How do you go about starting a small manufacturing business?

[S. Heslop]

I always ask these dopey general questions but this might be my dopiest yet! So i'm sorry about sounding completely clueless.

I've been thinking about starting a business making musical instruments for a while (it's a more exciting idea than going back to college), but i've really got little idea what that'd entail. I figure starting a business would require stuff like insurance, renting premises, safety, etc.

It's something i'd like to read up on but the stuff i'm finding via google is either vague and doesn't go into specifics, or it's aimed at people hiring employees.

One thing i'm concerned about is what effect my total lack of practical qualifications would have. Would I end up having to pay more for insurance if i'm commercially operating tools? Or would health and safety law not let me touch any tools at all without appropriate training? Would I need to fill in risk assessment forms and hang safety posters if it's only me working?

I've got a million and one questions though, and would appreciate if someone could direct me to some useful stuff to read up on.

[John Rudd]

Ok,
Having worked in heavy engineering all my life....

You need to read up on:
The health and safety at work act
Electricity at work act
Have employment liability insurance if you employ people
Employment law...
I sure there are plenty of other things to consider........

[chipenter]

Just make some instruments and sell them , will give you an idea iff there is a market , after all Stradavarious was a one man band at first .

[BaronJ]

Having been self employed for most of my working life my advice is simple !  "Just do It"  If you don't you will wish that you had, if you do and fail you will wish you hadn't.  Being self employed is a life of all fat or all famine !  It comes in waves.  One minute you have so much work that there aren't enough hours in the day, the next you are left wondering where everybody has gone to !

Good luck...

[John Stevenson]

If it's just you working none of the above relates to you.
H&S and employment laws don't apply.
Insurance is a moot point as if what you are selling cannot injure or kill anyone then its really up to you.

About the only legal thing that does apply is to notify work and pensions that you are going self employed and to set up a direct debit for national insurance, currently about £12 a month, varies from month to month. That has got to be the best value contribution any government has come up with. That £12 gets you your pension [ if there is anything left ] and your health contributions.

[Jonny]

Agree with above and went same way 51 months ago.
Built up tooling and machinery over the last 20 odd years, think you can back date 5 years if got receipts.
Self employed you are the business just register with HMRC and pay the basic on monthly basis around £11.
Employ a good accountant may knock you £600 p/a but money well spent, the online way is meant to catch you out.
No H&S your not employing.
Biggy is I couldnt find an insurance company, soon as you mention power tools they enquire further and further and when state lathes expect to be greeted with an instant "we don't insure".

Best marketing is word of mouth, if your good enough you don't need to tout or advertise. Expect massive influxes this will always catch you out no matter how much you plan ahead such as 11 1/2 months work within 6 days all you can do is book a time slot provisionally.
Trade want everything for nowt and sell at three times your price, not worth it. Key is finding and establishing a niche, sell direct but you have to be the best and always stay two steps in front of competitors having bigger better tooling.

Small scale can come under local gov as cottage industry and no need to inform them unless creating a nuisance.

[shipto]

some banks give "free" small business advice I have quoted the free because you probably pay later.

[S. Heslop]

Just make some instruments and sell them , will give you an idea iff there is a market , after all Stradavarious was a one man band at first .

I was planning to do it from the garage to test the waters, but i've just ran out of space to set up the tools required. It's getting kind of ridiculous in there! Renting a unit would let me set up properly.


Thanks for the replies though. I guess I was worrying too much since I've had run-ins with health and safety in the past.

One place I volunteered at a few years ago was fine with me climbing around the front of a moving locomotive, and doing drive-by pruning over a gorge (fun, but I wouldn't do it again!), still wouldn't let me near the lathe due to law and insurance. Which is understandable but i'd been assuming the worst in terms of setting up a business.

[awemawson]

"Renting a unit would let me set up properly."

Key to starting a one man business when you are not sure of the market, is strictly controlling your costs. This militates very much against that strategy.

