Passing the Production Torch

When Sarah Shaw started her handbag business more than a decade ago, she was making the felt bags all by hand at home on her dining room table. But after making 200, she realized she needed help to keep up with demand.

There comes a time when every successful entrepreneur realizes he or she has hit a widget wall. The entrepreneur has created a product that catches on, but now needs to take it to the next level and get help making it.

"It is a positive sign of growth when an entrepreneur realizes that he or she can’t keep doing it all themselves and starts to look to partners to help grow the business,” says Clifford Holekamp, senior lecturer in entrepreneurship at the Olin Business School at Washington University in St. Louis. “In the case of manufacturing, third-party production is often the best step forward from growing out of the entrepreneur’s garage.”

So how does one get started? The best strategy is to take small, methodical steps, like Shaw did when she expanded her Los Angeles-based business from her dining room table to the factory floor.

First, she hired a woman to sew the bags and was able to churn out about 150 per week. But when an order came in from a major specialty chain for 800 units, she decided, “I need a real manufacturer.”

Finding third-party manufacturers is all about word-of-mouth, Shaw says, and she networked among other handbag designers as much as possible, even asking retailers in downtown Los Angeles about producers they worked with.

She first had to decide how much she could afford to pay to have the item made. Her strategy was to work backward from her wholesale price, around $30, to what a factory would charge.

She found a small manufacturer in Los Angeles that did not specialize in handbags, but could produce the bags for $5.50 each. She did a lot of hand-holding, having the factory produce a prototype that she was happy with and even showing the producer how to glue on the label.

“I kept on top of how I wanted everything,” she recalls.

After a successful run with the handbags, Shaw launched a new product in 2006 — a closet organizer for handbags — under the name “Simply Sarah.”

“I found a factory in Los Angeles by pounding the pavement yet again,” she says, but in 2007 she decided to take production to China, just about the time she got pregnant with twins. “A girlfriend of mine knew someone manufacturing their handbags in China and she reached out to them and they gave me the name of the factory.”

Alas, not everyone has such connections.

Steve Llorens, co-founder of Arch Angel Brands, a company that makes arch supports that attach to one’s foot, used a host of online websites that connect small firms with manufacturers and suppliers, including Alibaba.com, manufacturing.com and ThomasNet.

Arch Angel Brands, based in Jersey City, New Jersey, was able to find just the right producer in Taiwan, and the sites, Llorens says, helped cut his research time because he was able to directly reach out to companies overseas via the Web. “I was looking for the easiest way to get it done,” he says.

When considering manufacturers, you have to balance quality and cost, stresses Josh Green, CEO of Panjiva, another company that brings together small U.S. firms with overseas manufacturers and suppliers. “If quality is of extreme importance, you’re going to have to look for someone who is experienced in high-quality manufacturing,” he advises.

Here are some other basic tips from Green:

- Get information on the financial health of the producer. - Choose a producer that’s in a geographic area you’re comfortable with. - Make sure the company has served firms that are similar to yours.

You can also hire a middleman, or agent, if you can afford it, Green says, adding that the cost can be anywhere from 3 to 6 percent of the manufacturing price. But, he cautions, sometimes agents get factory kickbacks.

And he strongly recommends face-to-face meetings. “It helps set the tone of the relationship, and when problems pop up, as they always do, you already have a relationship with the person you’re calling,” he says.

Known online as Careerdiva.net, Eve Tahmincioglu is the author of “From the Sandbox to the Corner Office,” an in-depth look at top U.S. CEOs and the lessons they learned on how to succeed in business, as well as a career columnist for MSNBC.com.

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