How to open a steel manufacturer?
Want to start a steel manufacturing business but don't know where to begin? Then you've come to the right place!
Our comprehensive guide covers everything related to opening a steel manufacturing business - from choosing the right concept to setting out your marketing plan and financing your business.
You'll also learn how to assess the profitability of your business idea and decide whether or not it can be viable from a financial perspective.
Ready to kickstart your entrepreneurial journey? Let's begin!
Understanding how a steel manufacturing business works
The very first step when exploring a business idea such as starting a steel manufacturing business is to make sure you understand how the business operates and makes money (which is what we call the business model).
This will not only give you an initial idea of how profitable the business can be, but it will also enable you to make sure that this is the right business idea for you, given your skills, start-up capital and family or personal lifestyle, in particular.
The best ways to get to grips with the steel manufacturing business's business model are to:
- Talk to steel manufacturing business owners with experience
- Work a few months in a steel manufacturing business already in operation
- Take a training course
Talk to steel manufacturing business owners with experience
Experienced steel manufacturing business owners have valuable insights and can provide practical advice based on their firsthand experiences.
They've likely encountered and overcome challenges that a newcomer might not anticipate. Learning from other’s mistakes can save you both time and money and potentially increase your venture’s chances of succeeding.
Work a few months in a steel manufacturing business already in operation
Obtaining work experience in the industry can be a crucial factor in confirming whether you truly want to start a steel manufacturing business, as it provides insight into the day-to-day activities.
For instance, if the working hours are longer than expected or if other business requirements don't align with your personal lifestyle or preferences, you might reconsider your entrepreneurial goals.
Even if you've decided that this business idea is a good fit for you, gaining work experience will still be valuable. It helps you better understand your target market and customer needs, which is likely to be beneficial when launching your own steel manufacturing business.
Take a training course
Obtaining training within your chosen industry is another way to get a feel for how a steel manufacturing business works before deciding to pursue a new venture.
Whatever approach you choose to familiarise yourself with the business, before going any further with your plans to open a steel manufacturing business, make sure you understand:
- What skills are required to run the business (compare this with your own skills)
- What a typical week in the business is like (compare this with your personal or family life)
- What is the potential turnover of a steel manufacturing business and the long-term growth prospects (compare this with your level of ambition)
- Your options once you decide to sell the business or retire (it's never too early to consider your exit)
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Assemble your steel manufacturing business's founding team
The next step to start your steel manufacturing business is to think about the ideal founding team, or to go in alone (which is always an option).
Setting up a business with several partners is a way of reducing the (high) risk of launching a steel manufacturing business since it allows the financial risk of the project to be shared between the co-founders.
This also allows the company to benefit from a greater diversity of profiles in the management team and to spread the burden of decision-making over several shoulders.
But, running a business with multiple co-founders brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your business.
To make an informed decision, we suggest asking yourself these questions:
- How many co-founders would increase the project's chances of success?
- Do you and your potential partners share the same aspirations for the project?
- What is your plan B in case of failure?
Let's examine each of these questions in detail.
How many co-founders would increase the project's chances of success?
The answer to this question will depend on a number of factors, including:
- Your savings compared with the amount of initial capital needed to launch the steel manufacturing business
- The skills you have compared with those needed to make a success of such a project
- How you want key decisions to be taken in the business (an odd number of partners or a majority partner is generally recommended to avoid deadlock)
Put simply, your partners contribute money and/or skills, and increasing the number of partners is often a good idea when one of these resources is in short supply.
Do you and your potential partners share the same aspirations for the project?
One of the key questions when selecting your potential partners will be their expectations. Do you want to create a small or large business? What are your ambitions for the next 10 or 15 years?
It's better to agree from the outset on what you want to create to avoid disagreements, and to check that you stay on the same wavelength as the project progresses to avoid frustration.
What is your plan B in case of failure?
Of course, we wish you every success, but it's wise to have a plan B when setting up a business.
How you handle the possibility of things not working out can depend a lot on the kind of relationship you have with your co-founders (like being a close friend, spouse, former colleague, etc.) and each person's individual situation.
Take, for instance, launching a business with your spouse. It may seem like a great plan, but if the business doesn't succeed, you could find yourself losing the entire household income at once, and that could be quite a nerve-wracking situation.
Similarly, starting a business partnership with a friend has its challenges. If the business doesn't work out or if tough decisions need to be made, it could strain the friendship.
