Business Strategy/Entrepreneurship thread for metal shops

[jamscal]

Beyond the normal day to day business of getting customers and doing work, what are some of your entrepreneurial exploits?

And how did they affect/change your business?

Also, if you moved to 'the next level' what business/financial choices helped you to get there?

(The next level being working 'on your business' more than 'in your business'.)

 

[Ox]

If I didn't recognize your name I would think that this was posted by some college kid that simply doesn't know what he doesn't know, and wanted to word it to sound like he was smart.


I for one - as a blue collar putz, I have no clue how to read what you asked.


You've been at this long enough, how 'bout you put yours out there to git us started?



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

Think Snow Eh!
Ox

 

[jamscal]

Ha, thanks for the feedback....I actually tried wording it a couple different ways, wasn't ever satisfied and ended up with that^^^ sorry.

I'll think about a better way to put it but if someone wants to freestyle that's fine too.

 

[Ox]

I'm gunna take a stab...

Beyond the normal day to day business of getting customers and doing work, what are some of your entrepreneurial exploits?

And how did they affect/change your business?

Before I started my own shop (@ 22 yo) I had a DJ business on the side already. (late 80's)
One of the stabs at the time was "You make $200 for 4 hours work?"
Well, that was for 4 hours of playing time, but the day started soon after noon when I went in to clean up, pack up, and head out to destination and set-up.
Then there was about the same time on the other end with getting home at 3AM sometimes.
But I liked it, and it paid the grocery bill at the time.

I soon started my shop, and for the first few years, I needed that grocery subsidy more than ever!
But after about 4 years, my shop was busy and I needed those hours on Saturday afternoon/evening in my shop, and had to hang up my hat on the weekend gig.

Also, if you moved to 'the next level' what business/financial choices helped you to get there?

(The next level being working 'on your business' more than 'in your business'.)

I still don't understand your differentiation between "in" and "on" in this Q.

IDK if "level" is really the case, but around the 3 yr mark I started running more and more production, and less and less tooling.
That is a shift, not sure about a level?

Over the next several yrs my milling capacity stayed the same, but I went from #3 Turret Lathe, to a Brownie, to a half dozen or more multi-spindle screw machines.
Is that a level?

I had been eyeballing CNC lathes, but I really didn't have that kind of work coming accrost my fax machine. Then in late '96 / early '97 a 50% customer hired a Consultant to tell them how they were not running their business right. This joker came up with the fact that they needed to put all their machining in one package and find one supplier to produce all these parts, and also with the option to be able to order just one pc at a time for the same $.



They sent out their "representitive" quoting pkg, and I drug my feet.... and I drug my feet... and I ..... was hoping that they would see the stoopidity in this approach and call it off, but - that didn't happen.... They were 50% of our business, and it seemed that our option was to quote the pkg and maybe get it all, or lose what we have had.

So I did finally bid the pkg, and we ended up "winning" the bid. (if that could possible be a good thing or not IDK?")

There was much Swiss work in there, as well as a bunch of CNC lathe work.
I have no clue how we would be taking on all these new part numbers and keep the dates required. (somewhat seasonal business to boot)
So we bought a new CNC lathe with live toys and sub, which should be able to run at least 1/2 of the parts, and still wasn't sure what on Earth we were gunna doo with the Swiss work, but I still didn't know how many parts there was nor the EAU of them yet, so I hadn't done anything with that regard yet. Likely try to farm out the first year?

So, I went from having interest in a used lathe, and kind'a lookin' at the J&L 45/15's and whatnot, to buying a new fancy 2" lathe with barfeeder for $180K!

So that is what initiated our move to "the next level". (if that's what you meant?)



Now - with that said, we got an order for the first 2 new parts, and then that was it. They finally came to their senses and nixed that whole stoooopid pkg deal.
I kept all my old work, never got a repeat on the 2 new jobs, and never saw any of the other new work.
... and then didn't have any work for the new machine that had $3750 payments for about a yr and a half...
On the positive side tho - we didn't have to pay any income taxes for '98! (or '99, '00, nor '01)


Ever since then, the live tooling/sub lathe work has been our main market, so in the end, that was a good move, even if it about killed us.