[micktoon]

Hi Simon , I am with the ' just do it ' lads, try to make in your garage and sell from home if you can to test the waters as once you rent a unit its money going out even if you do not sell anything or spend the week putting up shelves etc. You could test the waters without going fully into it as long as you just keep all receipts for what you buy and all payments received, if it looks like its a no go, thats the end of it , if it looks ok you still have the paper work to keep things right, I am thinking part time type thing along with what your doing now before registering self employed etc ? What type of instruments do you make out of interest ?
  Cheers Mick

[S. Heslop]

"Renting a unit would let me set up properly."

Key to starting a one man business when you are not sure of the market, is strictly controlling your costs. This militates very much against that strategy.

I suppose your right but I'm really not sure how i'd fit any more into my garage, and there's not really anything I could get rid of to make space either. I suppose I could just make a few the hard way to see if anyone would want to buy them.


Banjos are the instruments I primarily want to make. It's goofy but I figure you'd have a better chance selling them than guitars. Guitars are pretty well covered, and i'm assuming that people in the market for banjos would be more willing to buy from folk like me.

[John Stevenson]

If you are going to start out small then ignore the business accounts, they actually give you nothing but take monthly fees for having a business account.
Just set up another 'personal' account at another bank and use that.

Johnny, if you think power tools are bad then just mention welding.
I have had to drop site work off my insurance as they have priced it out the market. Not bothered as it's a good excuse not to do any but they wanted triple what I was paying two years ago.

Can you relocate stock and other stuff to a shed to make room, failing that any old biddies along your road not using their garages that you could rent cheaply ? Mate of mine keeps some old motor cycle spares in a couple of garages, he mows their lawns and cuts the hedges in lieu of rent.

Remember once you go self employed everything is deductable. Coffee, milk, washing powder for your overalls, boots, gas, electric, part of the council tax, water rates, dog food for the guard dog.
Even got one of ours VAT registered. Even got it a vote one year.
Put Old English Sheepdog - grey and white on the polling form, they read it as Graham White, hope the thick bastard never gets called up for jury duty.

[RodW]

I really would recommend keeping your overheads down to start off given where you are for now. Make do with the space you have. Buy a garden shed if you have to. I have done something similar and it has funded all of my tools but to start with, I kept the overhead as low as possible while, setting my prices high enough to allow outsourcing which I eventually got to. Set your prices based on the customers perceived value, not yours as theirs is probably higher than yours. Remember as a business owner, you are paid on results, not by the hour. Insurances I have not bothered with but I am in a position our house is not on the line if something goes wrong. If you own real estate, you need insurance!

[geoff_p]

Beware the VAT man!

When I started I was encouraged to "voluntarily" register for VAT.  So I did.  Of course I had no VAT-number to put on my invoices - you only get that AFTER you are accepted - so I couldn't charge VAT just yet.

Eventually, after about 3-months, I got the registration stuff, along with a bill (610 quid) for the Vat I should have charged if I had had a number, payable within 14-days.  Frankly it broke me.
Geoff,
Well out of it, in Thailand 

[Kenne]

Having spent the last 45 years running my own business , I will tell you the few things I have learned , you have to be willing to work more hours than you ever have before (every hour you can stay awake), make less money (yours is the last pay check written), be responsible for everything that happens (good or bad) , and get used to the idea that you will learn something new every day .
Having said that ,it's the best thing I could have done , but also remember to spend as much time with your family as you can .
Find someone that knows how to do what you want to do and get them to teach you the basics , (everyone does things a little differently anyway )and most of all never forget the machines know if you are paying attention to them , and if your not , they will do something to get your attention ........................

