Another new shop thread, but I'm different(I think).

[Clifford098]

Hey everybody. I hope your day is going well as you stumble across my post. So, I am another guy who is posting about opening my own shop, but how do I go about writing this? Please bear with me.. as I may be a little flustered while posting this.
My situation is this. I have been a machinist since I have been 19 years old. I am now 33. I have only worked with Swiss. For the first 2 years of my career I operated stars and tsunami. I didn't program them and started setting up just before I ended up at my most recent employer. There, there is only citizen and my primary job is to set up and program. I am familiar with many different operations.. he'll... probably everything that you can do on a Swiss. I can troubleshoot the machine and make repairs( I always shadowed service when they have visited). I never really got on the job training and always had to teach myself. I made my own problems and I fixed my own problems. I even ran 5 machines by myself under nobody's supervision for the first 3 years there. Everyone that I work with looks up to me and always tells me that I'm a great teacher. The problem here is that I don't think I'm a wizard or anything.. I've always had to fly by the seat of my pants and do what I had to do to make a quality part in an acceptable cycle time. That's another thing. Once I learned how to program.. I was cutting cycle times by 60 percent without killing quality. Not necessarily through more agreessive machining.. but through different approaches.
I'm not one of these guys who has machining down to a science. I can make it work and I always do. The problem I'm facing is that I only know how to program with the mitsubishi and fanuc controls on citizens. I guess I'm used to ,C and , A etc.. instead of trigging out my own shit.. but I have partmaker for that... which I'm good with.
I have recently come into a lot of money though and have always wanted to start my own shop. I have probably 600K to start out with.. without financing. It would be just me, my fiancé, and an ex-coworker getting the place up and going. On top of that.. I have enough to pay him around 22 bucks an hour (for 1.5) and to survive on for about 2 years. I know the price point of the new citizen L's.
My question is this: would you do it if you didn't have to finance anything? All I have to lose is money that I would just bum around with. It would probably be enough for a new machine with a warranty, a comparator, coolant, other misc essentials, and a very cheap space, right? I'm just looking for some real advice from others who have taken the plunge. I'm confident that I can make it work... I just would like some advice, warnings, or maybe some more inspiration.

 

[WDW]

Do you have any work lined up? Personally even if I had 600K to pay for all my equipment up front I would look at financing any new equipment I buy. For the 5% they charge for financing the cushion of extra cash in the bank is well worth it. Look at buying used but newer equipment where you can. Remember it always costs more than you think to get going. Also do you enjoy your current job? Why not continue to work there save your money and retire early?

 

[WILLEO6709]

without a customer you have a christmas list, not a business plan. Most employers frown on employees becoming competitors. However, with 600k, it would be a nice christmas list. top on my list would be an okuma m560 mill, then a LB3000 myw, probably an engine lathe with a nice through hole, a bridgeport ( yep, a manual one), a vertical and horizontal bandsaw, your own building, and partmaker ( name your cam software). You should be able to get all that for 600k ( in my area at least ). I know you specialize swiss but for a startup ya gotta make what people want to buy from you.

 

[HuFlungDung]

I'm still working on clearing that 600k hurdle so I can 'bum around'

Just buying a production machine because you loved one once, does not sound good. You need a real plan in order to not waste your money....it goes away fast....ask the lotto winners about it.

 

[mkd]

Yep that's certainly different. congrats (and condolences for your inheritance i guess)
Personally, I'd take $100k to start the business with a 10 year old machine that costs $50k. And put the rest ($500k) in an annuity or other investment vehicle, such as a building to grow into.
Getting greedy and prematurely building a fancy a$$ shop without a clear sales direction is a certain path to make a small fortune out of a large one. Ask me how i know.

 

[danrudolph]

I'm about 7 years into doing what you are proposing, but didn't start with $600k. Easily have invested that much in equipment and tools over that time.

The first thing you will run into as far as getting work is a quality system. You'll need to be ISO9001 as a minimum to get work that pays well enough to run on a swiss. You'll also need a good plan to clean/finish/deburr the parts.

If I was in your situation, I'd look for a good condition used M20 or M32 to get started, saving some money for additional live tools when you need them. Next hire a quality consultant to get you a basic QMS and then you're ready to look for work.

Next you'll find it takes a ton of work to keep a swiss busy for any length of time.

 

[JNieman]

This is a scenario I've "war-gamed" so many times over and over and over.

IMO, make your own parts. Don't start a shop making other peoples parts. If I were to start up, I'd have to have some parts designed and proofed out, and started to sell on my own. Work your day job until you're sure your new venture is self sufficient. Then part ways on good terms and offer to take on some of their run-off when they need a little more capacity - that's just insurance work.

Make your own stuff - you have control, you have the ability to get out and increase production and keep your product desirable. If you're like me, you'd likely need a snake oil salesman to promote and sell your stuff, maybe with "curb appeal" depending on the type of product being sold. Think about what your hobbies are and make better gear or comparable gear more affordable.

