Making Money by Making Something
Listen to business news, and one thing you'll hear repeatedly is that the U.S. is a consumer-driven economy. In other words, our economic health depends on people buying and selling stuff. But somebodyí s actually got to make all that stuff people buy and sell. That's where manufacturing comes in.
If the word "manufacturing" gives you a mental picture of a huge production plant (imagine an automobile assembly line), think again: most manufacturing is done in very small shops.
According to the latest figures available, compiled by the Small Business Administration, as of 1999, here's what the break-down by size of private manufacturing firms looked like:
Total manufacturing firms: 311,902
0-99 employees: 291,004
0-19 employees: 226,673
0-9 employees: 177,246
In other words, over 93% of all manufacturing companies had fewer than 100 employees, and nearly 57% had fewer than 10!
What's more, many large manufacturers, including auto and computer makers, depend on small manufacturers for many of their parts, supplies, assembly, etc. So small manufacturing is very much alive and well.
Of course, the term "manufacturer" covers a broad range of products: from hand-crafting small fashion accessories or body lotions to producing automobiles or kitchen sinks. "Manufacturing" merely refers to the process of taking raw materials and adding value to them to make something of greater value. In other words, you take steel and make refrigerators or tomatoes and make salsa.
Manufacturing is typically divided into two main categories:
Durable Goods, such as automobiles, appliances, furniture
Non-Durable Goods, such as apparel, food, paper goods
Being a manufacturer can be very creative. A lot of us are interested in and challenged by the process of devising, designing and producing "stuff." Most manufacturers -- even very small manufacturers -- are involved in R&D (research and development), meaning they continually investigate ways to make new products or improve products or production methods.
Manufacturing also potentially provides you more leverage from your investment of money than many other categories of business. Since you are adding value to raw materials, once you've recovered your initial investment for R&D, equipment, and capital costs, you can often be quite profitable.
One major drawback is the capital investment typically required to start. After all, before you can begin shipping products, you need to make them. That means machinery, other equipment, workers, raw materials, as well as the resources necessary to design, test, and market your products.
On the other hand, you may be able to start your manufacturing operation on a shoe-string. Many manufacturers begin as cottage industries -- making their products at home (or in the proverbial garage), then selling their goods at crafts fairs or to a few small retailers directly. That's a good way for you to build sales, work out design kinks, and do real-life market research before you start mass producing your goods.
If you are interested in starting a manufacturing business, you'll find many resources to help. Governments generally want to increase the number of manufacturing jobs because they create products that can be exported (improving a country's balance-of-trade) and generally create higher paying jobs than in other industries (such as the service sector). So good news: there are many federal and state agencies designed to help you establish, grow, and improve your manufacturing company, as well as to assist you in exporting your products.
A good source of assistance, especially once you are up and running, is the Manufacturing Extension Partnership (MEP) of the National Institute of Standards and Technology, an agency of the U.S. Department of Commerce. MEP has over 400 non-profit centers, located in all 50 States and Puerto Rico. They provide manufacturing and business specialists, with real-life experience, to assist American manufacturing companies, large or small. Contact them at www.mep.nist.gov or 1-800-MEP 4 MFG (1-800-637-4634).
Manufacturing can be challenging, but the rewards can be great -- both emotionally and financially. Few things are as satisfying as seeing your product on a store's shelf. I can attest to that personally, as I love going into bookstores and seeing my books for sale. There's just something irreplaceable about having a tangible product -- clear evidence that you've not only consumed something, but made something new.
Copyright Rhonda Abrams, 2002
Rhonda Abrams writes the nation's most widely-read small business column and is the author of The Successful Business Organizer, Wear Clean Underwear, and The Successful Business Plan: Secrets & Strategies. To receive Rhonda's free business tips newsletter, register at www.RhondaOnline.com.