A humble request for mentor. Potential new shop.

[CTFL]

Well gentlemen,

A lot of "new shop" threads.
That is not what I'm trying to do here.

I am reaching out in the hopes that someone who may have received assistance starting up their business is looking to pass on some guidance.
(which is possibly even distasteful than another "new shop" thread)

Some very wise people have said, "you would be surprised how many people are willing to help, just gotta ask".
This is me asking so I dont totally faceplant my family's wellbeing.

Short bio: floor sweeper, manual machines, cnc machines, operator, machinist, macros, programmer, manufacturing engineer 2/3 (according to Donkey Hotey, which resonates with me).
I've been on PM for a while, now using company email, new PM name. (never much of a member presence anyhow)

I have an opportunity at the moment to start a business
I am very analytical and can generally reach optimal decisions but I am ignorant to many business concepts (reading, discussing, and learning now)

The common saying "dont know what you dont know" applies to me.

Looking for a PM discussion as probably more productive than a wide open thread. From which I expect to take a few lashings.
Im Houston based, in machine consideration stage, general advice, and unknown/surprising financial obligations, expected income, etc....
We can build from there and if there is any small value I can bring to the table, I will do so.

OOOkkkkaaayyyy...... the gasoline has been poured.
The match is lit, and "post thread" is the blaze. Lets go.

 

[Covenant MFG]

Someone: *Asks for advice on starting a shop*

Practical Machinist Members:

 

[Mr. Atoz]

Exactly what type of shop do you want to build? Will you be a product or job shop? Give us more info on what you want to do. You wear your humility well. +100 points.

 

[kustomizer]

Do you have a place to happen?
What if any tools do you now own?
Do they relate to the work you plan to do?

 

[CTFL]

Exactly what type of shop do you want to build? Will you be a product or job shop? Give us more info on what you want to do. You wear your humility well. +100 points.

Thank you Sir.

There are 3 customers I have in mind and connections with:
2 are product based. ( pb1 and pb2)
1 is job shop based. (js1)

The two product based customers, pb1 and pb2, need different machines. Horizontal for pb1 and lathe & mill for pb2
The job shop, js1, requires a 5axis.

js1 and pb1 machine needs can overlap though. I could install tombstone and/or high density fixture on 5x machine.

Only enough capital to acquire 5x or Mill+lathe duo.

Goal of company is to eventually reach high volume, strict requirement, automatable products as foundation.
Would still accept prototypes to keep skills sharp and to accommodate non product customers.
All industries welcomed with focus on Aero.

 

[CTFL]

Do you have a place to happen?
What if any tools do you now own?
Do they relate to the work you plan to do?

Letter of intent sent to small industrial building. 2200sq/ft including 300sq/ft office.
1st right to refusal for 4500sq/ft space they are completing in Oct 2024.
2 year lease. Nothing signed just yet.
Price is high, $2750/mo + utilities

I only own general machinist tool's (might have an endmill or tap at most) and computer strong enough for CAD/CAM.


All tool holders are planned to be rolled into financing. Tools will be purchased in 1 of 2 ways.
1: General tooling for 5x mill leaning towards versatility for wide array of incoming jobs (heat shrink probably out initially)
2: Specific and known tooling for product based customers (some of these parts I have already programmed in my prior jobs)

 

[Covenant MFG]

Aaaannyway, fun stuff aside, I'm only about 2 years in, still smoothing out the feast or famine stuff, but this so far has been helpful for me.

1. Start with no debt. This is for several reasons. First, pulling off a successful shop takes a remarkable amount of work, and if you can pull it off without making it "easier" by financing, it's a good sign you can make it work when things actually get tough. Second, is with any new venture, the goal should be to figure out as fast as possible if it's worth continuing. Debt obscures that. If you cannot continue without taking money from your future self, it's a decent sign that stable profitability is doubtful. If you can make good profit without having to take on debt, bada-boom you've proven pretty reliably that it works.
Third, you have to learn business via the school of hard knocks regardless. If you're dealing with small numbers, you learn to master them before the consequences get so big they can sink you. If I start off my business with a 20k job and lose money on it, I'm SCREEEEEWED. If I lose money on a 1k job, I'm hurt but educated, and know enough to handle the 20k job when it comes along. You don't throw a newbie on your brand new Hermle, don't throw yourself on a super expensive job.
Fourth, just plain risk reduction. I've had great months and I've had slumps so bad I didn't make a profit. But, it's just me, and literally the only overhead is rent. If/when sales dry up, cool I can just go pick up a day job or side work and just wait it out, or work on my sales skills.

