Employees working on production line in a factory.
Finding the right factory to manufacture your product requires due diligence on your part, and this guide helps establish the steps you can take in that process. — Getty Images/serts

You’ve created a prototype, collected feedback, raised funding, and now you’re ready to bring your product to market. The next step: finding the right factory to make your dream a reality.

There are many questions to answer in your search for a manufacturing partner. This guide will take you through some of the key considerations when vetting factories and some places to get started in your hunt.

Learn the different types of manufacturing partners

Before you get started, it’s important to understand that there are a few different types of suppliers who can help bring your product to market. These are:

  • Manufacturers: the actual factory that produces your product.
  • Wholesalers or distributors: middlemen who buy pre-made products in bulk and add their margin to the total cost.
  • Trading companies: these middlemen have relationships with factories that produce a certain product category. They make money by adding a margin to the cost of the actual product costs.
  • Dropshippers: these companies supply products and fulfill orders of already-existing brands.
  • Sourcing agents: these middlemen may actually work with a wholesaler or trading company and perform a very similar role.

There are benefits and disadvantages to working with each of these partners. For example, a trading company or sourcing agent often deals in smaller quantities and with a larger variety of products, which can be great for small businesses; however, they can be more expensive than working with factories directly.

Choose between a domestic or overseas factory

Next, you will need to decide whether you want your product manufactured in the U.S. or overseas. While domestic factories tend to offer high-quality products, adhere to U.S. labor laws, and tend to be relatively easy to communicate with, they may also charge higher rates and offer fewer options. Further, not only are there fewer U.S. factories but those that exist may be equipped to make a more limited number of products.

[Read more: 3 Companies Share Their 'Made in the USA' Success Secrets]

Factories overseas may have lower manufacturing costs and offer many more options to choose from. They may take effort to vet, and you must be careful with your intellectual property if you’re sending your prototype overseas.

If cost is your biggest concern, there’s a good chance you will need to outsource your manufacturing to an overseas partner. There are a few directories and strategies that can help you find the right factory.

Getting referrals from fellow business owners via social media and forums can be a great starting point and a way to get feedback on suppliers you've been evaluating.

Liz Bertorelli, an entrepreneur in residence with Shopify

Do your research

Whether you work with a domestic or international factory, there are a number of ways to find the best match for your needs. Start with online manufacturing directories such as ThomasNet, Maker's Row, MFG, Kompass, Alibaba and Oberlo to help you filter and find available manufacturers.

Once you’ve created a shortlist of possible options, solicit referrals from others in your business vertical. “Getting referrals from fellow business owners via social media and forums can be a great starting point and a way to get feedback on suppliers you've been evaluating," Liz Bertorelli, an entrepreneur in residence with Shopify told Martha Stewart.

You can also research domestic factories (as well as those in Mexico and Canada) using their NAICS code. Ask to see a business license from overseas factories because reputable manufacturing companies should be able to show proof of legal incorporation. Research overseas factories on Google, social media, and other forums to make sure they’re reputable.

Ask questions

To do your due diligence, create questions to ask the factories that you’ve added to your list. A few questions to ask before signing a contract could include:

  • What is your minimum order quantity?
  • What is your sample pricing?
  • What is your production pricing?
  • What is your turnaround time?
  • What are your payment terms?
  • Do you subcontract work to other factories, or is all production done in-house?

These questions should give you a good start toward understanding whether or not a particular factory is well-equipped to handle your request.

[Read more: How U.S. Manufacturers are Using Alibaba to Connect With Buyers Around the World]

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