[hermetic]

First, make a selection of the type of musical instruments you have in mind, and realistically calculate the cost in time amd materials. Now double the price and see if you can sell any. ( Sir John Harvey Jones used to say that a manufactured item should be on costed 1000% to get the retail price) Would you sell them yourself or through other outlets? Internet is good but has costs in time as maintaining the site etc. Other outlets (music shops etc) will want at least 20% markup, possibly more.  This way you can do what 99% of small businesses fail to do, that is, charge enough for your product, and most importantly, See if there is a market. As for renting a unit...........I agree with what all the above have said, Business starter units provide somewhere for small businesses with good ideas to go bust in! Work out how many instruments a week you would be making to pay the rent, and all the overheads! It aint worth it untill you can no longer possibly cope with the demand, and then buy somewhere! Renting is a mugs game.
Phil

[S. Heslop]

Thanks again for the advice. Since renting a unit does seem like a bad idea now, i've been thinking about how to re-arrange stuff in the garage (once again! It feels like i'm never not rearranging the garage) to find space for at least a
 bandsaw and a thicknesser.

Before being distracted by exams I was building up an ensemble of daft machines to have a go at producing a batch of banjos. I've got 3 designs (vanilla, zither, and electric banjos), and most of the cost would be in time since the wood and materials aren't too expensive relatively. My plan was to see how quickly I could produce them, and price it based on that (plus the cost of materials). It's just now that i'm finished university and wondering what i'm going to do, i'm thinking about going back to that idea but taking it a little more serious.

[RodW]

Thanks again for the advice. Since renting a unit does seem like a bad idea now, i've been thinking about how to re-arrange stuff in the garage (once again! It feels like i'm never not rearranging the garage) to find space for at least a
 bandsaw and a thicknesser.

Before being distracted by exams I was building up an ensemble of daft machines to have a go at producing a batch of banjos. I've got 3 designs (vanilla, zither, and electric banjos), and most of the cost would be in time since the wood and materials aren't too expensive relatively. My plan was to see how quickly I could produce them, and price it based on that (plus the cost of materials). It's just now that i'm finished university and wondering what i'm going to do, i'm thinking about going back to that idea but taking it a little more serious.

Don't price on time and materials, price on perceived value and the competition. Make sure you have enough fat for distributor pricing and the ability to outsource some manufacturing. Start high! Sell your products uniqueness, not just your time! This is what I did and it has paid for everything in my workshop. as for VAT/GST, I went to our tax man and asked them to backdate it after a quarter. Your expenses are high starting out so you have a lot of tax credits. Take some advice from an accountant. Go with your passion!

[DavidA]

Maybe best to make one through to completion and estimate your time from that.

Then see if it sells.

Have you made them before ?

Dave.

[Auskart]

Make a good product and find some customers is a good start. 

[S. Heslop]

Maybe best to make one through to completion and estimate your time from that.

Then see if it sells.

Have you made them before ?

Dave.

Never made one from scratch but i've repaired a few of them (not exactly to a fine luther standard though). I had a surprising amount of fun making 50 hooks and nuts for a banjo pot that was missing them, and with that amount it was worth giving it some thought as to how to produce them the quickest. I ended up putting a hole in the end of a steel bar with a polished round-over, and used a ground up chisel to push (with a hammer) the 4mm brass rod into the hole to bend the hook. Then used a fixture in the lathe toolpost to hold the things for cutting the excess brass off. It was quick and worked pretty well. Ever since i've been thinking about finding another 'batch' process to play with, and making whole banjos could be alot of fun.

The internet also has alot of opportunities to market them.

Don't price on time and materials, price on perceived value and the competition. Make sure you have enough fat for distributor pricing and the ability to outsource some manufacturing. Start high! Sell your products uniqueness, not just your time! This is what I did and it has paid for everything in my workshop. as for VAT/GST, I went to our tax man and asked them to backdate it after a quarter. Your expenses are high starting out so you have a lot of tax credits. Take some advice from an accountant. Go with your passion!

One thing i'm concerned about is that when it comes to banjos there's the cheap Chinese ones, and then there's the ones produced by the artisan craftsmanne type of instrument maker. With those I get the feeling they're selling more of an idea than an actual instrument, and it's not something I could (or would want to) try and compete with.

But yeah until I produce a first few banjos there's really no telling if there's a market for what i've got in mind.

