Manufacturing is becoming a hot business in India. Indian government under PM Modi is providing all possible assistance to the manufacturing sector. There is great scope in the sector in the near future. Now, it has become impossible for international companies to ignore India as a manufacturing hub.
As a matter of fact, there are many advantages of starting a factory in India. Of course, you will get the advantage of cheap labor, lower costs, and numerous other perks. Even as international businesses are entering India, there is a huge potential for Indian entrepreneurs.
For international businesses, setting up a manufacturing unit has become a lot easier. Government is providing many relaxations, incentives and numerous other facilities. However, they must choose local partners for expediting registration, getting licenses, approvals, contractors and vendors.
With the help of local partners, the international businesses will be able to seamlessly manage procurement, quality issues and timely completion of units. And, there will be no problem in land acquisition as well.
In the same manner, domestic businesses can also open manufacturing units. They enjoy even more patronage from the government. There is great potential for starting small manufacturing units in chemical, cement, steel, electrical & electronic and automobile sectors.
After the onset of global pandemic, many entrepreneurs started manufacturing units to make oxygen production plant for meeting the exponential local and global demand. Many entrepreneurs also set up small units to produce sanitizers and making masks.
Important Tips for Starting a Manufacturing Unit
Getting licenses and approvals
Opening a manufacturing factory is easy since the government has simplified the regulations. Still, there are many regulations, licenses and approvals that you must obtain for starting the factory. Depending upon the sector, the government has formulated different regulations and formalities.
As a rule, you must apply for licenses and approvals from the concerned department. Next, the department will look into your application. If you meet all the set criteria, your business will have the official permission to proceed. Additionally, there are hosts of facilities extended to the manufacturing units.
Estimate income for 1st year of operations
Financial management is the most import part of any business enterprise. Before starting the factory, it is imperative that you estimate the cash sales. It is your gross income generated through sales and other transactions.
As business person, you must have an overall idea of estimation of income during the first year of your operations. Moreover, it must also include taxes and GST. There is no denying the estimates will depend on the sector you are operating.
For succeeding in running a factory, it is essential that you keep tab on the finances. To begin with, there must be enough cash available so that your operations can go unhindered at least for one year. If you do not arrange the sufficient moat for one year, it is likely that your business will run into difficulties at the first bump.
Decide the nature of manufacturing unit
Undeniably, it is very important to decide your target audience, namely, the customer base. At the outset, you must decide whether you will sell only to the local customers or global customers. And, you must also decide whether you will be selling finished products for the consumers or fabricate components or spare parts for other manufacturers.
Besides, it is imperative to plan if the production will start only after receiving orders or it will be continuous. Determining the location and size of the factory is crucial. Normally, establishing the manufacturing unit near highways or connecting roads is handy in transportation. Moreover, it also helps in easy delivery of raw materials and distribution of products.
As an owner, deciding to open a showroom connected to the factory is important. It will determine the future trajectory of your enterprise. There must be a due process for every aspect of the business. Will there be automation of industrial processes? Will the labor do all the work?
Lastly, delivery of your good in the market is vital. Therefore, you must decide if you will employ full-time sales representatives or part-time selling agents. Also, size of the operation will determine how many skilled workers you will need.
Arranging the required finances
It will not be out of place to say that no business can survive without adequate finances. Finances are available from banks and other financial institutions in the following means:
Term loan (long & medium term)
Working capital loan
Seed capital
Hire purchase leasing for machinery
Angel investment
Loan against property
Unsecured Business Loans
At the time of arranging finances, it is important that you go through various governmental schemes and grants for small scale like oxygen, clothing, spare part, industrial, rubber, medical, paper, nitrogen plant manufacturer. For securing any type loan, you will need the following documents for processing of your application:
Project report
Documentation for loan application
Balance sheet and profit loss statement for last three consecutive years of firms owned by promoters
Income tax assessment certificates of partners/directors
Proof of possession of land/building
Architectural estimate for construction cost
Partnership deed/memorandum and articles of associations of company
3M’s of manufacturing business
Manpower
Project report will define the projections for manpower in running the manufacturing operations. However, it is advisable that you recruit the staff in a phased manner. It is not a good idea to recruit all manpower at one go. But, operators and technicians must be available before installation of machinery.
Machinery
Finding and deploying the exact machinery is crucial. Before making a purchase, one must do a survey of the market. During the search, you will find the technology and equipment with right specifications you need. Moreover, it is better if you consult an expert on the machinery.
Material
Arranging the materials is an important part of running a successful manufacturing unit. Normally, you must estimate the amount of materials for a quarter and place the order accordingly. Excess of materials will not only cause cash flow problems but also lock up working capital.
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