It's essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.
Undertake market research for a steel manufacturing business
The next step to start your steel manufacturing business is to use market research to check that there is indeed an opportunity to be seized. Let's take a look at what this involves.
The objectives of market research
In a nutshell, doing market research enables you to verify that there is a business opportunity for your company to seize, and to size the opportunity precisely.
First of all, market research enables you to assess whether the market you're targeting is large enough to withstand the arrival of a new competitor: your steel manufacturing business.
The market analysis will also help you define the product and service offering of your steel manufacturing business, and transcribe it into a market positioning and concept that will strike a chord with your target customers.
Finally, your market research will provide you with the data you need to draw up your sales and marketing plan and estimate the revenue potential of your steel manufacturing business.
Analyse key trends in the industry
Market research for a steel manufacturing business must always begin with a thorough investigation of consumer habits and current industry trends.
Normally, steel manufacturing business market research begins with a sectorial analysis which will provide you with a better understanding of how the industry is organized, who the major players are, and what are the current market trends.
Assess the demand
A demand analysis enables you to accurately assess the expectations of your steel manufacturing business's future customers.
Your analysis will focus on the following questions:
- How many potential customers are present in the geographical areas served by your company?
- What are their expectations and purchasing behaviors?
- How much are they willing to spend?
- Are there different customer segments with distinct characteristics?
- How to communicate and where to promote your business to reach your target market?
The main goal of your demand analysis is to identify potential customer segments that your steel manufacturing business could target and what products or services would meet these customers' expectations.
Supply side
Supply-side analysis looks at the products and services offered by your competitors on the market.
You should focus here on the following questions:
- Who will your competitors be?
- Are they any good?
- Where are they located?
- Who do they target?
- What range of products and services do they offer?
- Are they small independent players?
- What prices do they charge?
- How do they sell their products and services?
- Do their concepts appeal to customers?
One of the aims of your supply-side analysis will be to gather the elements that will enable you to define a market positioning that will set you apart from what is already being done on the market, so as to avoid direct confrontation with competitors already established (more on that below).
Regulations
Market research is also an opportunity to look at the regulations and conditions required to do business.
You should ask yourself the following questions:
- Does it take a specific degree to open a steel manufacturing business?
- Do you need specific licences or business permits?
- What are the main regulations applicable to your future business?
Given that your project is still in its early stages, your analysis of the regulation can be carried out at a high level for the time being. You just want to identify the main laws applicable and check that you meet the conditions for running this type of business before going any further.
Once your project is more advanced, you can come back to the regulation in greater detail with your lawyer.
Concluding your market research
Your market research should lead you to draw a clear conclusion about your chances of commercial success of your business idea:
- Either the market is saturated, and you'd better look into another business idea.
- Or there's an opportunity to be seized in the geographical area you're considering, and you can go ahead with your project to open a steel manufacturing business.
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Choose the right concept and position your steel manufacturing business on the market
The next step to start a steel manufacturing business is to choose the company's market positioning.
Market positioning refers to the place your product and service offering occupies in customers' minds and how it differs from how competitors are perceived. Being perceived as a high-end solution, for example.
To do this, you need to take the following considerations into account:
- How can you make your business stand out from your competitors?
- Is it better to start a new steel manufacturing business or acquire one that is already up and running?
- How to make sure your concept meets customer needs?
Let's look at each of these in a little more detail.
How can you make your business stand out from your competitors?
When you decide to start your own steel manufacturing business, you're facing an upward challenge because your competitors are already ahead. They have a good reputation, loyal customers, and a strong team, while you're just getting started.
Opening a steel manufacturing business offering exactly the same thing as your competitors is risky and potentially doomed to fail: why would customers take the risk of choosing a newcomer rather than a company with a proven track record?
This is why it is advisable to avoid direct confrontation by adopting a differentiated market positioning wherever possible: in other words, by offering something different or complementary to what is available on the market.
To find a market positioning that has every chance of success, you need to ask yourself the following questions:
- Can you negate direct competition by serving a customer profile that is currently poorly addressed by your competitors?
- Can your business provide something different or complementary to what is already available on the market?
- Why will customers choose your steel manufacturing business over the competition?
- How will your competitors react to your entry into their market?
- Is the market sufficiently large to allow you to set up a new independent business, or is it better to consider another avenue (see below)?
Is it better to start a new steel manufacturing business or acquire one that is already up and running?
