Growth for Small Manufacturing Companies

Feb 11, 2022

Small manufacturing companies play a key role in the economy, providing goods and services and producing products that people use every day. The manufacturing industry is undergoing a major transformation. The days of large, labor-intensive factories are being replaced by leaner, more efficient operations that are relying more on automation and technology.

Understanding Manufacturing

Unlike other businesses that can more easily maneuver to remote working or telecommuting, manufacturing companies are built around their facilities and the people that run them. This means the costs involved in manufacturing don’t just involve the financial spend on goods, supplies and vendors, but also the cost of time and opportunity. A broken down machine impacts yield. When the people who run the machines are left standing around, it impacts the bottom line and profitability.

This is important to understand as we discuss growth strategies. The costs of time lost, such as to inefficiency or by spending time in the “wrong” ways, can be significant to a company’s ability to grow.

Finding Time in Manufacturing

It’s not just with equipment breakdowns or inefficiency that time is lost. Especially in smaller manufacturing companies, it’s often founders or a small team of leaders that are wearing many hats. In addition to running the business, they’re managing teams. Hiring and firing. Bookkeeping and accounting. Picking up a broom at the end of the night.

One important pathway to growth is for these leaders to find time – and be prepared for the costs of finding it. Outsourcing certain responsibilities frees leaders up to do more business-building. Outsourcing to experts creates exponential benefits. Hiring a fractional or part-time CFO, for instance, doesn’t just offload what a business owner might have been already doing – it adds expertise and experience previously not had. This can create a dramatic shift in a company’s potential growth. The right CFO can introduce new financing relationships, help develop goals and strategies, find cost-savings and understand the nuances of reporting. Will this new outsourced talent cost the company money? Of course. But ultimately the potential to create more revenue or profitability is much greater than with the status quo.

Costing Money to Make Money

You’ve heard that old maxim before, but it’s especially true for manufacturing companies. When orders double by 50%, you’re growing! Great! But the first thing you’ll have to do is hire more people, or lease more equipment or expand to additional facilities. Your profits can quickly get eaten up in service of growth. This is another advantage of the right partners around you to explore financing options, debt, vendor relationships or other ways to keep cash flow positive so growth can continue.

The Right Path to Growth for Small Manufacturing Companies

Other ways manufacturing companies can grow include:

• New products
• Increased sales and/or expanded markets
• Acquisition, of a company or even just a product or product line

For the small manufacturing company these can be harder paths to climb. At ProCFO Partners our guidance is to surround yourself with the right advisors, support and partners to make growth a strategic imperative – one that you plan for and are prepared for. Make sure it’s a considered decision to take on additional costs for new products, markets or even making an acquisition. It’s more likely that rethinking time and resources can help the small manufacturer climb a steady, manageable path to growth.