Managing one’s contract manufacturer(s) can be an ongoing, daunting task for business owners of all sizes. But for those starting a new company or launching a new product, securing an initial business relationship with an appropriate co-packer can be even more challenging. A contract manufacturer or packager may be quite hesitant to invest in a small business or new idea, allocating production space and resources to an unknown entity. On the flipside, a brand owner must be willing to take a leap of faith with a new company or new brands and allow a co-packer to bring ideas to life. These helpful steps should be considered in order to attract one’s preferred manufacturing partner:

Success. Nothing sounds sweeter to a co-packer’s ears than the prospect of working on a new project with an entity that has already experienced commercial success. Whether or not the past business achievement is directly related to one’s current industry focus, simply having the know-how and initiative to have achieved success in the past indicates a likely possibility of reaching the pinnacle again. This is a very tempting opportunity. The messaging should be made clear: Past success breeds future success! 

Referral.Anyone who has done it knows that cold calling contract manufacturers is a bear. A better option is dropping a name or two of a respected industry person(s) who is familiar with one’s selected co-packer of choice (and vice versa). Getting one’s metaphorical foot-in-the-door becomes a faster reality. This tactic is effective even if the individual’s name you mention is not someone you know personally. For example, I call XYZ Company because I believe that it is a suitable co-packer for my new endeavor. During the course of the initial discussion, we recognize that we are mismatched. While conceding to the lack of apparent fit, simultaneously I ask for a referral to an alternative co-packer(s) that may be a more complementary partner.

Plan. A successful business starts with a plan. And a new venture should start with a deliberate plan and tremendous upside potential that is closely guarded by its owner. Asking one’s contract manufacturer to sign a Non-Disclosure Agreement (NDA) prior to advanced discussions sends the message that you have a sound strategic plan – a plan valuable enough to be protected!

Contract. Requiring a signed Manufacturing Agreement between both parties prior to an initial production run not only legally protects the entrepreneur, but also sends a clear message to the co-packer that commercial success is imminent provided the chosen contract manufacturer is capable. The message sent is evident: Seriously focused individuals want to minimize chance.

Payment. Most respectable contract manufacturers will require 50 percent paid upfront before any raw materials are pre-ordered for an initial minimum quantity production run. Net 30 Terms upon delivery for the remaining 50 percent of final product is fair. If one is having challenges securing the attention of a preferred

co-packer, offering 50 percent down and the remaining 50 percent paid immediately upon delivery (initial shipment only) is a sure-fire method to gain the attention of the sought-after manufacturer. Agreeing to pay invoices aggressively at the beginning of the relationship removes much of the co-packer’s fear of non-payment, especially given the failure rates of new ventures. 

Equity. In some instances it may be appropriate to offer the contract manufacturer an equity position in the new business. Although taking this route adds structural complexity and proper legal due diligence, in theory it certainly ensures favored line-time visibility. If one’s contract manufacturer has “skin in the game,” the relationship switches from vendor/supplier to partner/partner. In times of line-time scarcity, this added level of alliance could prove invaluable.

Packaging. Take ownership of as many packaging components as possible. The fewer “ingredients” for which one’s co-packer is responsible, the less administrative overhead required to manage the particular account. Packaging review, approval and supply management are very time-consuming tasks. Removing the packaging responsibility component from one’s co-packer also has the added benefit of allowing the manufacturer to be more focused on product quality and advancement.

Advisory Board. Perhaps one’s personal business experience does not impress the co-packer of choice. In this case, the collective wisdom of an Advisory Board just may be enough to sway the contract manufacturer to consider a newly hatched business idea with the proper group’s backing. The mere presence of an Advisory Board can provide the added confidence necessary to take a chance on a new product endeavor. An Advisory Board need not be a formal legal entity. Preferably, the group is a strategically collected group of individuals whose talent is available to you on an as-needed basis, especially during the start-up phase.

Web site. All viable businesses should have a Web site to tout the company’s wares. But to begin with, having at least a working beta site much ahead of an expected product launch date can display a forward-looking approach to one’s co-packer. In fact, asking for the contract manufacturer to review and provide feedback on one’s beta site can offer valuable longer-term “buy in” opportunities. Launching a Web site may seem obvious, but offering your potential “partner” a sneak-peek prior to site launch can create an atmosphere of inclusion and commitment.

Building a bridge with a new subcontractor is not an easy task. It takes a combination of ingenuity, diligence, salesmanship and good timing. Every business owner wants to be affiliated with a commercial winner — either from the past, present or future. A critical component to attracting one’s favored co-packer is to provide a vision of success backed up by specific tactical means to achieve the overall objective. The contract manufacturer partnership is paramount to reaching the goal. Having the co-packer truly believe in the mission increases the likelihood of triumphal prophecy.