Is that what'chew was after?


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

Think Snow Eh!
Ox

 

[Garwood]

I interpret the "working on instead of in" part as how you transition from owning your own job to steering a business that is kind of it's own thing. That could be by hiring management employees or developing a brand, a really kick-ass website or???

I wouldn't say I'm "next level" on anything. I am my business. I do it all, but I have a plan that will change that. I have several product brands that I'm developing. My #1 focus for the past 6 years has been a rock solid foundation which to me means owning my own building, solid, redundant machines to make my parts, vendors I can outsource to if wanted/needed and the overall efficiency/idiot proofing of processes, documentation and organization. When that is 100% there (I'm about 85% right now) I'm switching gears, hiring an office employee and amping up the marketing effort significantly.

 

[Kalispel]

Building Wealth

I joined my kids in a business because I wanted them to have an avenue to build wealth.

I spent 35 years in the corporate world and I now subscribe to the theory that corporations are the new plantations. I never believed that until the past five or so years. The political correctness and hypocrisy is now sickening. Management’s use of IT tools to measure people is stifling. Executive greed is amazing. Advancement is based on pedigree and credentials over aptitude, experience and merit. I know my kids will not climb today’s ladder. I would never have survived my climb following today’s rules.

My wife and I do not want to give the kids a pile of money because it will probably end poorly. So, we decided to make them work for it. We started building the business foundation while our three kids worked for plantations in engineering, HR and CNC machining. My engineer son and I did the designs for our first products while he worked. My CNC son and I made the prototypes while he worked. Once the business was working, my wife and daughter started working on the office management and web tools. Once it was cash flow positive, they all joined full time.

The next step was buying small companies to add to the core. Mostly tired companies with one or two product lines and a website. The owners are selling to retire. I did a lot of M&A so I line up the opportunities. The kids integrate the desirable parts and we discard the rest. “CNC” handles the move, organization and production. “Engineer” handles the information, programming, materials, troubleshooting, etc. “HR” structures the financials, HR and website integration.

I force the kids to have a strategy and to run it. Their present struggle is prioritizing. They pursue too many product extensions and process changes. It is making money and their attitudes are changing. They are learning quickly.

Their next move will likely bet the farm on a big investment. They are young enough to fail without crushing their lives. If they win, they will truly own the business.

Our gain is having our extended family together. Our hope is the kids can maintain harmony in their roles and not let their greed or ambition destroy the business when we step out.

 

[Jashley73]

I spent 35 years in the corporate world and I now subscribe to the theory that corporations are the new plantations.

Exceptionally well said...

 

[Ox]

Exceptionally well said...

Yeah, that first paragraph sums it right up eh?



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

Think Snow Eh!
Ox

 

[Jashley73]

Yeah, that first paragraph sums it right up eh?



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

Think Snow Eh!
Ox

I just wish I'd have come to that conclusion a decade ago, and had the gumption to get _something_ started. Before 2 kids, tuition payments, 2022 health insurance & everything else...

 

[Kalispel]

Take it for what it says. The thread is about entrepreneurial strategy. I shared ours.

The comment about tired businesses is accurate. The companies are past their prime. The owners want to retire. Investment has stalled. All companies have “activity traps” that are best abandoned. There is nothing brutal about it. All of the owners have been great people. Smart and nice. They were all looking to sell.

We have great confidence in our kids. The all graduated from university and have successfully worked in their chosen fields. They can clearly do well in life on their own.

Corporate power is increasingly concentrated in fewer and fewer hands. Corporate environments have become so inclusive and woke that it is impossible for individuals to differentiate themselves. It is ironic really.

Independent business ownership is one of the few ways left to generate true wealth. Helping our kids do this could follow several paths. We could give them a pile of money — not good/not going to happen. We could buy them a bigger company — they would never truly own it. We could insist they grow it brick by brick — too slow to establish a platform that can support all of them. Buying product lines and assets that they integrate might work. The jury is still out.

 

[Ox]

I just wish I'd have come to that conclusion a decade ago, and had the gumption to get _something_ started. Before 2 kids, tuition payments, 2022 health insurance & everything else...