[hanermo]

Some good advice, from both ends, re:pricing.

You can be cheap and cheerful, or very good and high end. You cannot be both.

If you go for the cheap end, you are competing against established processes with automated tools.

You are unlikely to be succesful in competing with them - unless you have a direct sales channel.
This may be captive market, uniqueness, relationships (clubs, known-avanues, location, affinity to a product or hobby or area of expertise etc).

Selling cheap seldom succeeds.
Ie unless you have sufficient margins, any success you may initially have will cripple you, as you cannot afford to expand, and cannot pay for the (usually very much more expensive) tools and processes you now need to produce in larger numbers.

Planning in terms of money is the most important issue.
The ONLY issue.
(Unless you get lucky. A huge nr of businesses work not because they did it well, but because they got lucky with product pricing/market and demand. Paypal and makerbot are two examples. So is ebay.)

YOU need to know YOUR numbers.
In my experience, 99% of people never do this.
Numbers means;
What does it cost ME to do A, in terms of pieces, hours, materials, opportunity costs.

Just because you are subsidising it from your garage, does not mean its free.
E.g. Plan it like this:
IF you cannot do item(s) b yourself, where can you get them ? At what cost ? How long does it take ? At what price do I now need to sell them ?

If you dont plan to pay yourself a salary (with taxes) you dont have a business, you have a hobby.
A succesful business makes profits.
Profits are what is left over after taxes, and paying off the machines, and paying off the workers.

Do you want to be a 10$/hr piecework worker ?
Both yes and no is fine.
Being honest with yourself is likely a good idea.

Once you have a written plan, ie spreadsheet, with numbers, the financial success is much more likely.

There is nothing wrong with a hobby that generates some extra cash.
Many mechanics and tinkerers (musicians, marine stuff, motorbike stuff, RC stuff, model-engineering, ewc.) do so.

[Lew_Merrick_PE]

Ah, come on, does nobody remember that to start a small manufacturing business, you start with a big manufacturing business -- and wait!  ;-)

[BaronJ]

Maybe best to make one through to completion and estimate your time from that.

Then see if it sells.

Have you made them before ?

Dave.

Never made one from scratch but i've repaired a few of them (not exactly to a fine luther standard though). I had a surprising amount of fun making 50 hooks and nuts for a banjo pot that was missing them, and with that amount it was worth giving it some thought as to how to produce them the quickest. I ended up putting a hole in the end of a steel bar with a polished round-over, and used a ground up chisel to push (with a hammer) the 4mm brass rod into the hole to bend the hook. Then used a fixture in the lathe toolpost to hold the things for cutting the excess brass off. It was quick and worked pretty well. Ever since i've been thinking about finding another 'batch' process to play with, and making whole banjos could be alot of fun.

The internet also has alot of opportunities to market them.

Don't price on time and materials, price on perceived value and the competition. Make sure you have enough fat for distributor pricing and the ability to outsource some manufacturing. Start high! Sell your products uniqueness, not just your time! This is what I did and it has paid for everything in my workshop. as for VAT/GST, I went to our tax man and asked them to backdate it after a quarter. Your expenses are high starting out so you have a lot of tax credits. Take some advice from an accountant. Go with your passion!

One thing i'm concerned about is that when it comes to banjos there's the cheap Chinese ones, and then there's the ones produced by the artisan craftsmanne type of instrument maker. With those I get the feeling they're selling more of an idea than an actual instrument, and it's not something I could (or would want to) try and compete with.

But yeah until I produce a first few banjos there's really no telling if there's a market for what i've got in mind.

Reading this, you aren't looking to start a business, you're looking to start a hobby !
 

[CHA5]

Reading this, you aren't looking to start a business, you're looking to start a hobby !

To be fair, a hobby that pays for itself, or at least contributes is a good thing, but it should NEVER be confused with starting a business !

I'm gobsmacked that more folk aren't making a little money off what they 'enjoy' as a hobby.