SMEs entering the heavy industries be aware

workThe heavy industry in South Africa is a large contributor to our economy. These companies can be identified as automobile, mining, petroleum and steel manufacturers. For these to operate successfully, they require enormous injections of cash and large plants in which to run their operations. This is not the type of market to enter into if you’re a small business entity. However, because the manufacturing plants require very specific machinery parts, health and safety equipment, enterprise resource planning solutions and the like, a small business who can offer niche and essential solutions might do very well.

Know what you’re getting yourself into

Unlike starting your own business in other “softer” sectors, the heavy industries are incredibly specific with their wants and needs. You won’t be able to sell your products or services to your family members, friends or neighbours unless they’re a mining project manager or electrical engineer, you get the picture. Plus these massive plants and manufacturing companies are covered by a lot of red tape. You need to be able to acquire sign off of procuring your products from the right person with the signing power and who’ll place the correct legal procedures and documents in place.

Ask all the right questions

To enter into the marketplace you must ask some pertinent questions. There are a number of concerns within this sector that differ to others. For instance, how will you protect your rights to the product? If you’re entering this sector with a niche product in mind that requires you engineering and manufacturing it yourself then you cannot afford to allow for a large number of competitors. Also, how will you fund your business activities if the market slows? Will you apply for corporate finance as a business entity or machinery asset finance for your equipment? What’s more, if you’re importing the product have you considered import taxes and the like?

Understand your competitor

Because this industry is incredibly specific you must make sure to do a proper competitor’s analysis. This will inform you of who your competitors are, how they operate, who their biggest clients are and how to compete with them. What’s more, their marketing strategies can be analysed and with this information you’ll be able to create a strategy that keeps you competitive with whatever your “little something different” might be that makes your value proposition more worthwhile.

Location, location, location

Naturally, your biggest expense in this specific game is your factory premises and your equipment. Manufacturing businesses or those that serve the heavy industry are certainly not able to operate from a home office. Or a least not for very long. The storing and maintenance of the products will require a factory or warehouse-type of space and this is expensive. Deciding whether to purchase property or not is about whether you have the money or an excellent credit rating that’ll afford you a couple of million. But expenses for this type of business are simply very high. You need to crunch the numbers properly before you launch your venture.