A way to benefit from a proven concept and reduce the risk of your project is to take over a steel manufacturing business.
Buying a steel manufacturing business allows you to get a team, a customer base, and above all to preserve the balance on the market by avoiding creating a new player. For these reasons, taking over a business is a lot less risky than creating one from scratch.
Taking over a business also gives you greater freedom than franchising, because you have the freedom to change the positioning and operations of the business as you see fit.
However, as you can imagine, the cost of taking over a business is higher than that of opening a steel manufacturing business because you will have to finance the purchase.
How to make sure your concept meets customer needs?
Once you have decided on your concept and the market positioning of your future steel manufacturing business, you will need to check that it meets the needs, expectations and desires of your future customers.
To do this, you need to present it to some of your target customers to gather their impressions.
Where should I base my steel manufacturing business?
The next step in our guide on starting a steel manufacturing business involves making a key choice about where you want your business to be located.
Picking the ideal location for your business is like selecting the perfect canvas for a painting. Without it, your business might not showcase its true colors.
We recommend that you take the following factors into account when making your decision:
- Availability of skilled labor - A steel manufacturing business requires a highly skilled and specialized workforce to operate the machinery and handle the raw materials. Therefore, the ideal location should have a pool of skilled labor available.
- Parking space, road and public transport accessibility - Steel manufacturing businesses often require the transportation of heavy materials and products, so a location with ample parking space and good road and public transport accessibility is crucial for efficient logistics.
- Storage space - As a steel manufacturing business deals with large and heavy items, having adequate storage space is important to keep the materials and products organized and easily accessible.
- Competitor presence - While having competitors nearby may be seen as a disadvantage, it can also indicate that the location is suitable for a steel manufacturing business. It means there is demand for steel products in the area and a potential for collaboration or partnerships.
This list is not comprehensive and will have to be adjusted based on the details of your project.
The parameters to be taken into account will also depend on whether you opt to rent premises or buy them. If you are a tenant, you will need to consider the conditions attached to the lease: duration, rent increase, renewal conditions, etc.
Lease agreements differ widely from country to country, so it's essential to review the terms that apply to your situation. Before putting pen to paper, consider having your lawyer look carefully at the lease.
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Choosing your steel manufacturing business's legal form
The next step to open a steel manufacturing business is to choose the legal form of your business.
The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.
Why is your steel manufacturing business's legal form important?
Choosing the legal form for your steel manufacturing business is an important decision because this will affect your tax obligations, your personal exposure to risk, how decisions are made within the business, the sources of financing available to you, and the amount of paperwork and legal formalities, amongst other things.
The way you set up your business legally will impact your taxes and social contributions, both at a personal level (how much your income is taxed) and at the business level (how much the business's profits are taxed).
Your personal exposure to risk as a business owner also varies based on the legal form of your business. Certain legal forms have a legal personality (also called corporate personality), which means that the business obtains a legal entity which is separate from the owners and the people running it. To put it simply, if something goes wrong with a customer or competitor, for example, with a corporate personality the business gets sued, whereas without it is the entrepreneur personally.
Similarly, some legal forms benefit from limited liability. With a limited liability the maximum you can lose if the business fails is what you invested. Your personal assets are not at risk. However, not all structures protect you in such a way, some structures may expose your personal assets (for example, your creditors might try to go after your house if the business incurs debts and then goes under without being able to repay what it owed).
How decisions are made within the business is also influenced by the legal form of your steel manufacturing business, and so is the amount of paperwork and legal formalities: do you need to hold general assemblies, to produce annual accounts, to get the accounts audited, etc.
The legal form also influences what sources of financing are available to you. Raising capital from investors requires having a company set up, and they will expect limited liability and corporate personality.
What are the most common legal structures?
It's important to note that the actual names of legal structures for businesses vary from country to country.
But they usually fall within two main types of structures:
- Individual businesses
- Companies
Individual businesses
Individual businesses, such as sole traders or sole proprietorships, are legal structures with basic administrative requirements.
They primarily serve self-employed individuals and freelancers rather than businesses with employees.
The main downside of being a sole trader is that there's usually no legal separation between the business and the person running it. Everything the person owns personally is tied up with the business, which can be risky.
This means that if there are problems or the business goes bankrupt, the entrepreneur's personal assets could be taken by creditors. So, there's a risk of personal liability in case of disputes or financial issues.
It is also not possible to raise equity from investors with these structures as there is no share capital.