Well, the times they have'a changed...

For over a year before I started my own shop, I didn't even have insurance on my truck.
Heck, for the whole summer of '88 I drove an old POS truck that I didn't even have the title for!
I don't think that we had health ins until the shop covered our employees. We got it the same as them. (mid 90's)

Life was cheaper back then for sure.
Maybe it wasn't s'posed to be, but you could fly under the radar a little easier then.
At least I could...

I started with only 2 nickles, and I think that they were buffalo's?


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

Think Snow Eh!
Ox

 

[Mcgyver]

I still don't understand your differentiation between "in" and "on" in this Q.
Ox

Hamburger stand. Working in the business is flipping burgers. Working on the business might be developing detailed systems, creating training programs, HR manuals, supplier agreements, standard packaging, marketing and branding programs and standards, prototype store layouts etc. Working on the business is developing it so its scalable and does not depend on any one person's skill, i.e. doesn't run on tribal knowledge, its all codified....its doing everything you'd need to do so you could step away and keeps going. It's a short order chef vs what Ray Kroc did with McDonalds

 

[mario.pogacic]

Hi everyone. I hope that this is good topic for my questions. I have a lot of them
I am working now in a cnc lathe workshop on 2 lathes. One is Haas st10 and the other is Prvomajska tu360 with Phillips control. I have my own workshop which was manual until now because I have bought a Schaublin 110cnc lathe with 3 axes. My goal is to leave my regular job and work only in my workshop but I have a few questions. Is the Xometry platform good for jobs that they are giving? And what's the best way to get a lot of a job? I have experience in finding a jobs but not for cnc machining...I know that it's almost the same as entrepreneur but there must be some tips and tricks how to have more that my lathe is running at least 5 days in a week for begging.
I appreciate every answer.

 

[mhajicek]

Hi everyone. I hope that this is good topic for my questions. I have a lot of them ��
I am working now in a cnc lathe workshop on 2 lathes. One is Haas st10 and the other is Prvomajska tu360 with Phillips control. I have my own workshop which was manual until now because I have bought a Schaublin 110cnc lathe with 3 axes. My goal is to leave my regular job and work only in my workshop but I have a few questions. Is the Xometry platform good for jobs that they are giving? And what's the best way to get a lot of a job? I have experience in finding a jobs but not for cnc machining...I know that it's almost the same as entrepreneur but there must be some tips and tricks how to have more that my lathe is running at least 5 days in a week for begging.
I appreciate every answer.

There's a whole thread about Xometry on here if you look for it. In summary, a very small number of people claim it worked for them, under the right circumstances. You have to have the material already on hand, be able to pump the parts out super fast and ship them right away. You may also need to anodize them yourself, or have a buddy who can do that for you next day. Having ISO certification and the like are almost, but not quite, required to get jobs that pay decently. That said, if you have near zero overhead and live in an area with low cost-of-living, you might do ok. If not, well, that's the kind of shop you're competing against.

 

[snowman]

Having ISO certification and the like are almost, but not quite, required to get jobs that pay decently. That said, if you have near zero overhead and live in an area with low cost-of-living, you might do ok. If not, well, that's the kind of shop you're competing against.

This was my finding.

I could find plenty of work, but it didn't pay and you had to do a LOT of it the long way in order to grow. Then you had the choice of hamburger helper or ramen. If you chose ramen, you might be able to put away enough money to grow your capacity such that you can afford the overhead needed to build an ISO company.

My shop went from trying to support itself as a shop, to a shop performing cheap work building equipment for my other side hustle. After five years, I am only now on the verge of succeeding. Growth is still 100% supported by my full time gig.

 

[cnctoolcat]

The well-know book "The E-Myth" describes how to have a "franchise" mentality for your business.

What does this mean, exactly?

Well, the theory is to document everything in the business and how it's done. By having manuals and standard procedures, you can replicate your business anywhere else by just following the documented procedures.

It does make sense. This way a business can run and continue running as long as the employees follow the procedures.

It would be a LOT of work to make written procedures in a machine shop, but if you had them, the business would certainly have a good chance of survival without the owner(s) being there.

