Bruce -- AM Editor
Plastic
- Joined
- Mar 7, 2006
- Location
- Cleveland, Ohio
Here’s the problem two shop owners posed to me last week:
They have a machine shop that is running pretty well and profitably.
A machine tool company wants to sell them one of their top-of-the-line milling machines, and the machine is very tempting - they expect that they will find plenty of work for it, and it has all the bells and whistles, so who wouldn't want it?
However, it costs $750,000, and the manufacturer wants a 10 percent – that’s $150,000 – down payment, with a delivery date of six months after the down payment is posted. (Delivery is not guaranteed in six months, it might be 7 or 8 or 9 months after posting the down payment.)
So, the shop owners don’t know if they should do it or not.
They have annual sales of about $15 million a year, about 100 employees, and a full-enough schedule with business in the medical and food industries. Their current operations are about half turning and half milling, and the new machine would significantly advance the shops capabilities.
The question that the owners have though, is:
Is the gamble worth it?
Although they think they will be able to keep the machine busy once it’s installed, spending $150,000 for a piece of equipment that won’t be delivered for 6, 7, or 9 months is putting them on edge. They can make the investment, but they'll be stretched thin, and they're understandably worried.
What if the economy turns down in four months, or two months after the machine is installed?
Like anyone else who's in business they've been through a lot to survive, adn they’re doing pretty well right now, so they are also worried that, if they grow too fast, their quality of life will suffer. I think that sounds like being a bit afraid of success, but that's what they said and it's one more thing they have to worry about after spending all that cash.
So, what'd'ya think?
They have a machine shop that is running pretty well and profitably.
A machine tool company wants to sell them one of their top-of-the-line milling machines, and the machine is very tempting - they expect that they will find plenty of work for it, and it has all the bells and whistles, so who wouldn't want it?
However, it costs $750,000, and the manufacturer wants a 10 percent – that’s $150,000 – down payment, with a delivery date of six months after the down payment is posted. (Delivery is not guaranteed in six months, it might be 7 or 8 or 9 months after posting the down payment.)
So, the shop owners don’t know if they should do it or not.
They have annual sales of about $15 million a year, about 100 employees, and a full-enough schedule with business in the medical and food industries. Their current operations are about half turning and half milling, and the new machine would significantly advance the shops capabilities.
The question that the owners have though, is:
Is the gamble worth it?
Although they think they will be able to keep the machine busy once it’s installed, spending $150,000 for a piece of equipment that won’t be delivered for 6, 7, or 9 months is putting them on edge. They can make the investment, but they'll be stretched thin, and they're understandably worried.
What if the economy turns down in four months, or two months after the machine is installed?
Like anyone else who's in business they've been through a lot to survive, adn they’re doing pretty well right now, so they are also worried that, if they grow too fast, their quality of life will suffer. I think that sounds like being a bit afraid of success, but that's what they said and it's one more thing they have to worry about after spending all that cash.
So, what'd'ya think?