Despite the downsides, being a sole proprietorship has some advantages. There is usually very little paperwork to get started, simpler tax calculations and accounting formalities.
Companies
Companies are all rounders which can be set up by one or more individuals, working on their own or with many employees.
They are recognized as a distinct entity with their own legal personality, and the liability is usually limited to the amount invested by the owners (co-founders and investors). This means that you cannot lose more than you have invested in the business.
This separation ensures that in legal disputes or bankruptcy, the company bears primary responsibility, protecting the personal assets of the founder(s) and potential investor(s).
How should I choose my steel manufacturing business's legal structure?
Deciding on the legal structure is usually quite straightforward once you know how many co-founders you'll have, whether you'll have employees, and the expected revenues for the business.
A good business idea will be viable whatever the legal form you choose. How businesses are taxed changes every year, therefore one cannot rely on specific tax benefits tied to a particular structure when deciding to go into business.
One easy way to proceed is to take note of the legal structures used by your top five competitors, and assume you're going with the most commonly chosen option. Once your idea is mature and you're prepared to formally register the business, you can validate this assumption with a lawyer and an accountant.
Can I switch my steel manufacturing business's legal structure if I get it wrong?
You can switch your legal setup later on, even if it involves selling the old one to a new entity in some cases. However, this comes with extra costs, so it's better to make the right choice from the beginning if you can.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
Assess the startup costs for a steel manufacturing business
The next step in creating a steel manufacturing business involves thinking about the equipment and staff needed for the business to operate.
After figuring out what you need for your business, your financial plan will reveal how much money you'll need to start and how much you might make (check below for more details).
Because every venture is distinctive, providing a reliable one-size-fits-all budget for launching a steel manufacturing business without knowing the specifics of your project is not feasible.
Each project has its own particularities (size, concept, location), and only a forecast can show the exact amount required for the initial investment.
The first thing you'll need to consider is the equipment and investments you'll need to get your business up and running.
Startup costs and investments to launch your steel manufacturing business
For a steel manufacturing business, the initial working capital requirements (WCR) and investments could include the following elements:
- Steel melting furnace: This is a crucial piece of equipment for a steel manufacturing business as it is used to melt scrap metal and other raw materials to create molten steel. It is a fixed asset that requires a significant capital investment.
- Rolling mill: A rolling mill is used to shape and form the molten steel into various products such as sheets, plates, and bars. It is a necessary piece of equipment for a steel manufacturing business and can be a costly investment.
- Crane and lifting equipment: The steel manufacturing process involves moving heavy materials and products, which requires the use of cranes and other lifting equipment. These are fixed assets that are essential for the smooth operations of a steel production facility.
- Raw material storage and handling equipment: A steel manufacturing business requires a significant amount of raw materials, such as iron ore, coal, and limestone. Therefore, investing in storage and handling equipment, such as silos, conveyors, and loaders, is necessary for efficient production.
- Waste management and environmental control systems: Steel production can generate a lot of waste and emissions, which can be harmful to the environment if not properly managed. A steel manufacturing business needs to invest in waste management and environmental control systems to comply with regulations and minimize its impact on the environment.
Of course, you will need to adapt this list to your business specificities.
Staffing plan of a steel manufacturing business
In addition to equipment, you'll also need to consider the human resources required to run the steel manufacturing business on a day-to-day basis.
The number of recruitments you need to plan will depend mainly on the size of your company.
Once again, this list is only indicative and will need to be adjusted according to the specifics of your steel manufacturing business.
Other operating expenses for a steel manufacturing business
While you're thinking about the resources you'll need, it's also a good time to start listing the operating costs you'll need to anticipate for your business.
The main operating costs for a steel manufacturing business may include:
- Raw materials: As a steel manufacturing business, your main expense will be the cost of raw materials such as iron ore, coal, and scrap metal.
- Energy costs: Steel production requires a significant amount of energy, so you can expect high expenses for electricity, natural gas, and other energy sources.
- Labor costs: Hiring and retaining skilled workers is crucial for a successful steel manufacturing business, so you will need to budget for salaries, benefits, and training.
- Equipment maintenance: The machinery and equipment used in steel production require regular maintenance and repairs to keep them running at optimal levels.
- Transportation costs: Moving raw materials and finished products to and from your facility will incur expenses for transportation, including fuel, trucking, and shipping fees.
- Accounting and bookkeeping fees: As a business owner, you will need to hire professionals to handle your financial records and tax obligations.
