Want to begin a business to lower costs for manufacturing companies. Need advice

by seoed
7 replies
Hi,

together with a friend of mine we want to start a business where we offer to produce components of different sizes and styles for a lower price than the company's own price.

The process should work as follows:

We will talk with the potential customer and say that we will try to produce parts which normally the company itself produces for a certain price. This should be of course lower than the current price which is paid by the company.

We will check if this will be possible without reducing the quality of the product.
So, the whole process, even if it doesn't bring any advantages to the customer, will
not produce any kind of costs to the customer. In fact, the customers have nothing
to lose.

There are only some problems:

We still don't have an office and everything else which is needed to appear like a real business like a website, telephone number etc..

Nonetheless, we thought to just start by contacting some potential customers. However, we dont know if we:

1. Should do this in this stage (without having an office, website etc.)
2. If we should do it
-> shall we contact them via phone, email or traditional mail?

What is your opinion on those 2 points? Do you think we are correct to start with it now to just see how it really goes?

Do you have better ideas?

Thanks for all your thoughts
#advice #begin #business #companies #costs #lower #manufacturing
  • Profile picture of the author Blase
    I used to work for a manufacturing company.
    Unless you know some magic to get the economy of scale
    that the current mfg gets I don't know how you will
    do it for less.

    But, that wasn't your question.

    1. You can start without an office.
    If you came to me I don't care if you work out of your car.
    I want to see proof of past success and talk to other clients.

    2. Contact, the only way you are getting to me is by
    referral or word of mouth.
    I had sales people coming through the door that I dealt with
    on a daily bases. If they talked to me about something or someone
    I would check it out.
    If you called the receptionist dumped you.
    Email = delete
    Snail Mail = maybe, it would have to be a good piece.
    Industry mag write ups, not ads would help also.

    Hopefully that helps.
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  • Profile picture of the author Kevin Perry
    I would want to find out if the business is viable before spending money on things like an office or a decent website.

    Blase has a good point as well. Sure you may be able to produce the components for less, but can you produce the volume that the company would require in the same time frame?

    See if you can get a meeting with the company to discuss these things and show them your components.

    Kevin
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    • Profile picture of the author jimbo13
      Perhaps I am reading this incorrectly.

      A manufacturer wants to lower their costs right across the board and you can do this easily simply by offering to renegotiate all of their contracts.

      That is everything from stationary to telecoms to raw materials etc etc.

      You can do this on a split reduction model whereby you 'share' the savings.

      Eg you find $50k pa in savings and split it 50:50 or some other margin. The company still saves $25k pa which on the front end would be a lot of sales to hit the same once you take profit margins in to account.

      If you are good at doing deals and negotiating then the sky is the limit for this type of thing and you can work from your car like Blase above has said.

      However, the way I read your post is that you are going to go to a manufacturer and say that you will do all of the manufacturing yourself for less. In other words you are telling him to shut down and lay everyone off apart from a sales and skeleton customer service.

      This is not really what manufacturers are dying to hear.

      The contracts who buy from the manufacturer may want to hear that as it will increase their profits but the actual manufacturer doesn't.

      Make sense?

      Dan
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  • Profile picture of the author Blase
    Originally Posted by seoed View Post

    Hi,

    ...we want to start a business where we offer to produce components of different sizes and styles for a lower price than the company's own price.
    Dan,

    I totaly get what your saying about a mfg not wanting to stop
    mfging. I thought about that when I read the post. I think there
    maybe potential clients, in the US at least, that may be interested.

    I was involved in the electronics industry and most mfg's here have
    giving their business to what we call "board stuffers". (outsourced)

    Many of those companies started here, but quickly migrated overseas.

    I just don't know how he is going to do. :confused:

    As far as lowering contracts with vendors, we have loads of
    companies that do this.

    In some cases I stopped calling on the Mfg and started calling
    on the pro buyers.

    They made their money exactly the way you laid it out.
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  • Profile picture of the author seoed
    Thanks for your all your contributions.

    Hm, so Blase, you say that contacting a manufacurer is in my case almost impossible as you point out that getting a meeting with someone would only be possible by word-of-mouth or referral. Well, that is the problem here
    As we still didn't start we cannot show any kind of success story or the like. Thus, word-of-mouth is impossible and referrals either. I also cannot show anything as we are not even a start-up.

    I ask myself this: What has the manufacturer to lose if we take one of his components and do the research?
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    • Profile picture of the author Blase
      Originally Posted by seoed View Post

      Thanks for your all your contributions.

      Hm, so Blase, you say that contacting a manufacurer is in my case almost impossible as you point out that getting a meeting with someone would only be possible by word-of-mouth or referral. Well, that is the problem here
      As we still didn't start we cannot show any kind of success story or the like. Thus, word-of-mouth is impossible and referrals either. I also cannot show anything as we are not even a start-up.

      I ask myself this: What has the manufacturer to lose if we take one of his components and do the research?

      seoed,

      I wouldn't say impossible, but it's going to tough. If you where trying
      to contact me when I was in the business it would have been impossible.

      If you don't have any proof you are going to have to take the approach
      that you are just starting out and you are looking for someone to
      help at a very low price.

      Have you trried getting in touch with SCORE?

      They may be able to help you out.
      Also you may check out all of the mfg associations out there.
      There are lots of resources around the mfg niche.
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  • Profile picture of the author Aaron Doud
    I guess my question is why do you believe you can even do it for less?

    You really don't seem to have tested this yet. At this stage the only way you will get a company to give you a chance to test this is to personally know them. Do you know any people in your network you could talk to about helping you network to get a test client?

    Maybe there is more to this then what you are saying here but it really sounds like you just pulled an idea out of thin air and think you can turn it into a business.
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