Contract Manufacturing Business

How Profitable Is A Contract Manufacturing Business? (Updated for 2024)

Pat Walls

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Updated: October 5th, 2024

How Profitable Is A Contract Manufacturing Business? (Updated for 2024)

So you want to start a contract manufacturing business?

And the first question that came to your mind was, “well, are contract manufacturing businesses actually profitable?”

With a market size of $1.5B - there’s plenty of business to go around.

Especially considering:

You could start a contract manufacturing business with as low as $60,000
Based on our data, contract manufacturing businesses generate an average of $10.1M per year

There’s money to be made. Don’t worry.

But, I don't want to spoil it all. Below we’ll cover everything you need to know when it comes to the profitability of a contract manufacturing business.

Let’s dive in!

Is a contract manufacturing business profitable?

Yes, a contract manufacturing business is generally a profitable business. However, you still need to consider several factors since these things always impact the overall outcome.

For instance, since average revenue is $10.1M per year with an estimated gross margin of 30%, you could expect to recover your investment within 25 months or even less.

But of course, it all comes down to how much you earn compared to the potential revenues of your contract manufacturing business.

To determine whether your business is profitable, you should earn more than your expenses in the beginning months. However, while you're in your first month, it can be challenging to know what to expect.

Therefore, you should maintain a record of your monthly expenses and income to determine whether you're meeting your goals. By doing this step, you can see how your contract manufacturing business is doing and if any changes or adjustments need to be made to enhance or maintain your efforts.

Is a contract manufacturing business worth it?

If you’re wondering if a contract manufacturing business is worth it, the answer is a big YES. With contract manufacturing businesses, you have the potential to earn $10.1M per year (this is based on data reported by real founders).

Further, you could have your initial investment back within months. Simply put, it’s a business worth a shot, especially if you have the resources and make the necessary efforts to achieve or surpass the target.

With a market size of $1.5B, it will be possible for you to build something that grows and turns into a flourishing business. As such, it’s the type of business you might want to consider starting.

Of course, you must learn and understand every aspect of running a contract manufacturing business to ensure success. Still, as long as you have the initial investment and can endure a few months before your actual gains, this business could be worth it.

You might want to consider reading more specifics about successful contract manufacturing businesses case studies.

Examples Of Profitable Contract Manufacturing Businesses

Here are a few examples of profitable contract manufacturing businesses, and a few more details about them:

1. KO-Pack ($3M/year)

Payton LaCivita, co-owner of KO-Pack, had a lifelong passion for entrepreneurship. After successfully launching his own brand and consulting for others, he saw an opportunity to disrupt the contract manufacturing and copacking industry. With a vision to provide fast and reliable services to e-commerce brands, Payton and his co-owners raised capital, built a state-of-the-art facility, and started attracting clients with their innovative product offerings and exceptional customer service. Since their launch in May 2020, KO-Pack has experienced impressive growth, adding new client partners weekly and averaging $150k in monthly revenue.

Is it profitable? Yes
How much money it makes: $3M/year
How much did it cost to start: $1M

How We Started A $150K/Month Contract Manufacturing And Copacking Business

KO-Pack is a contract manufacturing and copacking company for men’s grooming, haircare, skincare, aroma therapy, and natural household products, growing at 40-60% YoY growth and averaging $150k per month.

Read this case study

Read by 3,022 founders

2. Earth's Creation ($6M/year)

Donald Passwaters turned a setback into success, leveraging over 40 years in the supplement manufacturing industry to start EC Nutrition. Fired from FEDCO in his forties and faced with financial pressure, he channeled his expertise to build a multimillion-dollar enterprise, operating out of a 100,000 sq. ft. facility.

Is it profitable? Yes
How much money it makes: $6M/year
How much did it cost to start: $100K

Building A $6M/Year Supplement Manufacturing Business

Case study: EC Nutrition, a manufacturer of nutraceuticals, started with no buildings or equipment and now operates out of a 100,000-square-foot facility, experiencing 400% growth in revenue over the past six years and anticipating another 400% increase in the next five years by expanding into new markets and launching new products targeting brain health and sports nutrition.

