Product development/prototyping is in my opinion the most important part of your company’s pre-launch business structure. If your product isn’t perfect upon release you risk losing potential customers forever and creating a bad reputation right off the bat which is why many startups fail. Keep in mind that bad news always travels faster than good news which is why it’s always better to put the best product you can on the market over something that is “just good enough” while you risk a poor final product even if it may take a short amount of time. In order to have a successful prototyping and manufacturing experience, you must find an accredited manufacturer. It is critical, and I can’t stress this enough, that your manufacturer is merited. Remember, the quality of your product is up to the manufacturer, it’s up to you to find the best value.
When you set up your first meeting with your manufacturer here are things you may need to bring:
NDA – Non-Disclosure Agreement
Before you and your manufacturer begin talking about design, you MUST make sure that they sign a Non Disclosure Agreement. This is essential in order to protect your ideas and trade secrets from theft. Without an NDA, the manufacturer can essentially do whatever it wants with your idea including patenting it in their name, selling your idea to competitors, and even copying your idea and selling it privately if you already don’t have a patent. There are many real life horror story examples of when businesses fail to bring an NDA to the table. Bottom line: get an NDA. You can find a generic one for free all over the web and it will save you a massive headache in the long run.
2. A sketch, design, or existing prototype of your product.
Without something tangible like a sketch, the manufacturer’s job will be miserable. It will take them more time, which in the end will cost you more money, time, and personal frustration. Make sure to have your produced spec’d before you meet with your manufacturer unless you have an existing prototype. Expect to give up the prototype to the manufacturer if you end up working with them. I was lucky enough to have an original prototype which is making the prototyping process easy and affordable.
3. Ask for information about SKU policy.
A stock keeping unit (SKU) is an individual exact spec of your product. For example, Company A sells small, medium, and large pants in navy and khaki colors. Each individual combination, i.e., large navy, small khaki, medium navy, etc…, is considered one SKU. Manufacturers will have a minimum order per SKU, not per generic product. This is costly as you could be forced to buy more of one SKU than meets the demand. For example, Company A needs to fill 200 pairs of small khaki pants, except their manufacturer’s minimum order is 500 pairs per SKU. This means that in order to fill the demand, you’ll be forced to buy 300 more pairs of pants than you can actually sell! Inventory management can make or break your company, therefore, your potential manufacturer’s minimum order is one of the most important parts of choosing a manufacturer.
4. A confident attitude.
Remember, the manufacturer is earning YOUR business, not the other way around. The first meeting can be intimidating for some people, change your attitude and put yourself first in this situation; you’re paying them for a reason. Don’t be afraid to walk away from the table if you don’t like what you see, it’s better to be safe than sorry. Additionally, try to negotiate price with your manufacturer if you decided you want to work with them. Start with an offer that is 20-30% less than what they tell you their price is and go from there. Some manufacturers, like the one I work with, don’t negotiate price. This isn’t the end of the world, just make sure you stay within your budget and don’t overpay.
5. Manufacture domestically!
Yes, it’s true, it’s MUCH cheaper to have your products manufactured in China or Mexico than here at home. Don’t! Get it done here in the USA. American manufacturing is more expensive, however, it will also come with peace of mind. Working with a Chinese manufacturer almost guarantees that your product will be stolen, produced, and re-sold in Chinese markets by third parties. You’re probably thinking, “Tom, I’ll just sue them!” Think again. When you’re running a startup odds are you won’t be able to afford spending tens of thousands on legal fees. Not to mention that nations like China generally like to shelter their manufactures from legal action and rarely lose cases as it’s in their economy’s best interest. According to the Owens & Mulherin Law Firm, it’s essentially impossible to win a lawsuit against Chinese manufacturers as a startup. This is much more unlikely to occur here at home. You also will be able to exploit some marketing potential when your products are made here. Consumers often will buy the product that is made over than the competitors that is made in China if the price is the same. Your profit margin may be lower, however, if you market the “Made in the USA” bit correctly you may sell more units than if your product were to be made overseas.
In conclusion, an NDA, tangible sketch/design spec, SKU information, a confident attitude, and an American geographical location, will make your prototyping experience smooth and efficient. Feel free to message me in the “Contact Me” page if you have any comments, questions, or concerns. Good luck!
Courtesy: The Development Corporation, Rocket Lawyer Inc., Karman Healthcare Kathleen Fasanella, fashion-incubator.com, Harry Campbell Wall Street Journal, Owen & Mulherin Injury Lawyers