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  1. #1
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    Default Chance to open a machine shop - $60k

    Thank you for the add!

    I was with my previous company for 6 years and spent the last 3 years implementing two MicroVu CMM instruments to our inspection processes. I am hobbyist at heart and love building things.

    I moved to Southern California in September and started a new job at a growing medical device manufacturer. We rely on several local and foreign machine shops to supply us the parts to build the device we sell.

    I have always wanted a hobby grade CNC mill, but now I am contemplating on going full scale. If I did go full scale I would have the opportunity to provide parts for my company, which would be very lucrative. I have somebody who is willing to front $60k to get it started if I am serious. In yours guys opinion is this doable with this budget? I lack CNC experience, other than being a CMM programmer and working with machinist at my previous job to insure quality. I am a quick learner and mechanically inclined. Thoughts? Thanks guys.

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    No.


    ..........

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    Partnerships (almost) never end well. Especially when its such a lopsided one.

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    Yeah, its enough to get started.. As long as its more job shop oriented than full blow pennies a part
    production..

    FIRST.. since you aren't a machinist, I question how you know the parts are "Very Lucrative"?? Is it because
    the dollar totals are big?? Or are they really easy parts that your company won't go out for quotes for... Even
    though some of them are coming from overseas???


    Where are you putting these machines??? Do you have 3 phase available? What tools do you already own?
    Are you prone to ulcers and heartburn? How many 120 plus hour work weeks are you able to string together
    before you "lose it"?? Does your better half get pissy when she doesn't see you awake for more than 10 minutes
    a month?

    If it was easy and "lucrative", everybody would do it..

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    Quote Originally Posted by dlewis0831 View Post
    I am a quick learner and mechanically inclined. Thoughts? Thanks guys.
    For $60K you are running a business out of your house?

    Volunteer to clean out the sumps of some machines at your new employer, and investigate how you would dispose of industrial waste from your residential address.

    Don't overlook the ugly stuff.

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    You want to move from being a salaried employee to an outside contractor?

    Was this your employer's idea? If so, time to find another employer. . . .

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    IF you are serious about this go to the Bank and get your money there. Not enough money in this, or any, venture to pay for all the arguments, hurt feelings, lost friendship and always having to keep your eye on the money man.

    60,000 is not much these days ( price of my last pickup ) and you could pay that off in 5 years, just by driving your current truck for 5 more years.

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    Thanks for the info guys! Deff alot to think about now. Little more info - I am in charge of accepting parts and accepting them inventory, so I am able to see POs. There is little desire to find a shop to provide better quality parts at better price. Management team is too busy at this stage in the game to shop around, but as dicussed with them provide a better part at the same price and plop it on the desk and they are game. We have been having issues with our shops not providing consistent parts. Parts that I know should not be having problems. Being a QA Tech and CMM programmer for 6 years and holding working relations with machinist I know the parts are not too high on the difficulty scale and are overly priced. Definitely not looking to get rich over night, but with a constant flow of production parts and weekly jobs from the R&D department I don't think idle machines would be a problem. I have a good support team of engineers and machinist willing to help me get things going for the occasional six pack. The lender is not looking for a return, which is always a plus and willing to go along for the ride.

    Another route I could take is stick with my original plan of - smaller scale for my own hobbies and start with jobs from the R&D department at my work and see how it goes.

    Thanks for the info guys much appreciation. Alot to think about now.

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    No, deff not. I would still maintain my job with them. I have been saving for a hobby grade mill for some time now and now debating stepping it up to be able to provide parts for them.

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    Quote Originally Posted by dlewis0831 View Post
    If I did go full scale I would have the opportunity to provide parts for my company, which would be very lucrative.
    You do realize that amount of money will get you started on a basic "commodity" job shop.

    Around every corner is a 2 car garage with a Haas mill, and running mastercam.

    They are all in a race to the bottom, and are at most, at $45 an hour.

    This size machining capability is now a commodity, much like Corn, wheat, and electricity.

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    For a medical device insurance will be impossible. Especially in California. Eventually a patient will die, and there will be lawsuits for everyone in the manufacturing chain. I knew a medical device manufacturer in California who was having his parts made in Belgium. Cost was high, but the risk of lawsuit was much less. That is the only reason the parts were made in Belgium. As an individual with no history there is no way you will be able to insure yourself against this, so all of your possessions will be at risk.

    Alan

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    long term what is it you want to do? If it's to have your own business then this could be an opportunity to give it a try. If it doesn't work, can you go back? Or find other work easily? In other words, what's the worst case scenario for you? If you like your work now and in the future at that company looks bright, then since you believe the price and quality can be better from suppliers, then take the initiative to see if you can get a bonus by getting those supply channels working better for the company you are working for by negotiating or finding better alternatives for them. If they don't have the time, and you can get compensated for spending extra time/effort then it's a win-win. Do they have these types of "improvement" motivational programs within your company? If they don't propose them as every company should empower their employees to find better ways to operate.

