Last Updated on Mar 30, 2020 by James W


Do you plan to start a new manufacturing venture in 2016? Are you currently putting the final touches on your business concept? Then you’ll want to take some time out to read this post. There is a reason most manufacturing firms have moved their operations overseas during the last few decades. It relates to the fact that producing products in the US has become incredibly expensive. New entrepreneurs might not understand all the costs involved, and so we wanted to offer some advice.

Don’t let this information stop you from realizing your dreams. Just make sure you understand all the unavoidable costs ahead of time. Only then can you create an accurate budget that will provide for your company for the first twelve months. The last thing you want to do is run out of money at a crucial moment. However, that happens to many new manufacturing companies every week. The basic rule of thumb? You need to perform a lot of research if you want to succeed in this cutthroat marketplace. Even so, nobody can argue that bringing manufacturing home isn’t a good idea.


Direct Materials

There is no getting away from that fact that you will have to invest a lot of money in materials when starting your business. Without those components, you’ll never create finished products for your customers and clients. Make sure you understand the real cost of buying those items before launching your venture.

You might require woods, plastics, and a broad range of different parts. Spend some time considering every step of the manufacturing process to ensure you leave no stone unturned. It’s also sensible to contact many different suppliers early to get the best deals. Obtain quotes from everyone you call and use that information to lower prices.


Direct Labor

Unless you’re willing to run the entire factory alone, you’ll have to employ workers. That might cost more than you imagine which is why we’re highlighting the step today. You need to cover all the associated expenditure your company will encounter during the process. It’s possible you might have to pay for a legal professional to develop the contracts, and you also have to think about things like sick pay.

Of course, it’s sensible to restrict the number of jobs you offer during the early stages. That is because cash flow issues could mean you struggle to make wage payments at the end of the month. Also, if you experience a slump in sales, there might not be enough work to go around. However, you’ll still have to cover those salaries.


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Factory Overheads

All manufacturing bosses will have to rent or purchase premises for their operation. It’s vital that you understand the costs involved when creating your budget. So, now would be a good time to contact local commercial property agents. Explain the nature of your company and your size requirements. You might have to discuss other issues too depending on your manufacturing niche.

Some rules and regulations affect where you can base your company if you use dangerous chemicals. There are also many other laws that could come into play. If you’re unsure about anything, seek some legal advice before undertaking the task. Once you know how much suitable premises will cost, it’s easier to ensure you don’t overlook any expenditure.


Contractor & Equipment Fees

Your company will almost certainly outsource certain tasks to save time and boost productivity. So, you need to contact relevant firms ahead of time and ask about their prices. Perhaps you need to find a powder coating specialist to ensure your products are robust? Maybe you’d like to look at the cost of buying the equipment first? Just make a shortlist of companies that provide powder coating supplies and compare quotes. The same goes for other processes like galvanizing. There are hundreds of different firms working in those industries, and so it won’t take long to find the best deals.

Again, you just need to explain your operation and let them know how often you’re likely to require their services. People who are starting large manufacturing companies should arrange meetings. That is because they will usually need a substantial commitment.


Insurance Cover

Buying insurance for a new manufacturing company can seem incredibly complicated. That is because most specialists will want to create a tailored package. They will take a look at your operation and assess the risks before offering a quote. The chances are that you will have to purchase many different forms of insurance to avoid issues. For instance, you’re going to need policies for indemnity, professional liability, and property. You might also wish to consider worker’s compensation cover and product liability insurance.

The experts you contact will spend time explaining each policy before making recommendations. Always shop around when it comes to buying insurance because some firms will charge more than others for the same service.


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Marketing Costs

Marketing and promotion can become expensive if you don’t have experience. That is the case in the manufacturing world where you’re selling to other businesses. Do yourself a favor and contact advertising agencies that serve your industry. The people working for those companies will know how to get the best results fast. They have a vast knowledge of marketing techniques, and they will work hard to put your business in front of the right people.

Of course, all promotional agencies will charge a premium for their services. That expense can vary depending on which specialist you select. While it’s tempting to go for the lowest price, that usually means you’re purchasing an inferior service. For the best outcomes, choose a mid-range company with an excellent track record.


Health and Safety Expenses

The last thing you want is for a worker to injure themselves on your premises. However, there isn’t much you can do to stop it from happening. Some people are just prone to being in the wrong place at the wrong time. That said, bosses who invest enough cash in health and safety tend to get better outcomes. Their incident rates decrease, and they pay less in compensation. That is why you must put a lot of money aside for health and safety this year.

Appoint a member of your team to act as the employee representative. Pay for them to take part in appropriate courses, and then put their skills to good use. They should perform risk assessments on every process within your business and then offer safety advice. It’s also possible to outsource the job by calling impartial specialists.


Waste Management Costs

Most manufacturers will pay different amounts for effective waste management. Governments around the word now put pressure on business owners to go green. That means there are some pretty hefty fines involved if you make any mistakes. Most factories will use hazardous chemicals as part of their processes. Disposing of those liquids properly is essential if you want to avoid negative consequences. So, take a moment to consider the type of waste your operation is likely to produce.

You can then call waste specialists who will explain your options and let you know about the costs. It’s critical that you understand those fees ahead of time because they could affect your turnover. So, you might have to raise prices slightly to ensure there’s enough capital.


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Police & Security Fees

It’s always sensible to contact the cops when you plan to start a new manufacturing business. In most towns and cities, they offer an invaluable service you’re going to require. For a small fee, you can link the factory alarm system to the local police station. That should mean that officers arrive at the scene whenever criminals try to gain access. It’s the best way to ensure any incidences of crime are handled fast.

You’ll also have to consider other security costs like CCTV, alarm systems, and motion sensors. Contact security professionals, explain the situation and get some quotes. Hopefully, protecting your premises won’t break the bank if you shop around. However, you’ll have to pay whatever fees the police ask. As a rule, they’re not interested in negotiations.


Company Expansion Costs

Growing your business is something that could help you to survive well into the future. That is why all new entrepreneurs should add an expansion strategy to their business plans. While you might make a decent profit during your first year, it’s wise to spend that money on pushing your business forward.

Make sure you understand how much you can allocate to that process before starting out. If you fail to invest in your brand, the company could stagnate and cease to make a profit. Nobody wants that to happen after all the hard work and effort. So, develop a plan, consider any variables, and stick to your guns.

Now you know about some of the unavoidable costs new manufacturers face, it should be easier to get things right. Print this article if you’re worried that you might forget something moving forward. At the end of the day, there are so many issues to consider that sometimes we all need a point of reference. Whatever you plan to produce, we hope your company goes from strength to strength this year. Who knows? Maybe you could become the catalyst that brings US manufacturing home for good!


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