How To Prevent Manufacturers From Avoiding Your Startup? (Part 1/2)
Statistics show, that only about 3-10% of hardware startups survive the first few years in business. There are many reasons for that. Sometimes, startups lack some simple every-day business skills that cause partners and manufacturers to turn away from them and decline cooperation. For manufacturers, working with a startup could be a headache and it is a risky proposition, often without enough profit.
Think about it this way: to solve a puzzle, people must have all the pieces available to them. If people can’t see each piece or don’t know they exist, it is impossible to complete the puzzle.
That’s why it’s important to talk about doing business with startups from the perspective of manufacturers and service providers. In hardware, you can’t simply hire a whole factory or establish your accredited testing lab yourself. You need to cooperate with others to make it happen and these facilitators must be treated as partners.
1. Establish Useful and Meaningful Relationships
Whether it’s a question of money or common goals such are “we want to grow together with you,” you must have mutual points of interest. Big manufacturers and service providers will usually not bother with startups. Some may have tried, and it didn’t work out. Often, they don’t even know how to deal with an industry newbie and vice versa. Their workflows are just not designed for you and are often difficult to navigate.
Also, ask yourself: can you make enough money for your partner? Or can you do something else in return for them such as refer them to other clients, be a significant project in their portfolio, or offer them an opportunity to get know-how on some technologies they haven’t yet worked with.
Last but not least, do not underestimate human qualities, values, and feelings – the true exchange. People do business with people and most importantly you should develop a meaningful relationship with a partner. Spend some time with them, go for lunch, invite them to an event, etc. If people don’t get along they shouldn’t do business together. On the other hand, don’t become so enamored with your business partners that you lose sight of your goals.
2. Pitch Your Startup to Manufacturers
Make your partners proud of working with you, make them feel good when thinking of you and your project. Never lie or exaggerate, it will backfire on you. Practice that pitch, master business forecasts, develop long-term plans, be strategic, learn public speaking. Can’t do that? Find someone who can.
We’ve seen so many great engineers developing great products! But they were so focused on products that they failed to develop business relationships, understand their customers or market. The core team of a startup is what most investors pay attention to first. They prefer teams that have three founders with different areas of expertise that are crucial for the project to succeed. One of these guys must definitely be able to sell the idea.
Share your startup charm and most importantly, the opportunity for all parties involved.
3. Learn About Partners
Before meeting a partner, do your homework to understand what you can expect from them. If you are meeting a manufacturer, find out what manufacturing business models exist out there, what is their typical scope of operations, and who typically works with startups of your size.
Then, go further and try to figure out what are their technical requirements to start working with your type of company. For example, if you want to go to a factory you must have a fully developed product which means work-alike and look-alike prototypes that include 3D mechanical files, Gerber files, BOM (Bill of Materials), and a well-developed Product Requirements Document.
You don’t have that and don’t know how to make it? Then you’re not ready for manufacturing. Never try to skip this step because it will backfire on you and cause fatal issues 99% of the time.
Knowing what you can or can’t expect from a partner is crucial before making a decision regarding a partnership. On top of that, you will be a far more trustworthy partner from their perspective and they will appreciate that you are not wasting their time.