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Apr 25 2018

Three Ways To Lower Your Manufacturing Costs

When you factor in the cost of labor, raw materials, packaging, shipping and quality control, manufacturing a physical product is often more expensive than anticipated. Especially if you’re producing domestically or in small quantities, as many new makers do. While the quickest and easiest way to reduce per unit costs is usually to increase production volumes, not everyone has the budget to scale up. Here we discuss three ways to trim expenses without having to up your order quantities.

Tweak Your Design

It’s natural to get attached to your original product design (they’re called “idea babies” for a reason!), but the design decisions you make while initially developing your product are not necessarily the best in the long-term. For example, you may have chosen a material without fully understanding the cost implications, or opted for a customization during manufacturing that requires higher minimums than you can regularly afford to meet. By selecting different raw materials and components, changing the way your product is constructed, or even eliminating a few bells and whistles, you can reduce costs and increase profit margins.

The best sources of advice on making a product more cost-efficient are your supply partners. Reach out to your main assembly factory and ask them to explain the most labor-intensive aspects of your design. Find out if any of your material sources could be replaced by something less expensive without compromising the item’s integrity. Put their knowledge to use!

Take, for example, my client who has a line of pet clothing. After seeking advice from her factory, she reduced her costs by 5%. All she had to do was choose a less slippery fabric! It seemed her originally selected material was proving difficult to manage on the shop’s cutting machines, requiring more time and oversight, and a higher than average defect rate (meaning, perfectly good fabric was getting thrown away). Until she reached out to the factory, the designer was completely unaware of this issue. You may wonder why a factory partner wouldn’t offer up this useful information to begin with. Though some certainly will, others assume you’ve done your due diligence and research and want them to adhere to your exact specifications. In short, they won’t interfere with design instructions unless asked.

Remove Packaging

Are you mostly selling your products online? If so, removing excess packaging is a simple way to bring down overall costs. The purpose of packaging is to inform and motivate a sale, which, in an ecommerce setting, is accomplished by the marketing copy and great photography on your sales page. Anything the customer sees after receiving their order (such as packaging) is extra!

True, nice packaging adds to the overall perceived value of your brand; however, you can communicate value in other ways. For example, some makers remove all packaging on the product itself and focus on branding their exterior mailers and boxes with a catchy tagline and brand logo. This eliminates the labor cost of affixing packaging solutions to individual SKU’s (such as hang tags, cardboard sleeves etc); boxes and mailers have to be packed regardless, so adding a logo does not increase handling fees.

Remember, it’s okay to use different packaging for your ecommerce inventory versus items that will be physically displayed on store shelves. This may require a little extra logistical configuration, such as having your factory label separate boxes of inventory (one with retail packaging, one without), but in the long-run, it will reduce costs.

Negotiate with Suppliers

Asking your factory point blank to reduce their prices is usually effective only if you have information to back up the request. Before attempting any negotiation, make sure to secure a handful of reference quotes from similar suppliers. This will tell you where your current supplier falls within the overall ‘pricing landscape’ and what type of reduction (if any) it would be realistic to request.

For example, let’s say you’re an entrepreneur making painted wooden photo frames. You would price out your exact design (at the same order quantities you produce with your existing partner) with three other factories. If two of the quotes come back 10%- 15% lower than your existing factory’s pricing, you now have a specific range to shoot for with your current partner. It’s much more powerful to enter into negotiations with a realistic target, supported by competitive research, than it is to make a weak, open-ended request.

It’s okay to share the quote numbers you receive from other suppliers to strengthen your negotiation, but for privacy’s sake, don’t share vendor names and contact info.

Apr 22 2018

10 Partners & Platforms To Grow Your Product-Based Business

As a product-entrepreneur, you’ll need various partners and platforms to launch and grow your business. The right tools and relationships translate to efficiency and success! (And the wrong ones = wasted time/money.)

When choosing any new partner, it’s best to opt for a low-cost sign-up option, such as a trial month at a reasonable rate, or even a free or refundable trial period. When doing project-based work, start small. If you need graphic design help for example, start on a logo, and if the partner you’ve selected does a great job, then have them do other items on your wish list.

Here are some of the most popular partners used by the Learn To Make A Product community:

