Invent It, Sell It, Bank It!: Make Your Million-Dollar Idea Into a Reality (26 page)

Write a pitch that can answer all the questions buyers will likely ask.

Practice your pitch over, and over, and over again.

8

THE DREAM BECOMES TANGIBLE—MANUFACTURING AND PACKAGING

“Quality means doing it right when no one is looking.”

—H
ENRY
F
ORD

There is nothing more exciting to a new entrepreneur than getting that first purchase order (PO). Finally, there’s hard proof that someone other than your mother agrees with you that there is a hole in the market to be filled and that people will be willing, even eager, to spend money on your brainchild. There’s proof that all the planning and research and phone calls and hope and work haven’t been in pursuit of some pipe dream. When your PO comes in, you’ll want to have a manufacturer already lined up so that when you say the word, a factory foreman merely has to hit the start button to get your production lines rolling. As with almost every step in the invention-to-market process, however, getting to this point takes significant effort and research.

CHOOSING A MANUFACTURER

Where you make your product can be a complicated and, for some, even a morally fraught decision. If it is important to you to be able to personally supervise operations as your product comes off the line—it was for me—your first instinct will be to try to manufacture your product locally. Today, unfortunately, many manufacturers have shut down in the United States or have moved their operations overseas, and many product categories are almost exclusively produced in China or India.

Many entrepreneurs feel strongly about supporting local businesses, and also believe that the “Made in America” label will serve as a major selling point. I wholeheartedly support that belief and say go with it if you can. Sometimes, however, you may discover when starting out that despite your best intentions, it may not be possible for the type of business you’re in. I made everything in the United States for many years, but when I decided to make products out of wood, that became impossible. The manufacturing costs in the United States are often higher than they would be in Asia, India, or anyplace else overseas. Fortunately, in recent years we have seen some change. For some types of products, however, it may remain harder to hit the prices the public wants while trying to manufacture in the United States.

Manufacturing close to home can sometimes make it extremely difficult to make a profit on some products, because you can only charge so much, and if your manufacturing costs are too high, you’re not going to make enough money to sustain and grow the company, which in turn is not good for your local economy. If you find this is the case, use overseas production if you need to, with the goal of bringing your manufacturing back home as soon as you can. Having a successful, thriving business will allow
you to employ more Americans and use American resources for everything else, such as your employees, warehousing, your attorneys, your graphic designers, photographers, sales team, and so on. You can put a lot of Americans to work even if you cannot manufacture in the U.S.A. Another way companies sometimes try to keep their costs in check while still doing as much business as possible in the United States is by making some parts overseas and assembling them here. I am happy to say that many of my
Shark Tank
entrepreneurs have found such great success since we made our deal that they now employ many Americans.

Even if you are manufacturing overseas, you should feel positive about the fact that by growing a business here and doing what’s best for it, you will also be providing American workers with employment and contributing to economic growth.

Selecting a manufacturer will be an extremely personal decision you have to make. However, your main concern should ultimately be the same wherever your manufacturer is located—upholding your standards of quality and safety while keeping your product’s price point at a level that makes it attractive to customers.

What to Consider

First, what type of factory makes your type of product? Is your product made out of plastic, metal, glass, wood, or textiles, to name a few materials? Every factory specializes in a product category, but over time they often develop a reputation for excelling in a particular niche. For example, both a travel bag and a purse
are in a category called “cut and sew.” But if you have designed a new piece of luggage, ideally you would want to work with a manufacturer that produces luggage, not handbags. Whenever possible, select suppliers who have experience working with products like yours. Ask for recommendations from people you meet in the industry, such as your prototype maker, or people you might interact with at trade shows. There are a host of rules specific to every industry, and you want to be sure you’re working with a factory that understands them all and knows how to make a product compliant with laws, rules, and regulations.

