On the other hand, if you want your business to grow, you need to reinvest in the business. Maybe you need a bigger space, or a piece of equipment that will save you labor? Maybe you have an order for a bigger boat and need materials, supplies and equipment you don't have.  Possibly some piece of equipment has worn out and needs replacing.  All of this has to be taken into consideration.

Now you're business is growing.  You can only  fill so many orders, and you have more orders than you can fill?  What do you do? Do you hire labor to help? If you do, then you need to know the following.

What wage will you pay?  How much is labor going to cost you and will your business still be profitable? Do you know the fair labor laws in your state? Many states have laws about hours, overtime, breaks, what you can and can't ask an employee to do, and some states have laws about wages.  In addition to that there are the Federal Minimum Wage laws.

How will you pay Social Security and Medicare taxes for this person. Will you be able to offer them any benefits such as life and medical insurance?  If you offer medical you may need a National Standard Employer Identifier (NSEI) from the Department of Health and Human Services.

Since I wrote the above the Congress has passed the Affordable Health Care Act http://www.healthcare.gov/. This may affect your business. However, small businesses (the number of employees, not the volume of your business) may be exempted. But you need to check it out.

You will need to find out about deducting Federal and State taxes and how to report them. You may need to get a Federal Employer ID Number.

If you decide to hire immigrant labor how do you make sure you don't violate laws on hiring immigrants?

Pricing your Product:   If you have been tracking your costs, then you have a pretty good idea of what it costs to build the boat.  But did you keep track of your labor?  How many hours of your time went into the actual building of the boat?   Most businesses also add overhead costs to the cost of producing a product.  How much of that are you going to add.

Your cost   =   Materials + Labor Cost + overhead.

Your price  =  Your cost + markup for profit. Only you can decide how much a markup there should be for profit.  This is known as Profit Margin.

Typically in a volume production fiberglass boat manufacturing business, profit margin is about 5% to 10%.  The smaller the business and smaller the volume the higher the profit margin has to be to make any money. Do you add 50% or 100%.  You have to decide what you can live with. Profit Margin is how you earn money on your product, so think about this. Ask other builders how much they markup their boats.

While you are thinking about how much you will charge, also think about how you are going to collect payment. Too many boat builders have lost money because a person ordered a boat, and then changed their mind after it was built.  That is money out of your pocket.   Are you going to ask for cash up front?  Many boat builders ask for half up front, and half on delivery. Make sure you get the terms of the deal in writing. See Legal Considerations.  In the contract, provide for any changes the customer might make while the boat is being built.  You need to specify how these changes will be paid for. Have an attorney draw up a contract for you.  Or if you are brave enough there a simple contracts available that you can modify and use.  

Paying Loans or Credit:  Where are you going to get the money to start your business?  If you get a loan to finance your business, part of your cost of doing business is repaying the loan. Obviously how much this is depends on the amount of the loan, the interest rate , and how long you have to pay off the loan.  Some people mortgage their homes to get business loans.  This is not a good idea. If the business fails you are still held responsible to pay off the loan. If you can't make the monthly payment, the bank can take your house.  So be careful about getting loans. If you need collateral to secure the loan, try not to use your home as collateral.  Try to get what's called a signature loan.  A signature loan does not require collateral.   You still have to pay it, but you won't lose your home. Getting back to credit cards, this is how many small businesses finance the startup of their business. They max out their credit cards.  The interest rate can be considerably more than a bank loan but they won't ask for collateral. But, you may spend many years paying off the credit card debt.   If you do use a credit card for your business, use it only for your business! Never use it for personal purchases! Keep your business credit separate from your personal credit.

Others have financed their startup by borrowing from family and friends.  If you succeed, this can be a good way to get started, but if you fail it's a good way to lose family and friends. Only you can make these decisions.