Shopify– The benefit of Shopify is that you get a super-professional, functional website, that’s easy to manage on the backend, and that connects with a bunch of helpful shipping and promo apps. They have great DIY templates, although we recommend hiring a web developer to “make them yours” (you’ll still save money going this route versus creating a site from scratch).
Fiverr – Fiverr is great for accomplishing low-cost, project-based work, such as graphic design or keyword research for SEO.
Upwork – A lot like Fiverr, but a wider range of professional services, such as help with tech packs, photography, and digital marketing.
99Designs – Let graphic designers compete for your business! Host a design contest for logos, branding guides, product artwork and more.
Quickbooks Online – It’s VERY important to track your expenses, even when you’re just starting out. Plus, if you’re an LLC, you’ll need to submit a P&L and Balance Sheet to your accountant when it’s time to do taxes. Quickbooks automatically connects to your bank account as well as selling platforms like Shopify and Paypal.
Shipmonk – Want to make money while you sleep? Use a site like Shipmonk to handle all your fulfillment. Just ship finished product to their warehouse and they’ll do the rest.
Square – Want to process payments on the go? Attach Square’s card reading to your phone and take credit card payments at fairs, trade shows and other live events.
Convertkit – Another email service provider, but with expanded functionality. For example, when someone checks out with a product on your website, you can assign them a certain tag, and then trigger a series of automated emails (i.e suggest more products, collect feedback etc) over days, weeks or months.
Incfile – Need to file an LLC? Register your trademark? Incfile is one of the most affordable ways to get legal help.
Build a StoryBrand – If you do nothing else from this list, read this book! It will help you clarify your brand message so that people buy your product. Enough said.

Please note: none of these companies have asked us to promote their products. While some pay a commission since we send a lot of people their way, all of these resources are things we would 100% share regardless. We hope this list helps you grow your business!

Mar 17 2017

GUEST POST: How to Create Passive Income Through Private Labelling

Passive income ventures are a hot trend, but setting up a revenue-generating business without draining your time and energy is no easy feat.

But it is possible! If you’re the kind of person who visits the ‘make money online’ blogs, you’ve probably heard of private labelling as a path to profit. In simple terms, it means finding a manufacturer’s product you want to sell, tweaking it a bit (including adding your brand name) and then selling it as your own. Further, programs like Fulfillment by Amazon have made this process significantly easier (and much more passive) by handling things like storage, shipping, sales and even customer support.

Identifying the Right Product

Private labelling a product is not necessarily hard; the key is finding the right product. Here are some helpful guidelines:

Products that are smaller than a shoe box are cheaper to ship, especially if ordering from international factories or shipping to customers worldwide.
Avoid items that have liability issues, such as electronics, easily breakable items, explosives etc.
Focus on a category with minimal competition. You can use tools like Jungle Scout to find profitable product ideas.
Prioritize categories with market depth and that aren’t so niche that you will have few buyers.

Finding a Supplier

Finding a great supply partner is just an important as which product you sell! They are the ones who will ensure quality and timely deliveries. For better profit margins, you may want to get your products from international B2B suppliers such as Alibaba, Global Sources, or Aliexpress. To avoid a manufacturing learning curve, you can partner with a sourcing management companies, but note that they would take approximately 6-15% of your total purchase order amount as service fees. For some people, the hassle-free experience is worth it.

When reaching out to new suppliers, don’t purchase in bulk immediately. Get samples first! Once you’ve approved the samples, negotiate the required minimum order if it seems to high. It’s common for a supplier to advertise an MOQ of 500 units but agree to sell you 250. Starting smaller in the beginning can help minimize your risk.

Selling!

Once you’ve placed your first order, you’ll need to ship your products to a warehouse for fulfillment and choose a selling channel. If you’re using a site like Amazon, you’ll create product listings with keywords so that customers can easily find your product. This is where the money is, so be sure to do it carefully! Pay attention to traffic daily, and make tweaks to your listing based spikes or decreases in traffic. If you are selling multiple styles or choices of an item, you can test alternate product descriptions and keyword strategies to see which is most effective.

Finally, don’t be shy about investing in paid advertising on the platforms where you’re selling! This can help gain visibility and get reviews, especially while you’re building your sellers reputation.

About the writer

Sarah Kaiser is a digital marketing manager at Casino Global Sourcing, the sourcing division of a French retailer Groupe Casino. Godirek.com is the product catalog of Casino Global Sourcing, which offers helps and tips from product sourcing, cost saving to sales boosting for Amazon third party sellers.

Jan 13 2017

The Right Way to Check References

Checking references is a crucial part of the supplier vetting process. I’m always surprised at how many people fail to ask for them, or take the step to request references, but then don’t actually follow up and call! This an omission you can’t afford to make when deciding to work with a new factory, especially since interviewing references is a free, simple way to learn more about potential partners.

Here are 5 tips when requesting references from potential suppliers.

1) Ask For Multiple References, Not Just One

A good supplier should have more than one person willing to vouch for them. When asking for references, make it clear you’d like to speak with a few people. If they only send you a single reference, ask why this is the case, and politely let the supplier know you’d feel more comfortable hearing from multiple sources. If they avoid answering the question and seem unable to come up with alternate references, this may be a sign that another partner is a better fit.

2) Request References In Your Product Category

It’s best if you can speak to a past or present client who made a product similar to yours. For example, if you are launching a line of blazers and interviewing cut and sew factories, ask if they have any references for clients who have also completed orders for blazers. This is not always possible due to privacy concerns, however it’s still a good idea to ask, as you’ll receive insight into how the factory handles a specific product line.