- Insurance costs: To protect your business against potential risks and liabilities, you will need to purchase various types of insurance, such as property, liability, and workers' compensation insurance.
- Software licenses: You may need to invest in specialized software for steel manufacturing, such as CAD/CAM programs, inventory management systems, and accounting software.
- Rent or mortgage payments: If you do not own your manufacturing facility, you will need to factor in the cost of rent or mortgage payments for your space.
- Marketing and advertising expenses: To attract new customers and promote your products, you will need to allocate funds for marketing and advertising efforts.
- Employee benefits: In addition to salaries, you will also need to provide benefits such as health insurance, retirement plans, and paid time off to attract and retain top talent.
- Legal fees: As a business owner, you may encounter legal issues or need legal advice, which will require you to pay for legal fees.
- Office supplies: Running a steel manufacturing business will also require general office supplies, such as paper, pens, and printer ink.
- Banking fees: Your business will likely have various banking needs, such as account maintenance fees, wire transfer fees, and loan interest payments.
- Training and development: To keep up with industry advancements and improve efficiency, you may need to invest in training and development programs for your employees.
Like for the other examples included in this guide, this list will need to be tailored to your business but should be a good starting point for your budget.
How will I promote my steel manufacturing business's?
The next step to starting a steel manufacturing business is to think about strategies that will help you attract and retain clients.
Consider the following questions:
- How will you attract as many customers as possible?
- How will you build customer loyalty?
- Who will be responsible for advertising and promotion? What budget can be allocated to these activities?
- How many sales and how much revenue can that generate?
Once again, the resources required will depend on your ambitions and the size of your company. But you could potentially action the initiatives below.
Your steel manufacturing business's sales plan will also be affected by variations in consumer demand, like changes in activity during peak holiday seasons, and the dynamics within your competitive environment.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
Build your steel manufacturing business's financial forecast
The next step to start your steel manufacturing business: putting your financial projections together.
What is the financial forecast for a steel manufacturing business?
A forecast is a quantified decision-making document that shows the initial investment required to open a steel manufacturing business and the company's potential profitability and cash flow generation over the next 3 to 5 years.
As you think about your steel manufacturing business idea, the main role of financial projections will be to help you decide whether it makes sense to create the company.
Building a financial forecast helps determine the amount of initial financing required to start your steel manufacturing business.
In fact, creating financial projections is the only way to assess the amount of initial financing you'll need to open your steel manufacturing business, and to make sure your project makes economic and financial sense.
Keep in mind that very few business ideas are financially viable. At The Business Plan Shop, we've seen nearly a million business start-up ideas, and we estimate that less than one in four is economically viable.
Your forecast will therefore require your full attention and constant revision, as your project matures. It's also a good idea to simulate different scenarios to anticipate several possibilities (what happens if your sales take longer than expected to ramp up, for example), so you're ready for all eventualities.
When seeking financing, your forecast will be incorporated into your business plan, which is the document you will use to present your business idea to financial partners. We'll come back to the business plan in more detail later in this guide.
Creating and updating your steel manufacturing business's forecast is an ongoing process. Indeed, having up-to-date financial projections is the only way to maintain visibility over your company's future cash flow and cash position.
Forecasting is, therefore, the financial management tool that will be with you throughout the life of your company. Once you've started trading, you'll need to regularly compare the difference between your actual accounts and your forecasts, and then adjust them to maintain visibility over your future cash flows.
What does a financial projection look like?
The following financial tables will be used to present your steel manufacturing business's financial forecast.
The projected P&L statement
Your steel manufacturing business's forecasted P&L statement will enable you to visualise your steel manufacturing business's expected growth and profitability over the next three to five years.
The projected balance sheet of your steel manufacturing business
The projected balance sheet gives an overview of your steel manufacturing business's financial structure at the end of the financial year.
The cash flow projection
A cash flow forecast for a steel manufacturing business shows the projected inflows and outflows of cash over a specific period, providing insights into liquidity and financial health.
Which solution should you use to make a financial projection for your steel manufacturing business?
Using an online financial forecasting tool, such as the one we offer at The Business Plan Shop, is the simplest and safest solution for forecasting your steel manufacturing business.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- The software helps you identify and correct any inconsistencies in your figures
- You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
- After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
How do I choose a name and register my steel manufacturing business?
Now that your project of launching a steel manufacturing business is starting to take shape, it's time to look at the name of your business.