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    I fooled myself into thinking I could do work for my former employer. I'm still waiting for that first PO...

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    Quote Originally Posted by dlewis0831 View Post
    The lender is not looking for a return,
    There is your first fantasy.

    It may not be money, but the lender WILL be looking for a return.

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    The interesting part of your story is the device, not the making of parts. What is it, roughly?

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    $60K isn't close to enough. If you think you should be getting better quality ad think that you yourself, with no CNC experience, can make them better in your own shop you should be shopping them around to other shops. There are tons of guys who see a price on a PO and think "I've struck a goldmine" but don't have an accurate expectation of cost.

    Unless you're wrapping those beers with $50s your help might get scarce pretty quickly.
    Send the parts to a few people on the forum and I'm sure you'll be pleased with the quality and price.

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    Quote Originally Posted by dlewis0831 View Post
    I am in charge of accepting parts and accepting them inventory, so I am able to see POs.

    I see a conflict of interest

    There is little desire to find a shop to provide better quality parts at better price. Management team is too busy at this stage in the game to shop around,

    Until a new manager is hired and they drive price down to look good

    but as dicussed with them provide a better part at the same price and plop it on the desk and they are game.

    So they say, reality will be different.

    We have been having issues with our shops not providing consistent parts.

    They make stuff for a living, and have trouble, you can walk in and do better?

    Parts that I know should not be having problems.

    I get people coming in all the time "this will be easy for you"


    Being a QA Tech and CMM programmer for 6 years and holding working relations with machinist I know the parts are not too high on the difficulty scale and are overly priced.

    The price is more then the part being "easy". Insurance, slow pay customer, not really easy


    I have a good support team of engineers and machinist willing to help me get things going for the occasional six pack.


    Helping now, that could wear thin. Especially if you are making money.

    The lender is not looking for a return,

    Unless the lender gave birth to you, they want a return.


    Just something to think about.

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    Get a hot dog cart, you will make more with less stress.

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    I was told that making the first million was the hardest so I am busy making the second million and will go back to the first million later.

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    Perfectly doable.
    You have 99% of the needed ingredients, as the hardest part is having clients.

    Machining as such is not hard.
    Having clients who buy your stuff, at a profit for You, is hard.
    Do It !

    But...
    1.
    What if they stop buying Your parts ?
    Downturn, new management, global changes, new investors, new boss, etc...

    2.
    Ancillary equipment is 100%-200% of CNC tooling costs.
    You cannot afford new CNC stuff or new ancillary stuff, for 60k.
    No way.

    Your *profits* come from having everything in-house at a good level of use in %% terms.
    Auto saw, deburring, vibrators, anodising, paint, heat treat, stacking/racking, pallet loader, full-bars capability for lower costs, etc etc.

    *Anyone* can make a raw "40$ part" for 7$ in material.
    Plus 5$ in ancillaries outsourced.
    Total 12$.
    A "good" setup can make them for 5$, all-in.

    Don´t be afraid of the extra costs.
    Don´t buy lots of stuff at first.
    The extra debt will kill You, because all sorts of delays always happen.
    Always.

    Plan to have cash and debt.
    You NEED the cash, 99%+ probability.

    A good setup is steadily paying off the angel investor, with a good profit to them.
    Don´t worry/care about what they make, usually 100%-500% or more.

    If, say, you have paid them off 50% in 2 years, and You then run into cashflow issues..
    they will be delighted to help, at that point.
    Much cheaper, at that point.

    Your real risks are not in machining but in the business plan.
    The Real Costs, and things YOU yourself will never be able to think about in advance. At this point.

    Insurance.
    Bookkeeping.
    Taxes.
    Financing/factoring costs.
    Consumables.
    Security.
    Ancillary equipment.
    -Finishing. Packaging. Storage/racking. Pallets. Wrapping. Transport.
    Maintenance and "very expensive bits" needing replacement.
    Waste costs. Power. Installing more power - costs.
    Sales cost.
    Storage costs.

    Your biggest benefit is an "anchor client".
    It is also a major risk.
    Most guys / new businesses with one major client fail. About 90-98%.

    My biggest piece of advice.
    Discuss all above with your investor now.
    The last thing You want to do, is start discussing these things when payments are late to wherever.
    Plan for the company to store/reserve/need a cash infusion from the gross margin, every month.
    This is the cash cushion that will make the business succeed.

    Aim for about 10-20% of margin, until "$$" is in the bank, say 6 months running expenses including your salary and all taxes. About 100-200k.

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