For example, McDonald's has a procedure for everything (even where to store the Mc-brooms), so franchisees have it pretty easy.

ToolCat

 

[William Payne]

I completely understand the original posters question. What he is talking about regarding working in vs working on is this.

Working in is where you are the size that as an owner the business is reliant on you physically handling the tools and doing the work yourself maybe with some other staff.

Working on the business is where the business has reached a level where you have staff delegated to perform the work and the physical work doesn’t require the owner to actually do it himself. This is where the owner becomes a director or CEO of the company and manages from the top down allowing other people to perform the required tasks.

It all really depends on what kind of business owner someone wants to be, some people want to grow a big company that becomes self sustaining with or without them while other owners don’t ever want to put down the tools.

 

[Mcgyver]

It would be a LOT of work to make written procedures in a machine shop, but if you had them, the business would certainly have a good chance of survival without the owner(s) being there.

Its an interest question - does this methodology make sense to apply to a job shop environment? It is a lot of work, and and a key benefit of it is scalability. A way I like describe it that people seem to get is "MacDonalds success doesn't depend on finding the best french fryer in each neighbourhood". People get that. But in job, shop, success is more closely tied to the individual's skills and knowledge vs process and systems.

To test the question, would it make sense to have a franchise model? ( I know that isn't necessarily what the book means by franchise). If you had everything laid on, brand, IT, signage, website, quoting system, marketing, stationary, vendor contracts, etc etc would it provide enough of a competitive advantage to a location to justify the investment?

I'm doubtful it would work, (but not sure) because as a typical job shop is more project oriented than production. otoh Maco auto collision might be similar and they've made it work, but they serve a consumer market where it seems there would be more advantages to well run marketing program and brand. but maybe that's just my bias.

Anyway, the entrepreneurial stuff I've been doing (beyond stressing making payroll which is becoming a big nut) is an acquisition that provided some products, added to an engineering team so we are doing a lot more design build vs just making stuff. The design build is of equipment has the huge advantage that you are not just making the contribution between shop rate and cost, but also all the margin on the commercial 3rd party stuff that goes into the equipment - motors, drive, etc. Overall gross margins are the same, but it takes you a fraction of the production hours to get the same amount of contribution....i.e. for $X in sales you still get $Y gross margin, but you need 1/2 the guys.

Lastly we have put together a bunch of young engineers on the team with lots of ideas. We do lots product brainstorming with them, along with the promise that for big ideas we can commercialize (outside our current core area, after all that's their job) there'll some participation for them (we'd create a newco with them getting some ownership). We've also been doing a fair bit software work (ERP like) and I'm trying to get an e commerce site up (for some of our product type stuff). The biggest challenge to that we're finding (surprisingly) is shipping....finding someone who will provide real time quotes via API so we can concluded a sale is not easy.

I am convinced that knocking it out of the park requires some big new innovation/breakthrough, something, even if its in a small niche that is game changing. Compared to the dreamer at the kitchen table, we've got the means of production at our disposal - we can execute and try ideas! I've got the team in place for that and want to get the core business to the point where its basically a platform (and partial lab/development shop) that lets us all get through the grocery check out line while working on new product development, a lot of which is around newer technology. Plus its a lot of fun working with bright keen 20 somethings.....keeps you young!

 

[rb07565]

Kalispel

I have thought many times about using the business strategy of acquiring small companies just for their product line. I was curious, if you dont mind answering, how do you find and research small companies that fit your requirements for acquisition?

 

[Freedommachine]

I force the kids to have a strategy and to run it. Their present struggle is prioritizing. They pursue too many product extensions and process changes. It is making money and their attitudes are changing. They are learning quickly.

Their next move will likely bet the farm on a big investment. They are young enough to fail without crushing their lives. If they win, they will truly own the business.

Our gain is having our extended family together. Our hope is the kids can maintain harmony in their roles and not let their greed or ambition destroy the business when we step out.

I cannot decide which I find more intriguing;
the humble confidence that implies you know exactly what you are doing, or your ability to raise an entire family of determined individuals who can work together.

Either way, I am left with the conclusion that I need to know what you know.