Finding the name itself is generally fairly easy. The difficulty lies in registering it.
To prevent this guide from being too long, we won't go into all the criteria you need to take into account when choosing a striking name for your steel manufacturing business. However, try to choose a name that is short and distinctive.
Once you have a name that you like, you need to check that it is available, because you cannot use a name that is identical or similar to that of a competitor: this type of parasitic behaviour is an act of unfair competition for which you risk being taken to court by your competitors.
To avoid any problems, you will need to check the availability of the name:
- Your country's company register
- With the trademark register
- With a domain name reservation company such as GoDaddy
- On an Internet search engine
If the desired name is available, you can start the registration process.
It is common to want to use the trading name as the name of the company, and to have a domain name and a registered trademark that also correspond to this name: Example ® (trading name protected by a registered trademark), Example LTD (legal name of the company), example.com (domain name used by the company).
The problem is that each of these names has to be registered with a different entity, and each entity has its own deadlines:
- Registering a domain name is immediate
- Registering a trademark usually takes at least 3 months (if your application is accepted)
- The time taken to register a new business depends on the country, but it's generally quite fast
How do I go about it?
Well, you have two choices:
- Complete all registrations at the same time and cross your fingers for a smooth process.
- Make sure to secure the domain names and trademarks. Once that's done, wait for confirmation of a successful trademark registration before moving on to register the company.
At The Business Plan Shop, we believe it's essential to prioritize securing your domain names and trademarks over the business name. This is because you have the flexibility to use a different trading name than your legal business name if needed.
Regardless, we suggest discussing this matter with your lawyer (see below in this guide) before making any decisions.
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What corporate identity do I want for my steel manufacturing business?
The following step to start a steel manufacturing business is to define your company's visual identity.
Visual identity is part of the DNA of your steel manufacturing business: it makes you recognizable and recognized by your customers, and helps you stand out from the competition. It also helps convey your values, notably through the choice of colors that identify the company.
Creating your business's visual identity yourself is entirely possible: there are several online tools that let you generate color palettes, choose typography and even generate logos.
However, we advise you to delegate this task to a designer or a communications agency for a professional result.
Your corporate identity will include the following elements:
- Your business logo
- Your brand guidelines
- Your business cards
- Design and theme of your website
Logo
Your steel manufacturing business's logo serves as a quick identifier for your company. It will be featured on all your communication platforms (website, social networks, business cards, etc.) and official documents (invoices, contracts, etc.).
Beyond its appearance, your logo should be easy to use on any type of support and background (white, black, gray, colored, etc.). Ideally, it should be easy to use in a variety of colors.
Brand guidelines
One of the challenges when starting a steel manufacturing business is to ensure a consistent brand image wherever your company is visible.
This is the role of your company's brand guidelines, which defines the typography and colors used by your brand and thus acts as the protector of your brand image.
Typography refers to the fonts used (family and size). For example, Trebuchet in size 22 for your titles and Times New Roman in size 13 for your texts.
The colors chosen to represent your brand should typically be limited to five (or fewer):
- The main colour,
- A secondary colour (the accent),
- A dark background colour (blue or black),
- A grey background colour (to vary from white),
- Possibly another secondary colour.
Business cards
Classic but a must-have, your business cards will be at your side to help you easily communicate your contact details to your founders, customers, suppliers, recruitment candidates, etc.
In essence, they should feature your logo and adhere to the brand guidelines mentioned earlier.
Website theme
Likewise, the theme of your steel manufacturing business website will integrate your logo and follow the brand guidelines we talked about earlier.
This will also define the look and feel of all your site's graphic elements:
- Buttons
- Menus
- Forms
- Banners
- Etc.
Navigate the legal and regulatory requirements for launching your steel manufacturing business
The next thing to do in getting a steel manufacturing business off the ground is to handle all the legal and regulatory requirements. We recommend that you be accompanied by a law firm for all of the steps outlined below.
Intellectual property
One of your priorities will be to ensure that your company's intellectual property is adequately protected.
As explained before, you can choose to register a trademark. Your lawyer can help you with a detailed search to make sure your chosen trademark is unique and doesn't clash with existing ones.
They'll assist in preparing the required documents and steer you in picking the right categories and locations for trademark registration.
Moreover, your lawyer can offer guidance on additional measures to protect other intellectual property assets your company may have.