2. Learn sales. I'm still in the middle of this. Big big big skill, seems to be one of the things that kills 2nd generation shops (the kid doesn't have the hunger to go pull in work). I started by grabbing overflow from established shops, definitely the easiest way to get in but the work is kind of crappy. Overnight stuff, complex one-offs. You kind of have to charge dirt cheap, but dirt cheap in shop rate terms is still pretty high if you have no overhead (see 1).

3. Learn moneyyyyy. Accounting. Cash flow. I like the Profit First method. All the stuffs on invoicing and payment terms etc.

Books: Personal MBA. Profit 1st. E-Myth. How to Be a Rainmaker.

 

[CTFL]

Aaaannyway, fun stuff aside, I'm only about 2 years in, still smoothing out the feast or famine stuff, but this so far has been helpful for me.

1. Start with no debt. This is for several reasons. First, pulling off a successful shop takes a remarkable amount of work, and if you can pull it off without making it "easier" by financing, it's a good sign you can make it work when things actually get tough. Second, is with any new venture, the goal should be to figure out as fast as possible if it's worth continuing. Debt obscures that. If you cannot continue without taking money from your future self, it's a decent sign that stable profitability is doubtful. If you can make good profit without having to take on debt, bada-boom you've proven pretty reliably that it works.
Third, you have to learn business via the school of hard knocks regardless. If you're dealing with small numbers, you learn to master them before the consequences get so big they can sink you. If I start off my business with a 20k job and lose money on it, I'm SCREEEEEWED. If I lose money on a 1k job, I'm hurt but educated, and know enough to handle the 20k job when it comes along. You don't throw a newbie on your brand new Hermle, don't throw yourself on a super expensive job.
Fourth, just plain risk reduction. I've had great months and I've had slumps so bad I didn't make a profit. But, it's just me, and literally the only overhead is rent. If/when sales dry up, cool I can just go pick up a day job or side work and just wait it out, or work on my sales skills.

2. Learn sales. I'm still in the middle of this. Big big big skill, seems to be one of the things that kills 2nd generation shops (the kid doesn't have the hunger to go pull in work). I started by grabbing overflow from established shops, definitely the easiest way to get in but the work is kind of crappy. Overnight stuff, complex one-offs. You kind of have to charge dirt cheap, but dirt cheap in shop rate terms is still pretty high if you have no overhead (see 1).

3. Learn moneyyyyy. Accounting. Cash flow. I like the Profit First method. All the stuffs on invoicing and payment terms etc.

Books: Personal MBA. Profit 1st. E-Myth. How to Be a Rainmaker.

Thank you Sir. I appreciate the effigy as well. Still chuckling from it.
I'd also like to say congratulations on your 2 year journey. Happy for ya.

1. Great point. It took me a second to understand it. I take it to mean: if you can build it, you have a better chance of keeping it running than if you just bought into it.
2. I have some sales in my background and will look to improve.
3. thank you for recommendations. I've heard of profit first but need to learn more about it.

 

[MCritchley]

Could we wrap every "i want to start a shop' into one thread. It would certainly be easier to search, and folks wouldn't have to type the same message every two weeks. Kudos to the shop owners that type out repeated responses, we could save you valuable time if there was one thread.

 

[CTFL]

Thats a really good idea.
I was thinking about a ranking system of most valuable threads earlier today.(not just 'start shop')
With all the wisdom that has been shared, there needs to be a way to assimilate it all into essentially a masterclass guidebook, over many different subjects.

This one, to reiterate, is actually more seeking some one on one guidance if anyone is willing. Maybe a mutualistic relationship can evolve if there are ways we could help each other.

Please, anyone, feel free to PM if you are at all interested.
Thanks.

 

[CTFL]

Hmmm. Thinking about it more....I might actually already know how to do that, at least to combine into one thread thing.
Thanks MCritchley, that's got me thinking.

 

[Ox]

A lot of "new shop" threads.
That is not what I'm trying to do here.

Seems like any other new shop thread to me.
Haven't yet seen anything differ'nt.

This one, to reiterate, is actually more seeking some one on one guidance if anyone is willing. Maybe a mutualistic relationship can evolve if there are ways we could help each other.

I thought this was a site full of pen palls?