Next, once you locate the factories nearest you that can handle your product, look up their credentials and any online reviews. Look for their Better Business Bureau ratings. Call the factory and ask for references. Inquire about their other clients (if they haven’t signed confidentiality agreements), look up the products they make, and read the customer reviews. I once chose a manufacturer because I found out they made bags for Donna Karan, reasoning that it must be a reliable and quality manufacturer if it was working for such a big, quality brand. On the flip side, should you notice that several of the products manufactured at a factory are frequently panned online for being low quality, defective, or otherwise subpar, take heed.

If you can find a manufacturer you’d like to work with close to home, pay a visit in person. Ask to see the production lines and examine the quality of what is being made. Are you impressed? Does the product look nice? Does it work? Introduce yourself to the factory owners and ask to meet the head foreman. Do your instincts tell you that these would be ethical, responsible people to work with? Do they seem to care about the products they’re making and the people working for them? Do you get a sense that they would be willing to solve problems creatively, and would be
responsive when faced with a dilemma? Make sure you let them know that if you decide to do business together, they can expect to see you often because you intend to be as involved as possible in the production process.

These on-site visits are one of the best ways for a new entrepreneur to grow and learn about manufacturing, and it helps you creatively when you’re coming up with your next great idea. As you watch and learn, and spend time around the manufacturing process, you become more aware of what types of processes are available. As I learned about injection molding, I also learned about extruding and thermoforming. I learned that you could add wood chips to plastic to mimic the look of wood. I learned about colors and colorants. You just learn so much more on site than you would if your manufacturer were located overseas.

Manufacturing Overseas

Sometimes, however, there won’t be any manufacturers you can work with in your area, or you will calculate that, for the sake of cost efficiency, you will have to produce overseas. However, bear in mind that when you manufacture overseas, you trade lower costs for higher risk, because you won’t be able to keep as close an eye on the production process.

You’ll look for an overseas manufacturer much the same way as you would one that’s local. Get recommendations from people in the know, especially from retailers. Check the international company’s credentials. To my knowledge there is no international equivalent to the Better
Business Bureau, but testing labs like Bureau Veritas, Intertek, and SGS can do a factory audit and tell you if the factory is okay or not.

BureauVeritas:
www.bureauveritas.com

Intertek:
www.intertek.com

SGS:
www.sgsgroup.us.com

You can even hire a representative to select a manufacturer for you and negotiate pricing for your order. Often these manufacturer’s reps receive a 5 to 10 percent commission, or they will tack 10 to 15 percent onto the cost of the goods from the factory if they act as your direct source. For that kind of money, however, they should do far more than just make the connection between you and a reputable manufacturer. They should also do inspections, going in even before production begins to confirm that the manufacturer is not using child labor, that working conditions are good, and that you will be getting a high-quality product. Before the product ships, they should also visit and check that your product is being made and packaged correctly, according to the specifications you’ve given or that your retailer has given to you.

In addition to your representatives, you can also hire the same labs to send out an independent third-party inspector. They are invaluable, especially if you’re placing a sizable order. I use them all the time to check on big orders, even at factories where I’ve been doing business for years. They visit the manufacturers and make sure that the order coming off the line meets the standards you expect and are compliant with safety and environmental regulations. These regulations vary from country to country, so you have to be extremely careful when selling internationally.

The representatives can provide you with lists of regulations and the safety laws you need to follow, and they will know what you need to do so that your product is compliant. Wood products have to be properly sourced; many fabrics need to be treated with flame-retardants; certain adhesives and aerosol coatings once allowed are now banned. Even though the regulations governing
the use of these materials can seem indecipherable, you need to understand them thoroughly, and make sure you stay up to date, as they change over time. It would be horrible to think you’re ready to sell and suddenly be told that you have to make changes if you want to be compliant with regulatory codes because you’re using a dye that’s just been declared illegal, or your product poses a risk to children, or your instruction sheet has to be rewritten. Similarly, a washing and care instruction label is required on countless items, from T-shirts to travel bags, and if you didn’t have one, you’d have to go back and get one sewn in.