Inventory and Inventory cost:  One thing that any manufacturing business has to consider is how much inventory to keep on hand. There are two kinds of inventory. One is the materials, parts and supplies you purchase to make your product.   The other is the product you make, called finished goods.

Materials, Parts and Supplies: Most large companies today keep minimal inventory on hand, only enough to get them through an emergency for maybe a day or two.  This is calledJust-In-Time inventory management.  It means that they place orders that arrive just in time to be used up until the next order arrives. Inventory arrives on a daily basis.  This allows them to eliminate storage and management of inventory.  However this is hardly practical for the small business. Is there a better way?

Many small manufacturing business and job shops use bins.  You have two bins for each item in inventory. When the first bin is empty you order to fill that bin and work out of the second bin. When the order comes in you fill the first bin, but keep working out of the second bin until it is empty. Then you order more to fill the second bin and go back to working out of the first.  You can do the same thing by having one bin and ordering when it is half full but it's easier to know the order point  if you have two bins.  Over time you will learn how long each bin lasts and can adjust so that your order comes in just before the bin you are working from runs out.

This way you can reduce inventory cost by purchasing only the amount you need.

Another way to reduce inventory cost is to reduce the amount of waste.  Waste is simply what you don't use.  There are hundreds of ways to reduce waste and most just require a little thought. For instance if you are building a boat using plywood panels, how many pieces can you get out of each panel. If you are working from someone else's design they may have already figured this out. If it's your design then it will save you money to spend some time determining how you can use all of your materials. If you are building fiberglass boats you should have already determined exactly how much glass and how much resin goes into each part of the boat. Resin price fluctuates with the price of oil so it is best to know just how much you need. If you have left over wood, don't toss it out. You may be able to use it for small parts in another boat.  Or if you can't, you might be able to sell it to someone who can.  The point is to think ahead and purchase only what you need to keep on working.  You don't need to be standing around, or have workers standing around doing nothing for want of something to do the job. So make sure you have only what you need, but also know when to order so that you don't run out before the job is finished.

Finished Goods: The other kind of inventory is the product you make. If you only build to order, that is, you take an order before you build, then you would not have unsold inventory sitting around. But if you decide to do a production line type of manufacturing, it is likely you will have unsold inventory at the end of the year. The best practice is to not have any unsold inventory.  Some manufacturers who sell through dealers, have dealer meetings in the winter and take orders from them for the next years production.  This minimizes unsold inventory.  But if you sell factory direct, that is you have your own showroom and sales staff, then you must learn by trial and error how many boats you will sell each year and try to project ahead so you minimize the amount of unsold inventory. Why?  Unsold inventory takes up space and there are costs associated with storing it.  It also has to be listed as inventory on your taxes. It is also money you have spent but have not recovered by selling the boat. So it is best to keep unsold inventory to a minimum. Of course if you have your own showroom then you are going to have some unsold inventory, at least the boats that are sitting on the showroom floor. This is another thing you will learn about by taking business courses.   There are specific courses offered in inventory management, but it is also covered in most basic business courses.

Offsite Links Referenced in the Text

Purchasing and cost control for Small Business http://www.businesstown.com/accounting/purchasing.asp
Federal government http://www.uspto.gov/
Magnuson-Moss Warranty Act http://www.ftc.gov/bcp/edu/pubs/business/adv/bus01.shtm
Professional Boatbuilder http://www.proboat.com/
guide to starting a business http://www.sbtdc.org/pdf/startup.pdf
some states have laws about wages http://www.dol.gov/esa/minwage/america.htm
Federal Minimum Wage laws http://www.dol.gov/whd/flsa/index.htm
National Standard Employer Identifier (NSEI) from the Department of Health and Human Services http://aspe.hhs.gov/admnsimp/faqemp.htm
You may need to get a Federal Employer ID Number http://www.irs.gov/businesses/small/article/0,,id=98350,00.html
laws on hiring immigrants http://www.dol.gov/compliance/laws/comp-ina.htm