-----------------------

Think Snow Eh!
Ox

 

[macgyver]

I'm 12 years in and am taking the long drawn out way of doing things so it's really only been the last 2-3 where I felt like I didn't make a bad decision. I think it takes alot more persistence than anyone really truly believes going into it, things just take alot more than you'd guess they would and of course more time.

I got a loan on my machine, own my building and had lots of tools and a few manual machines already. Everything was fine with paying off that loan, but just for my own sake I don't plan to get another loan for anything.

I am an owner operator so the overhead is such that I can deal with it and not be stressed out with payroll and machine payments and rent etc. I'm able to weather life's storms much easier in my opinion than throwing that on top of things. I will say that recently things are busy enough and jobs running long enough that I have been more open to the idea of help. My personality and confidence in my abilities make it so that I am more at home with machine and building repairs and figuring out how to deal with that vs buying new(er) stuff and paying for whatever those things cost. I struggle with knowing when to let someone else do it and looking back I could have made things easier if had at least a few times...

Before I started officially and got the machine loan I spent alot of time on here reading all the threads all the way beck to the beginning of the forum. Lots to learn, lots of repetition, but there are comments in there from guys that aren't with us anymore and are worth reading. I'd also look into any thread that has anything to do with real estate, environmental issues, payment or lack of them, etc. There are enough on here and from all over that there is someone who has learned the hard way about a subject that wasn't even on my radar. I recall one guy had to deal with the EPA due to his place that he just bought. It turned into a huge deal. Enough so that if you knew it going in, you wouldn't sign up for that no matter the price. I remember thinking at the time that I had never even considered that being a thing I should ask about.

Also, I hated hearing it, but most will say don't quit your day job until is very obvious you can make it for awhile on your own. I didn't get another job, mostly because I felt if I worked for someone else, I'd never make it happen. Hindsight being what it is, I do wish that I had bought some big ticket things before I got booted from the old job. I was making good money and could have bought CAM software and a machine. I'd say get everything you can before you lose the day job.

I'd say buy a CAM package ASAP, that will be the foundation to actually making things no matter the machine. Pick one that will upgrade to multiaxis so you can grow with it.

 

[CTFL]

Seems like any other new shop thread to me.
Haven't yet seen anything differ'nt.




I thought this was a site full of pen palls?


-----------------------

Think Snow Eh!
Ox

Pen pals? Could be sir. Im sure there are private and friendly conversations between members.

Seen nothing different? I hope no one sees anything at all. Looking for some private conversations with a good natured person/people. Politely answering questions until then sir.

 

[CTFL]

I'm 12 years in and am taking the long drawn out way of doing things so it's really only been the last 2-3 where I felt like I didn't make a bad decision. I think it takes alot more persistence than anyone really truly believes going into it, things just take alot more than you'd guess they would and of course more time.

I got a loan on my machine, own my building and had lots of tools and a few manual machines already. Everything was fine with paying off that loan, but just for my own sake I don't plan to get another loan for anything.

I am an owner operator so the overhead is such that I can deal with it and not be stressed out with payroll and machine payments and rent etc. I'm able to weather life's storms much easier in my opinion than throwing that on top of things. I will say that recently things are busy enough and jobs running long enough that I have been more open to the idea of help. My personality and confidence in my abilities make it so that I am more at home with machine and building repairs and figuring out how to deal with that vs buying new(er) stuff and paying for whatever those things cost. I struggle with knowing when to let someone else do it and looking back I could have made things easier if had at least a few times...

Before I started officially and got the machine loan I spent alot of time on here reading all the threads all the way beck to the beginning of the forum. Lots to learn, lots of repetition, but there are comments in there from guys that aren't with us anymore and are worth reading. I'd also look into any thread that has anything to do with real estate, environmental issues, payment or lack of them, etc. There are enough on here and from all over that there is someone who has learned the hard way about a subject that wasn't even on my radar. I recall one guy had to deal with the EPA due to his place that he just bought. It turned into a huge deal. Enough so that if you knew it going in, you wouldn't sign up for that no matter the price. I remember thinking at the time that I had never even considered that being a thing I should ask about.

Also, I hated hearing it, but most will say don't quit your day job until is very obvious you can make it for awhile on your own. I didn't get another job, mostly because I felt if I worked for someone else, I'd never make it happen. Hindsight being what it is, I do wish that I had bought some big ticket things before I got booted from the old job. I was making good money and could have bought CAM software and a machine. I'd say get everything you can before you lose the day job.

