Manufacturing Biz Made Easy!: Calculating Startup Costs!

Okay so here I am with another super boring post 😥 that will help you in calculating overall costs that may make you a bit nervous while starting a manufacturing business 😓😜, calculating all such costs is quite easy unless you are totally new to the whole business thing!

This article is second in the series that I have recently started by the demand of my super awesome readers 😎, the demand was to provide step by step easy approach to manufacturing business and that’s what I am going to do in this article series!

Now before coming to the main theme of this article I would give you something more on manufacturing business, few relevant articles on the subject matter for semi-experts.

First one in those is about home based startup, if you want to launch a manufacturing startup from your home, a small scale manufacturing business then you should get through this article Launch Home Based Manufacturing Now (super easy!) 

The above article provides a neat, brief business idea with actionable content, so get through it too.

Now once you launch your startup next thing among many other things that you will need to do is marketing, advertising your offering.

Check this actionable piece on startup advertising you will learn quite amply from this article and if you are looking for some cool advertising ideas (then check this article).

Ohhkay!  😋 Now let’s get back to the main topic of this article!

How To Calculate Manufacturing Biz Costs!

Before you calculate cost you need to have a good business idea in the first place, suppose that I want to start a dry crispy snack manufacturing business.

            Important Note:      I always suggest to my dear readers that before getting in any type of business, it is better to spend at least 3-6 months in that business, learning maximum about that business, from A2Z, by spending time I mean spending time with those who are successfully running that business. Doing such will give you a much clear picture about the whole business idea you are interested in.    

I will develop this crispy snack idea further in the upcoming series, practically showing you guys the final product from logo, brand designing to packing to final consumer item, okay so right now let’s imagine I am going to manufacture crispy dry noodles.

First thing first, I need to know what kind of machines, ingredients, raw material I will need to produce this product and what will it cost to finally get that product in hands of the target buyer.

To do that, first I will need to do survey of the machines that will help me convert raw material into semi finished item or product, so a little browsing on internet helped me in finding the machine that can help me in achieving that.

The simplest machine that I found cost too less but that means very limited output or production, still I will use this machine as an example to explain the main topic of this article.

This machine cost around $15-$22, if you are in Asia, where labor is very cheap and you don’t have that much money to start this business, then starting with couple of these machines will help you get started.

Now if you are in west like Europe, USA etc then surely labor there isn’t cheap so going for a small end machine is the best way to do it.

Such a machine will cost between $2000-$3000, you should check out the following video on how such machine works, such machine is basically consists of three sub units, one is fryer, second is dryer and third is taste adder.

Although depending on your budget you can add more sub units like packing unit to pack the product according to your specification so on and so forth.

Check the following video for that machine

So let me put down the cost for both Asian & Western would be entrepreneur here.

Item Name	Cost	Other details
Nimco Snack Machine	$15-$20 for low budget Asian entrepreneur and $2000-$3000 for low budget Western Entrepreneur
Unit Location Monthly Cost (rent)	$40-$100 per month for Asia, Westerns should calculate rent in their area
Labor Cost	$500-$1200 per month for Asia, westerns should calculate minimum labor wage and acceptable wage in their area
Raw Material Cost	Amount $X per kg	It is hard to calculate the raw material cost, as it vary from region to region.
Packaging Cost	Normal packaging; 2 -2.5% of total manufacturing cost of one item, while 2.7-4.0% for high quality packaging of total manufacturing cost of one item.
Sales Cost	Sales team salary, commission, fuel charges etc, in Asia this is usually between 20 - 25% of total manufacturing cost of a single item. While in West it may vary depending on many factors like labor laws, minimum wage, high competition which require high skillful sales teams consequently increasing costs further also market demand, the higher demand with low competition means more production thus decreasing sales cost so on and so forth.	Remember 25% sales cost depends on the number items produced in a given time, for instance if salary of two sales guys $100 per week and you produce for instance 5 items per week each of which total manufacturing cost is $20, that means Sales Cost here is 100% of total manufacturing cost of one item, that’s the reason I said Sales Cost depends on number of items produced in a given time.
Other Costs	6-8% of total manufacturing cost of one item. Other cost includes different unidentified costs like machinery maintenance and repair, food, mess, fuel for your bike/car, stationary, printer, antivirus, power, bilty/freight charges etc.	Remember 6-8% other cost depends on the number items produced in a given time, for instance if mess, food, fuel charges for your own bike or car etc is $100 per week and you produce for instance 5 items per week each of which total manufacturing cost is $20, that means Other Costs here is 100% of total manufacturing cost of one item, that’s the reason I said Other Cost depends on number of items produced in a given time.
First Time Cost	In our business case, nimco business (crispy snacks) it is around $500 k	First time cost includes buying office stationary, furniture, fans, other small machines like heat sealer, stapler, scissor, drinking glasses, coffee mugs, scotch tap

That’s all the cost you would need to calculate in any manufacturing startup.

If you understood these few things you will definitely be in better position to calculate all the necessary costs.

In the next article I will be discussing one of the most important aspects of any manufacturing startup, business that is Target Market & Sales so stay tuned.

If you have learned cost calculation so far then I would suggest to also read the upcoming post on Target Market & Sales because even if you have a great idea, done all cost related calculation you can still fail if you have superficial idea, understanding about the target market and how will you achieve sales.

By failing here I mean utter failure of your startup with a lot of depressing weeks, months; really it’s too much to take! 😩

And yeah it doesn’t cost a penny 😌 to subscribe and share this little article on your social media accounts with all your friends, colleagues etc.

If I am helping you I think I need a little hand from your end too so get the word out about this kick-ass website of mine 😎, about its not so boring content!

Tons of thanks!

Over to you guys!