3) Set Up A Phone Call, Not Just An Email

Speaking on the phone can give you a more nuanced picture of how the reference feels about the factory. Maybe they provide a solid endorsement, but when you bring up the issue of meeting delivery deadlines, they make a joke about the factory always being late. This is information that you want to know! A phone call is usually more data rich than an email because of the multiple layers of communication (tone, pauses, offhand comments etc).

4) Include The Following Questions

First, it’s a good idea to write down your questions in advance so that you don’t forget something important. Everyone will have different questions based on their product type, past history, goals etc. but here are some that are universally helpful:

“How long have you worked with the factory?” (If it’s a very short amount of time, the answers they provide are only so valuable)
“Have you had any quality problems with the factory, and if so, what did they do to remedy the problem?”
“Has your pricing changed over time, and if so, why?”
“Does the factory consistently meet the deadlines that you set together? If not, why?”

5) Remember To See The Big Picture

Not all the information you receive from a reference is a yes/no data point in terms of deciding to work with a factory or not. Let’s go back to the previously mentioned comment about the factory sometimes being late. You may still decide to move forward with this partner, despite the report of delays. After all, no business is perfect and sometimes things come up.

The important thing is that you are now informed so that you can prepare for the relationship in the best way possible. If you know the factory you’ve selected occasionally runs behind schedule, you may build extra time into your production calendar, never over-promise dates to your customers, and make a habit of checking in with the factory regularly so that are you never in the dark about changing timelines. These are all things that will make your business run more smoothly.

Aug 23 2016

3 Mistakes People Make When Paying Suppliers

Sending a supplier money can be scary. Did you choose the best partner? Will they really deliver what you asked them to? How do you know you can trust them? Unfortunately – and I wish I didn’t have to say this – some of this fear is warranted. As someone who helps product entrepreneurs find factories on a daily basis, I’ve seen my share of wasted investments and relationships gone awry.

What I’ve also noticed is that many “makers” make the same mistakes when it comes to paying suppliers. When doing a “post-mortem” on what went wrong, the brand and I almost always uncover one of the following three errors.

1) Lack of thorough vetting

Did you ask for referrals *and actually call* those referrals? Did you ask them the right questions? Did you look for reviews and any complaints with the Better Business Bureau? Did you confirm (through a client list or reviewing samples) that the factory actually has experience in your category? A recent client ordering slippers agreed to work with a supplier who said “no problem, we can make those” after reviewing the photo they provided. The client proceeded to send several thousand dollars for the development and sampling of these slippers, only to find out the factory has actually not made a similar style and was learning as they went (which translates into sub-par samples and a lot of wasted time).

Vetting can be quite a bit of work, especially if you are exploring multiple suppliers. It’s a great idea to make a checklist of to-do’s and questions for each potential so that you don’t miss anything.

2) Moving forward without a contract or clear list of deliverables

Things can obviously get messy if you haven’t spelled out exactly what will get done and by what date. This is equally helpful for the supplier as it is the client, because schedules are often delayed when brands take longer than anticipated to provide instructions and feedback. Adding contingency clauses (ex: If X is not completed by Y date, we will do Z), either in a formal contract or as part of the written communication between you and a supplier will help prevent disagreements.

Taking this step would have helped another recent client who spent $10,000 in design fees with a firm in order to have samples for an upcoming trade show (that they had paid a significant amount of money to attend). The factory was constantly behind the eight ball, resulting in the client missing the show and losing their entire booth payment.

If it’s so important, why doesn’t everyone have a formal contract? Because some suppliers don’t issue them and they can be expensive for brands to create with a lawyer. As a rule of thumb, I suggest investing in a contract if your purchase order is large enough that you would be unable to continue with your business if things go wrong.

3) Paying 100% up front

Don’t ever do this! There will be a few exceptions where things sometimes require full payment, such as a mold fee for a metal or plastic component of your product. These are unavoidable. But when it comes to services like product or garment development, sampling, and production, it’s best to pay a deposit to get started and then the balance once you’re satisfied with the final product. This will sometimes require visiting a factory in person since they may ask for the balance payment prior to releasing your goods.

Another way to structure relationships with service providers (like designers and engineers) is to pay for the work in stages, as it’s completed. This allows you to start small and essentially “test” a new partner before committing to the whole job, and they also protect their time and energy since they’re not doing work they haven’t been paid for.

When you pay for a service in full, you lose your most compelling negotiating tool – a refusal to send more money until the company corrects unsatisfactory work. You also lessen your financial exposure should they fail to deliver entirely, which happened to a wearables brand who hired an engineer to create some technical drawing for them. The engineer started the project, sent incomplete files, and then stopped responding to communications. While it’s a shame to lose a 30% deposit payment (as they did) it’s even worse to lose 100%.

Something important to note: payment terms will evolve as you develop long-term relationships with suppliers. When both you and your partner trust each other and have successfully completed projects together, it’s natural for both sides to be more flexible with their requests.

Is an upcoming payment making you nervous? A support package can help you cover your bases.