I'd say buy a CAM package ASAP, that will be the foundation to actually making things no matter the machine. Pick one that will upgrade to multiaxis so you can grow with it.

Thank you. I will continue to research old threads. A part of me was worried that they go back so far they might have lost their relevance. I'll ignore that thought and read all I can.

Your philosophy of foundation and room to grow with machine and with CAM is of my exact opinion as well. I appreciate the insights.

 

[Steve Marquess]

Well gentlemen,

A lot of "new shop" threads.
That is not what I'm trying to do here.

I am reaching out in the hopes that someone who may have received assistance starting up their business is looking to pass on some guidance.
...

Retired now, but I've started and run a number of small businesses (7 total IIRC though only three "real" ones that lasted more than a few years). Not machining, but I think the business side issues are the same. So things I wish I'd known up front:

1. Get an accountant to do your taxes. I made the mistake of trying to go it alone for a few years. The IRS is a lot less gentle with businesses than with individual taxpayers, and the couple of grand you pay an accountant every year will be a lot less than the vicious fines for even the most innocent of mistakes.

2. Track every penny. You CAN do this yourself, with some discipline. To this day I force myself to reconcile every statement and enter every transaction daily or close to daily. Keep on top of it and it's 15 minutes a day. Wait until you have a foot high stack of invoices and receipts and it is really painful. You have to do this with software, not on paper. I use GnuCash but think any common double entry system would do fine.

3. Some of your customers won't pay you, either in full, on time, or at all. Plan for it. I had the worst problems with the biggest corporations, much better luck with small businesses and government agencies. For many of my contracts I would not have payment on deposit in my bank for 3 to 12(!) months after doing and delivering the bulk of the work.

4. Have enough savings to survive a long time (six months plus) with zero net income, and be prepared for several lean years until you have a customer base built up. My collection of repeat customers was (slowly) building up for fifteen years, right up until I retired and shut down those companies. I never drew a salary, my income was what wasn't eaten up with other expenses. One bad year I had a negative annual income (some $30K in the hole).

5. Get an attorney to review your proposals and the inevitable red-lining by prospective customers, for any large jobs (= any job you can't afford to lose all the revenue from). It hurts to drop several hundred dollars a pop on paper shuffling, but too risky not to. Also, after a while you and your attorney get a sense for what is needed, by sheer repetition, and it gets easier.

6. Be careful with subs. Often necessary but you are responsible if it's your name on the contract. Several times I had to pay out of my pocket to cover subcontractor screwups ($23K one time, $7.5K another ... it hurt to write those checks).

7. Some small subset of your customers will be pure gold, even (especially?) the ones you think won't really matter. I had several customer contacts that brought me new business as they moved from company A to B to C. I learned to cherish them and would even sometimes give unsolicited and unpromised discounts as a reward. Towards the end as I retired I my business was mostly repeat customers.

8. The flip side ... some prospective customers you just need to walk away from (politely of course). Learned that one the hard way. Several times.

-Steve M.

 

[p-moon]

Remember three things - Cashflow, CashFlow, and CASHFLOW. You can be extremely profitable and still go broke.

 

[Radar987]

There are easier ways to lose all your money. I would recommend hookers.

In all seriousness, the odds are stacked against you if you're not an expert at some portion of the business. You should either be an expert at machining or an expert at running a business. If you have to learn both at the same time, you're in for a bumpy ass ride.

 

[Thunderjet]

There are easier ways to lose all your money. I would recommend hookers.

OK dickhead, you owe me a new keyboard.
(But I would've added racing onto that list)

 

[Garwood]

Take care of your health and watch your stress levels. My first 10 years in business it seemed like I accomplished everything with tenacity and brute force. Some exciting health problems forced me to use my brain for solving more than the immediate problems right in front of me and plan shit, strategize. If I could start it all over I would definitely do more thinking and less working.

I'm of the belief a business isn't really worth doing without some kinda tangible foundation. More than just you working hard and being good for your word you need assets and cash to weather the dynamics of it all.

Ask yourself if you're going to be happy doing this. I enjoy doing what I do most days. I mostly enjoy the people part- Customers, like minded weirdos I would never form relationships with if I weren't in business. After awhile making parts loses some of it's excitement. Machines are just tools, owning some fancy gogetamus CNC's doesn't actually make your dick bigger or anything. You're not special because you make shiny parts. Just ponder what you really want out of this because you can make a lot of money making parts working for others without the grind of owning it.