Read this case study

Read by 2,431 founders

3. DetraPel ($7.2M/year)

David Zamarin, founder of DetraPel, came up with the idea for his business when he wanted to create a spray to protect his new Jordan shoes. However, lacking the chemistry knowledge, he started a shoe cleaning business instead. After discovering a harmful competitor's product, he sold his first business and invested the money into developing his own non-toxic and eco-friendly protective coatings, which has led to over $512,000 in sales in the last year.

Is it profitable? Yes
What's the gross margin? -3%
How much money it makes: $7.2M/year
How much did it cost to start: $60K

DetraPel: A Stain Preventor Product That Got On Shark Tank

DetraPel is a company that manufactures and distributes eco-friendly liquid repellent sprays designed to protect fabric and leather belongings, which has made over $512,000 in sales last year and has successfully partnered with Shark Tank.

Read this case study

Read by 11,437 founders

Learn more about starting a contract manufacturing business:

Where to start?

-> How much does it cost to start a contract manufacturing business?
-> Pros and cons of a contract manufacturing business

Need inspiration?

-> Other contract manufacturing business success stories
-> Marketing ideas for a contract manufacturing business

Other resources

How much can you make with a contract manufacturing business?

With a contract manufacturing business, you can make an average of $10.1M revenue per year (based on data reported by real businesses).

You can start with an initial investment as low as $60,000. Then, with proper knowledge and sustained effort, you could have an ROI (return of investment) within 25 months.

How much does a contract manufacturing business make a week?

Based on our data, average weekly revenue for a contract manufacturing business ranges around $209K. As such, you could see monthly revenues of $838K.

To know if your contract manufacturing business achieves the weekly profit target, you need to keep track of the total earnings you get per day. Afterward, you'll want to consider subtracting the expenses you have daily.

Learning your weekly profit can also show whether you're hitting your target goal for your contract manufacturing business.

How much do contract manufacturing businesses owners make?

The income of a contract manufacturing business owner can vary depending on various factors such as location, size, competition, and the owner's business skills.

But to give you some idea, the weekly revenue of an established contract manufacturing business is about $209K. But this can be lower or higher depending on so many factors - it's almost impossible to say exactly.

While the potential for earning a good income as a contract manufacturing business owner exists, success in this field requires a commitment to providing quality products and services and building a strong reputation within the community.

Contract Manufacturing Business Profit Margins

Generally speaking, a contract manufacturing business can expect profit margin of around 30%. Profit margins refer to the percentage of revenue that remains after deducting all expenses associated with running a business. In the case of a contract manufacturing business, profit margins can vary depending on various factors, such as the type and quality of products sold, the size of the store, and the level of competition in the area.

However, these figures can vary depending on the pricing strategy, inventory management, and overall efficiency of the business. To maintain healthy profit margins, contract manufacturing business owners must focus on managing costs, negotiating favorable supplier terms, and providing high-quality products and services to attract and retain customers. By doing so, contract manufacturing business owners can ensure long-term sustainability and profitability for their business.

Contract manufacturing business owner salary

The salary of a contract manufacturing business owner is an unpredictable figure. It's significantly influenced by numerous factors, including the store's location, its size, and the degree of competition. An owner of a well-established contract manufacturing business, in a prime position, might see an average weekly salary around the ballpark of $62.8K.

But it's worth noting, such numbers aren't always consistent. The earnings can vary wildly, potentially swinging by as much as 80% either way.

Achieving consistent success and maintaining a reliable income stream in this industry requires a deep commitment. It's imperative to offer high-quality products, deliver impeccable customer service, and nurture a trusted bond with the community you serve.

Conclusion

In a nutshell, based on many of our examples, a contract manufacturing business may be a promising business to start - but the success of your contract manufacturing business mostly depends on your effort and your approach.

If you focus on these, you'll have a much higher chance of a profitable contract manufacturing business.

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Starting A Contract Manufacturing Business: Everything You Need To Know

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