Getting your steel manufacturing business paperwork in order
For day-to-day operations, your steel manufacturing business will need to rely on a set of contractual documents.
Your exact needs in this respect will depend on the country in which you are launching your steel manufacturing business, the number of partners and the envisaged size of the company.
However, you will probably need at least the following documents:
- Employment contracts
- General terms and conditions of sale
- General terms and conditions of use for your website
- Privacy Policy for your website
- Cookie Policy for your website
- Invoices
- Etc.
Applying for licences and permits and registering for various taxes
Operating your business legally may require licences and business permits. The exact requirements applicable to your situation will depend on the country in which you set up your steel manufacturing business.
The lawyers who advise you will also be able to guide you with regard to all the rules applicable to your business.
Similarly, your accountant will be able to help you take the necessary steps to comply with the tax authorities.
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Writing a business plan for your steel manufacturing business
The next step in opening a steel manufacturing business is to draw up your business plan.
What is a steel manufacturing business's business plan?
A business plan serves as a comprehensive roadmap outlining the objectives, strategies, and key components of your venture.
There are two essential parts to a business plan:
- A numerical part, the financial forecast we mentioned earlier in this guide, which highlights the amount of initial financing needed to launch the business and its potential profitability over the next 3 to 5 years,
- A written part, which presents in detail the project of creating a steel manufacturing business and provides the necessary context to enable the reader of the business plan to judge the relevance and coherence of the figures included in the forecast.
Your business plan helps guide decision-making by showcasing your vision and financial potential in a coherent manner.
Your business plan will also be essential when you're looking for financing, as your financial partners will ask you for it when deciding whether or not to finance your project to open a steel manufacturing business. So it's best to produce a professional, reliable, and error-free business plan.
In essence, your business plan is the blueprint to turn your idea into a successful reality.
What tool should you use to create your steel manufacturer business plan?
If you want to write a convincing business plan quickly and efficiently, a good solution is to use an online business plan software for business start-ups like the one we offer at The Business Plan Shop.
Using The Business Plan Shop to create a business plan for a steel manufacturing business has several advantages :
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete startup business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can create scenarios to stress test your forecast's main assumptions
- You can easily track your actual financial performance against your financial forecast by importing accounting data
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using our solution, you can try The Business Plan Shop for free by signing up here.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast and write a business plan to help convince investors that your business idea can be profitable.
How to raise finance for my steel manufacturing business?
Once your business plan has been drafted, you’ll need to think about how you might secure the financing necessary to open your steel manufacturing business.
The amount of initial financing required will obviously depend on the size of your steel manufacturing business and the country in which you wish to set up.
Businesses have access to two main categories of financing: equity and debt. Let's take a closer look at how they work and what sources are available.
Equity funding
At a high level, the equity of your steel manufacturing business will consist of the money that founders and potential investors will invest to launch the company.
Equity is indispensable as it provides the company with a source of long-term (often permanent) financing and demonstrates the founders' conviction in the company's chances of success, since their investments would be lost in the event of bankruptcy.
Equity investors can generate a return on their investment through dividends (which can only be paid out if the company is profitable) or capital gains on the resale of their shares (if the company is attractive enough to attract a buyer).
As you can see, the equity investors' position is extremely risky, since their capital is at risk and can be lost in the event of bankruptcy, and the company must be profitable or resellable before they can hope to generate a return on their investment.
On the other hand, the return on investment that equity investors can expect to generate by investing in a steel manufacturing business can be very substantial if the company is successful.
This is why equity investors look for start-up ideas with very high growth or profitability potential, in order to offset their risk with a high potential return on investment.
In technical terms, equity includes:
- Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
- Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company than doing so as you can repay director loans at any time.
- Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
- Investment grants: these represent any non-refundable amounts received by the company to help it invest in long-term assets.
- Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.
The main sources of equity are as follows:
- Money put into the business from the founders' personal savings.
- Money invested by private individuals, which can include business angels, friends, and family members.
- Funds raised through crowdfunding, which can take the form of either equity or donations (often in exchange for a reward).
- Government support to start-ups, for example, loans on favourable terms to help founders build up their start-up capital.
Debt funding
The other way to finance your steel manufacturing business is to borrow. From a financial point of view, the risk/return profile of debt is the opposite of that of equity: lenders' return on investment is guaranteed, but limited.
When it borrows, your company makes a contractual commitment to pay the lenders by interest, and to repay the capital borrowed according to a pre-agreed schedule.
