare different products with sales. Anyone can make a T-Shirt, but not many people will make T-shirts in big enough numbers to make a profit. So knowing your targeted audience helps you work out prices and also gives you a bargaining position in negotiations.
- Acquire the right Materials and Equipment
It’s essential for a manufacturing business to have the right equipment and materials in place in order to get the job done. If you’re starting your own manufacturing business, both the equipment and materials need to serve multiple purposes and fit correctly with each other.
The key to starting well, is keeping costs down. To do this, you need to invest in the right equipment and materials which can then be used to make your product. While there is no set-in-stone list of materials you should be looking at when choosing them, take into consideration things like: cost, fairtrade policies, safety, labour laws, durability, supply etc.
You need to invest in the best materials and equipment possible, both for your budget and for the type of business that you will be starting. Also, when choosing your equipment, make sure that you have enough space to fit it and run it properly. You also need to consider a machine’s versatility before investing in it.
If you’re producing components for your factory, invest in high-quality equipment that will last for years. This way, if anything goes wrong with your equipment or your supplier runs out of parts, you won’t be left without a valuable part of your manufacturing process.
- Choose a Location and Set Up Your Business premises/Factory
It’s time to set up your factory. Think about where you want your factory to be located; how many people will work in it, and whether there are any free attachments nearby for you. The importance of location cannot be understated – if the factory is too close to a city or a suburb, then people may not feel in the mood for sitting through long shifts. Likewise, a manufacturing plant too close to a mountain or coastal region can be a bit intimidating for those who aren’t used to such striking landscapes.
It is also worth taking into consideration whether you wish to use your home, an existing factory or build a new one. This will determine where you source raw materials from, and whether it will be cheaper to source those materials from nearby areas or have transportation facilities to send them to you.
Ideally, you want to find somewhere which has good infrastructure (gas, electricity, water etc.) and is close to a transport network that will enable you to quickly get raw materials (including parts) from one place to another. Always try to find locations which are easy on the environment and offer good service levels from morning to night.
Finally, you need some type of efficient facility for running your business, housing your equipment, storing your materials and making the items you produce. Make sure the building is fit for purpose and is in accordance with relevant regulations.
- Apply to meet relevant Business and industry Regulations, Standards, and Compliance
Manufacturing companies must continue to meet the regulations and standards set by the government even if they start out as small as a sole proprietorship and are later incorporated as a corporation. It doesn’t matter if you run your business from a closet or front of the house, you still have to meet the formalities that are required to start a manufacturing business in Australia.
- Employ workers
You have several options to meet the human capital requirements of your business. Depending on size and several factors, you can run the entire operations alone or with a family/friend. Or you can either own a franchise and employ employees directly.
In either case, two concepts will apply: (1) Hire an experienced team and charge them with techniques they’ve learned, or learn directly from somebody who already knows the skills you need; and (2) Develop a product that you can offer at an affordable price.
As a manufacturing business, product development and customer service will be essential to your business growth and expansion. You will need to hire workers to the production facility as well as manage employees in operational matters.
In the event that you hire workers, you must comply with Australia’s national workplace laws specific to the manufacturing industry and Workplace health and safety regulations.
Workplace health and safety (WHS) management
If your company is going to be manufacturing products, it needs to be able to ensure that the safety of its employees, employees of subcontractors, and customers/customers of suppliers is addressed. The manufacturing process is highly regulated and any inadequacy could result in serious injury which you cannot afford to pass up. This is why you shouldn’t ignore WHS management in your manufacturing business.
All companies must now have a comprehensive plan in place that includes the design, implementation, and evaluation of specific preventive measures designed to reduce workplace risks. Any measure that can be taken to reduce the risk of an accident should be included in this plan. This includes ensuring appropriate employee training is provided, implementing equipment recommendations advocated by WHS legislation, and implementing standard operating procedures (SOPs). The benefits of implementing a comprehensive WHS Management plan include improved productivity, reduced absenteeism, reduced insurance premiums, and precise scheduling. Learn more about the WHS Management system here
- Obtain Insurance cover
One of the most critical things you will do as you start your own manufacturing business is to get insurance. You will be responsible for more than manufacturing your product. You will be responsible for all aspects of running the business, from physical plant structures to human resources. This surprises most new entrepreneurs for a number of reasons. First, it’s not just the physical plant that’s at risk, but the intangible assets as well. Most manufacturing companies include employees who you would want to protect in case something goes wrong.
What is needed is an insurance policy under which you will protect yourself against all possible contingencies, e.g., theft, fires, and income taxes, if your company is established in Australia.
In addition to general insurances, the following are manufacturing industry specific insurances you should obtain:
- General liability
- Assets and revenue insurance
- Professional indemnity insurance
- Machinery breakdown insurance
- Business interruption insurance
- Financing your project
Having money set aside for start-up costs and research can be an important factor to successful business formation. Many manufacturing startups fail because they don’t have a capital reserve to use if they need to. When that happens, many firms cut corners and rush their production lines, which results in poor quality products that often don’t sell well.
So, you do need money in order to make your dream a reality. Obtaining funding can be as simple as obtaining a small loan through your bank or a company and fulfilling many conditions required by the lender like having a manufacturing facility. Another financing option includes crowdfunding – inviting the public to contribute money for your business. Additionally, and most often the case, you have to contribute your personal savings or ask family and friends for loans.
- Marketing: Advertise your business
One of the most important aspects of starting a new manufacturing company is marketing. Manufacturing companies are usually small, and lack capital. You need to build up your reputation if you want customers to take notice of you. It is essential to identify your niche market and target it aggressively. There are plenty of ways in which you can advertise your manufacturing business. Whether it’s through flyers, adverts in newspapers, or direct mail, social media can play a significant role also – build a presence on social networking sites like Facebook and Twitter where there is a large market for your services or products. Know that your customers will not find you unless you create an incredible amount of content. You could write blog posts, create videos, or advertise on sites like Craigslist, Search engines (like Google), Facebook, Instagram, etc.