Make your own parts, make them parts for something you love doing, and you'll never 'work' again. THEN decide what machines will support the plan. Maybe sub out some parts for the beginning stages, proof them out, and see what your suppliers use to make your parts. Don't forget tooling and workholding. Adapt. Don't buy a machine and then try to find parts that'll go in it. Figure out the work you can do first. Then get what you need to do the work.

But ensure a safe transition. Have someone there to take care of the legal and accounting!

 

[Bobw]

600 grand, and wanting to start a shop..

I'd say Fuck It and retire, but its your money.

The LAST thing I would do is go out and buy a new machine, especially a swiss.

I think what I would do.. Buy a building or one of those industrial strip malls..
Rent out some space and save some for myself. At least try to generate some kind
of income and its something that appreciates, unlike a machine that depreciates..

Then I would go get a mill and a lathe, CNC of course, used and cheap, but not ancient
or beat to shit, and I would learn how to use those..

And if you want a swiss, I'd go find something used, maybe
something a little slower than what you are used to..

Then go find some customers or come up with a product.

Why go cheap? You have a nest egg there that can make the rest of your life really
f'n easy if your not stupid. DON'T BLOW IT.. Be Smart about it.


The swiss thing.. You've got to have the right customers to make that work for you,
and I don't think you have those.. Farmer Ted comes in and needs a shaft repaired,
you aint going to do that on a swiss. There is a reason that mills and lathes are
the bulk of machine tools out there, they do the bulk of the job shop work..

IF the opportunities that arise trend you towards more swiss machines, then that
would be fantastic, but I think you would be limiting yourself, and potentially
fucking yourself if you started with a high dollar swiss machine.

I don't think any of us have ever had our business go in the direction that it was
originally intended.. Opportunities arise and you take them, and sometimes they take
you down roads you didn't originally intend to go down... And that's not a bad thing.

 

[Guest]

I hope it wasn't the Star Techs that you were shadowing, because most of them are nothing but tail chasing idiots who constantly call the one guy in the office that knows the machines. If I had to do it all over and were in your shoes I would take that money and buy a house where they are cheap and still in good areas, invest the remaining $400k in something that earns a safe 6% a year and get a job at McDonald's. It is a lot easier to turn $600k into zero with a machine shop than turning it into $2 million. I was doing well in my early 40's as a small job shop, could have cashed out for a little more than what you have, and was looking at out of state property to semi retire to. Instead of fleeing expensive California (Where I lived at the time), I decided to corner the market selling dual alternator kits to the limousine industry. (hence my screen name)

At first all was well, the industry I served was booming, product was flying off the shelves. I bought machinery and set up dedicated production lines, the machinery was all used that I paid cash for. I hired a full time salesman and sent him to trade shows to work the floor along with some assistants. Through some research we gauged the ceiling of the current market to just the limo builders and I wanted all of it. We were gaining market share and selling more units by the month. From start up to fall off the party lasted a year, the industry started crashing before the recession was official, went from 23 active customers to 1 in a little over a year.

The industry never recovered, it was fueled by the west coast real estate bubble, and the over production still effects things almost 10 years later. At the peak limo transportation companies were all in the race to have the latest and greatest, the operators in some areas were not even keeping models for a year before replacing them, now you see 10 year old models still on the road all over the place.

Not wanting to lay people off as things slowed, (Had 5 employees) and figured the market would rebound, or worse case scenario I start having fire sales, I kept production going way longer than I should. Then when I pulled the plug I had a shop full of equipment most of it not suited for job shopping. To change over to job shopping I sold a lot of things at 1/3rd or less what I paid for them. PC driven CNC Mills that I paid $5k pre recession I sold for $1500. Some stuff I gave away just to get it out and clear space. Even though I was careful about spending I would say the dual alternator kit business venture burned $500,000.

Moral of the story be careful with that money, even what looks like a great plan to make more out of it can burn through it like a rock star with a bad drug and strip club habit.

 

[scadvice]

Don't jump into this. Take time to make the decision as to what you’re going to do. Even today 600k is a bunch of money.

What do you want to be doing 30 years from now? If you say owning a machine shop working 10 -12 hours minimum a day… that would put you in the 1 or 2 percent of shop owners. Most of us will want to back off ,relax or even get out in those later years.

I think you can do the shop with 250k at risk as your working fund. The rest I would put into some sort of safe investments like a Total Market Fund or Index 500 fund. I would NOT consider any annuity or other investment vehicles like them.

I would also consider maximizing out a Roth IRA each year going forward. As an example, Vanguard has some funds called Target Retirement Funds. I would look into these type of no-load fund companies.

FWIW – 350k untouched for 30 years of investment in the total market will grow to about 2.8 million.

Why do we start a business? To make money! And sure, there are other reasons too. But you already have in your hands the vehicle to do two goals in life that most of us are aiming for. Our own business and money to do what we want some day.

Once you decide what you’re going to do then write up HOW you’re going to do it. Then spend a month at least talking to and finding a good banker and CPA. Don’t just see one see a bunch and go with who you feel is the best.