As you can see, the lenders' return on investment is independent of whether or not the company is profitable. In fact, the only risk taken by lenders is the risk of the company going bankrupt.
To avoid this risk, lenders are very cautious, only agreeing to finance when they are convinced that the borrowing company will be able to repay them without problems.
From the point of view of the company and its stakeholders (workforce, customers, suppliers, etc.), debt increases the risk of the venture, since the company is committed to repaying the capital whether or not it is profitable. So there's a certain distrust towards heavily indebted companies.
Companies borrow in two ways:
- Against their assets: this is the most common way of borrowing. The bank finances a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the company cannot repay, the bank seizes the asset and sells it to limit its losses.
- Against their future cash flows: the bank reviews the company's financial forecast to estimate how much the company can comfortably borrow and repay, and what terms (amount, interest rate, term, etc.) the bank is prepared to offer given the credit risk posed by the company.
When creating a steel manufacturing business, the first option is often the only one available, as lenders are often reluctant to lend on the basis of future cash flows to a structure that has no track record.
The type of assets that can be financed using the first method is also limited. Lenders will want to be sure that they can dispose of foreclosed assets if needed, so they need to be assets that have an established second-hand market.
That being said, terms and conditions also depend on the lender: some banks are prepared to finance riskier projects, and not all have the same view of your company's credit risk. It also depends on the collateral you can offer to reduce risk, and on your relationship with the bank.
In terms of possible sources of borrowing, the main sources here are banks and credit institutions.
In some countries, it's also possible to borrow from private investors (directly or via crowdlending platforms) or other companies, but not everywhere.
Takeaways on how to finance a steel manufacturing business
Multiple options are available to help you raise the initial financing you need to launch your steel manufacturing business.
There are two types of financing available to companies. To open a steel manufacturing business, an equity investment will be required and may be supplemented by bank financing.
Launching your steel manufacturing business and monitoring progress against your forecast
Once you’ve secured financing, you will finally be ready to launch your steel manufacturing business. Congratulations!
Celebrate the launch of your business and acknowledge the hard work that brought you here, but remember, this is where the real work begins.
As you know, 50% of business start-ups do not pass the five-year mark. Your priority will be to do everything to secure your business's future.
To do this, it is key to keep an eye on your business plan to ensure that you are on track to achieve your goals.
No one can predict the future with certainty, so it’s likely that your steel manufacturing business's financial performance will differ from what you predicted in your forecast.
This is why it is recommended to make several forecasts:
- A base case (most likely)
- An optimistic scenario
- And a pessimistic scenario to test the robustness of your financial model
If you follow this approach, your numbers will hopefully be better than your optimistic case and you can consider accelerating your expansion plans. That’s what we wish you anyway!
If, unfortunately, your figures are below your base case (or worse than your pessimistic case), you will need to quickly put in place corrective actions, or consider stopping the activity.
The key, in terms of decision-making, is to regularly compare your real accounting data to your steel manufacturing business's forecast to:
- Measure the discrepancies and promptly identify where the variances with your base case come from
- Adjust your financial forecast as the year progresses to maintain visibility on future cash flow and cash position
There is nothing worse than waiting for your accountant to prepare your year-end accounts, which can take several months after the end of your financial year (up to nine months in the UK for example), to realise that the performance over the past year was well below the your base case and that your steel manufacturing business will not have enough cash to keep running over the next twelve months.
This is why using a financial forecasting solution that integrates with accounting software and offers actuals vs. forecast tracking out of the box, like the financial dashboards we offer at The Business Plan Shop, greatly facilitates the task and significantly reduces the risk associated with starting a business.
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Key takeaways
- There are 15 key steps to opening a steel manufacturing business.
- Your financial forecast will enable you to accurately assess your initial financing requirements and the potential profitability of your project.
- Your business plan will give your financial partners the context they need to be able to judge the consistency and relevance of your forecast before deciding whether or not to finance the creation of your steel manufacturing business.
- Post-launch, it's essential to have an up-to-date forecast to maintain visibility of your business's future cash flows.
- Using a financial planning and analysis platform that integrates forecasts, business plans and actual performance monitoring, such as The Business Plan Shop, makes the process easier and reduces the risks involved in starting a business.
We hope this guide has helped you understand how to open a steel manufacturing business. Please don't hesitate to contact us if you have any questions or want to share your experience as an entrepreneur.
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Founder & CEO at The Business Plan Shop Ltd
