How to Prepare a Business Plan for a Manufacturing Company

A business plan is indispensable in any line of business. It will help you study every aspect of your business, anticipate unexpected events, and prepare possible solutions.

Most probably, you will be producing various products as a manufacturing company. You should consider identifying your target market, where to source out the raw materials, what equipment to acquire, and the needed funds to start the operation.

This article will evaluate what to account for when preparing a business plan for a manufacturing company.

1. Identify What Products to Offer

Manufacturing can vary from food, industrial, appliances, equipment, construction, among manufacturing sub-industries. Knowing your target market can help you specialize your products to fit your customers' needs. Know the demographics, preferences, uses, and the type of buyers you are targeting.

2. Decide the Distribution Channels

Nowadays, there is more option for distribution channels, not just the conventional channels we knew before. You can now sell online on top of having actual outlets.

You can choose various distribution channels: distributor, retailer, and end customers. Various channels would mean different pricing and cost of distribution.

3. Projecting Sales

Projecting the sales will require you to identify the production volumes and prices by product. Then add up sales of all products to compute the projected sales. You can project percentages for expansion and adjust them based on actual data as you start to produce.

4. A Clear Procedure for Production Processes

Every product has a different process. Have a clear set of procedures to follow by the production workers. The production managers should know every step and make sure that they are followed diligently to avoid any production issues.

5. Where to Source the Raw Materials

It is vital to identify trustworthy suppliers to source out the raw materials. Consider both quality and prices offered by the suppliers. Also, assess the reputation of the suppliers whether you can work with them long-term. Also, harnessing good relationships with suppliers can give good credit terms and even inside information in your industry.

6. Capital Expenditure (CAPEX)

CAPEX will constitute a big chunk of the initial investment. Ensure to purchase the machinery and equipment with the correct specifications. Increasing production capacity would also entail additional investment for CAPEX. Projecting when you will expand will help you allocate a budget in the coming years.

7. Operating Expenses (OPEX)

Operating expenses incurred are the salaries and benefits of the indirect labor and management. Other OPEX are utilities, maintenance, transportation, marketing, professional services, insurance, property taxes, travel expenses, and contingencies.

8. Hiring Competent People to Manage the Business

Hiring competent people and ensuring that they stay by offering competitive salaries and benefits will significantly affect the business's success. Stakeholders and other interested parties will be critical when evaluating the people behind the business operation and management.

9. Timeline of the Project Implementation

You should have a timeline prepared for the project implementation. This way, you will be guided in doing specific activities and stick to them as possible. It will help keep track of the implementation of the project and ensure that everything is on schedule for the project implementation.

10. Sources of Funds

It will require a lot of investment when establishing a manufacturing company. Funds are needed in acquiring the land, building the production facility, purchasing the machinery and equipment, salaries for staff and workers, and the working capital to run the operation.

Banks and investors would want to see the viability of the project. You can best present this through a financial plan with a debt schedule to assess the capability of the business to pay its loan and distribute dividends.

11. Financial Analysis

The three financial statements are the primary tool of financial analysis. All are accounted for through the income statement, balance sheet, and income statement to assess if the project is feasible. A financial analysis will then make sense of the financial statements by utilizing ratios such as profitability ratios, leverage ratios, efficiency ratios, liquidity ratios, and growth ratios.

12. Financial Metrics

The Net Present Value (NPV), Internal Rate of Return, Payback Period are the critical financial metrics utilized to help decide whether to pursue the project. They are decision-making tools you can rely on when prioritizing investment and implementing a project.

13. Break-even and Sensitivity Analyses

The break-even analysis and sensitivity analysis test different scenarios and evaluate their impact on the business. It will assess the business stability in absorbing risks and economic downturns.

Use a Financial Plan Template to Assess Profitability!

As we discussed making a business plan, it is essential to present your business plan into numbers and assess financial feasibility as numbers won't lie. It will speak louder than words and help you decide whether the project is worth pursuing or not.

A financial plan template for a manufacturing company is equipped with critical metrics necessary to assess multi-product manufacturing business. It helps you present your assumptions easily. It will only require lesser effort on your part compared to starting from scratch. Utilizing a financial plan template can be your best option, especially if you don't have the necessary skills to make one your own or have time constraints to consider.