Talk to the banker about funding. Opening up a account with 250K in it goes a long way with what they will be willing to loan a startup. (do not talk to them about investing your money!) If they are vague in their commitment and are not up to negotiating …walk out and find another bank (you can always come back).I had a good relationship with US Bank.

CPA’s are the same, some are better suited for your type business than others.

Once you have a detailed and written plan come back here and we can talk about goals.

Anyway you asked and those are my thoughts…

 

[wheelieking71]

No way I would risk more than half of $600k.
Finance NOTHING!
Partner with nobody! (always retain 100% ownership)
If you can swing it, buy the building you want to put this in.
Reason: the space/building is the most expensive part, and if you fail, it is the only thing that will have any value at the end.
If you rent, you have thrown that money away. If you buy, you stand to get a good percentage of your money back.
When a machine shop fails the only thing left of real value, if you are even lucky, is the real-estate.

Finding lucrative work is the hardest part.

 

[wheelieking71]

I had a good relationship with US Bank.

I will second that. My US Bank guy, just this morning, came to me with paperwork to sign. Because, he knows how busy I am.
Yes, he certainly stands to make money off me. But, his level of service truly has been excellent. And, the rates are pretty good.

Beats the heck out of the first place I borrowed money for capital equipment!!!!

 

[Mcgyver]

All I have to lose is money that I would just bum around with..

With level of entrepreneurial motivation.....put your money in a well managed REIT or index tracking fund and get a job. Seriously. Succeeding in business is just magnitudes more complex than being good at a trade. That, and I'm guessing you're young....you may not appreciate how hard it is to get 600,000 and that it may never happen again. You'd otherwise just waste it bumming around? Give your head shake! Your life's mission right now is protect that and carefully grow it. Re read the sentence about 1000 times or more until it becomes very real. Putting it into a start up business is a very risky investment.

You may think I'm being harsh, but take that advice and a few decades from now when life is good and you haven't pissed away 600,000, you'll be wanting to put statue up in tribute to the guy who saved you from yourself

 

[Bobw]

Partner with nobody! (always retain 100% ownership)

Just because that can't be said LOUD enough.

 

[HuFlungDung]

I guess it's not fair to say you can't have any toys .

Risk a small amount on a mill and a lathe and see what you can do. See if you can top that 600K back up in full while working with what you have. One thing you might lack is incentive to really work, due to the lure of that nest egg sitting there. Lack of ambition can kill a good investment, too. You've got to find satisfaction in working, either by helping others (for pay, if that floats your boat) or by how fast you can make money. Can you get that, do you think?

 

[AndyF]

Watch this and meditate on it before you pull the trigger. The Position of Fuck You (John Goodman in The Gambler) - YouTube

 

[Wild West]

Ok, I'll weigh in on this.

You had quite a post on your abilities on the shop floor, what about your abilities running a business? You need to get those ducks in a row because you can blow through 600K faster than you think.

First go down and get to know your banker, tell him what you are thinking of doing and how he can fit into the plan. The bottom line is you want to keep your hands on as much of that money as you can.

Now, if I were you I would not look at new machines. You seem to have a lot of machine savvy so if it were me I would start looking at equipment auctions of shops closing down, you can pick up some real good deals if you understand the auction process, meaning, don't get caught up in the bidding frenzy.

With your banker devising ways to finance your previously owned acquisitions and you keeping most of that money in an interest bearing account, you can have your cake and eat most of it too.

What I'm trying to get across to you is sit down and think this over and get input from people with experience in this. Telling everybody you have 600K is not a good idea (like you did us). Play it close to the vest. Be smart. As I said, $600K can evaporate real fast the more people you tell about it.

 

[Wild West]

Just because that can't be said LOUD enough.

There have been many successful partnerships, the key is really knowing who you are partnering with. If you do find somebody have YOUR attorney draw up a partnership agreement spelling out all the responsibilities of each of you. There is also a lot more to a partnership agreement than that.

Also, find a partner that brings something to the table that you don't have. Both people being machinists is not good.

 

[Bobw]

There have been many successful partnerships, the key is really knowing who you are partnering with.

I thought I did, A good friend for 20 years.. I was wrong, I was REALLY REALLY REALLY WRONG!$$!!

 

[newtonsapple]

Go slow

Park the money in vanguard index funds or cds for the next year, take your time with this.

Don't tell anyone how much money you have. If I am selling equipment, I can always get you just what you need for about 600k.

Remember, you start a shop with customers, not equipment. Do you have customers? if you go the Swiss route, you are probably just stealing current customers and all the bad blood that involves. If you really want to go on your own, maybe look at taking on some of the work that comes to your shop, but isn't a good fit. Rent a small space, get a Cnc mill and lathe and take on prototype work.

You seem like a real machine guy, Swiss businesses require more business focus than most job shops because of the typical quality requirements and production focus which require securing good sales contracts. The good/very successful Swiss shops I work with have more front office quality people than machinists. The okay shops have a bunch of machinist and email me every now and then saying they have capacity to do the quick prototypes I am looking for.