Starting a new shop/manufacturing business.

How would one typically get started in manufacturing? I have always been interested in designing and building products. I have the back ground in farming and machine shop work to help get me started. I still dont know much, but I have a plan to start with building farm equipment and doing repairs. My area still has many smaller farmers who dont want to pay high prices for equipment from big manufacturers. Usually they buy used or find something cheap, but low quality.

Being that I farm for a living, Id rather build a relationship with potential customers through high quality, but low price equipment. Innovative add-ons for existing equipment commercially manufactured such as combines, tractors, etc., hay equipment, trailers, livestock equipment, etc. is the market Im looking for. I would love to start manufacturing larger equipment such as tractors in 30 years if it got that direction through innovative design that is not currently done or by building things that are not currently built because of design limitations that could be worked around. Id be okay with only making enough to pay for the capital purchase, labor, and maybe a few extra bucks after that. I own the land and buildings already. I have most things as far as repair equipment goes already, but Id really like to get a mill, lathe, pipe bender, sheet metal roller & brake & shear, and CNC plasma cutter in the next couple of years at a minimum.

The biggest thing I worry about is how to manage everything. I have a "plan" for what to build and where, but not necessarily the rate of growth, how big to start out with, if I should invest heavily in manufacturing equipment immediately or work my way up to it slowly, and what would be considered the most important thing to remember with everything. Im only 20 so financials aren't strong necessarily, but I also have a lot of time to build up a business if I can do it right.

Make sure your potential customers have your phone number. Tell everyone that you have started a farmer’s equipment repair business. Ask about problems and broken things.

Mechanola said:

Make sure your potential customers have your phone number. Tell everyone that you have started a farmer’s equipment repair business. Ask about problems and broken things.

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And go talk to those farmers and make sure they are willing to use you (or that they do in fact need you) AND are willing to pay a fair rate. Getting started in repair is not a bad idea and you could potentially use that to build a bigger business off of (i.e. a spring board). But the LAST thing you want to do is make a big investment in equipment (even if you do own the shop) and find that you're better off working in town. Investing $200K to make $20K/yr is not a good return. Investing $75K to make $100K/yr IS a good return.

The Dude

You are ideally positioned for 2 reasons.
Major space, and no rent.

Clients who often need BIG STUFF.

I would advice you to buy old, heavy large equipment, because

1. it is relatively cheap.
Small shops cannot fit and dont need large heavy lathes.
Thus prices are dirt cheap compared to bridgeport sized stuff and small 12-14" lathes.

Just junk the electrics, fit an ac brushless servo drive, and done.
All new wiring, modern stuff.
Does not even need to be cnc, but triple the torque to normal and full torque at all rpms cannot be beat.

Soft start, soft stop, and wont break much stuff if you tune it to error out on impact.

2. No to low competition.
You cannot ship heavy workpieces aka farm machinery out of town for repairs.

You have a captive market.

3. Proper logistics stuff.
Overhead crane, and you probable have stuff to move large workpieces around.

This type of stuff is ideal for retrofit modern motors, electronics and cnc stuff.
Servos, etc.
Glass scale DROs.
Etc..

4. Big 3-phase mig welder, 1.5 mm wire.
Water cooled.
Good for doing structural welds in 15 mm and thicker steel pieces, one pass, done.

5. Large drill press, so you can drill out broken bits, and fit bushings etc. whatever, efficiently.

You would for example be a great candidate for an old large cnc mill of huge size, now not-in-use due to obsolete and parts not available or $$$.

Big equipment needs big electric. Power company won't give you big electric without a big monthly demand charge that you pay whether you use the power or not. So its likely that any large equipment would mean you need an equally large generator.

There is NO business more difficult to get into or succeed at. Most successful manufacturers started as something else, a rep for other companies products, a repair facility for other products, a contractor or other service business. The reason is simple manufacturing takes a ton of cash, for the tools and equipment, engineering of a product, buying inventory to get the cost down etc. Most failures don't happen because of selling too cheap or bad product, most is from a lack of cash. Even big companies are brought to there knees by this one factor.

If you think you can do something cheaper than the people already in the market you probably don't understand the costs. Better to build something better at a higher price and learn to sell the customer on the value of a product. My whole career has revolved around always selling at a higher price than the competition. It's kind of nice, when everyone knows your price will be higher going in, you don't spend any time trying to get the job on price. Sitting at lunch with a customer once he remarked that the machines I build are really expensive. He already had one of everything I have ever built. So I asked him what he was using before he bought one of my machines, and where that machine was now. He admitted it didn't work and was sitting out back in the scrap pile. I then asked him how long my machine had been running and what he would replace it with today. He thought about it and said it had been running for 14 years and they had to take really good care of it because they have never seen another machine that could do the job better! He ordered another machine after lunch.

If you have an idea for a machine talk to people about how much they would be willing to pay for such a machine. Once you have the maximum number then multiply by at least 5 to come up with the cost for the first one. Consider that 5 times works for me only because I have a ton of experience. When I started it was much more! Then figure out where you get that kind of money for the first one. IF you pull that off you'll think you are all set. Until you find out how difficult it is to build more than one!

By now you probably think I am real party pooper to rain on your parade. I've been doing this for about 35 years, never made a lot of money, and wouldn't want to do anything else. Not to say a HUGE paycheck wouldn't be appreciated!

PoorMan said:

I have most things as far as repair equipment goes already, but Id really like to get a mill, lathe, pipe bender, sheet metal roller & brake & shear, and CNC plasma cutter in the next couple of years at a minimum.

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In other words, you don't have shit yet, for the repair biz

You sound like you've been brain-washed into being a cheap farmer. Cheap guys attract other cheap bastards and pretty soon, you're buried under a great big pile of crap. Nobody else will care, they're all happy to pay a 'reasonable rate' to some new startup. You can't take their appreciation and stick it in the bank.

I think you are casting a much too wide net over too many things. You need to focus on a few things first. You need to have a CAD system if you want to design and repair stuff. You need to be competent with reverse engineering things. You need to weld. You'll never scratch the surface of all those grand ideas by yourself, you'll need a large work force. You'll need industry contacts to get stuff built for your prototypes.

Focus, focus, focus. Get the lathe and the mill, and start learning there. 10 years later you might begin to clue in on what direction you want to head in, but not yet.

I wanted to design and manufacture certain products, on my own terms and without debt or outside investors, and started a job shop as the way to obtain the necessary shop. Customer work pays for new equipment and software and pays me to learn to use it. It's a nice shop - waterjet, machining, welding, sheet metal, custom tooling and assembly.

We get a lot of work that requires multiple processes, where the customer just wants finished parts and we're the only one they know who can do it in-house. I did bring a product to market, the irony is the job work pays better (per sq ft) than the manufacturing.

I stay away from repairs, ag/heavy equipment/vehicle work of any kind, and any sort of labor-intensive fabrication where the competition is a guy with a CNC plasma cutter in his barn. For what it's worth.

It can be done. I have a customer who started out as a dairy farmer, and started a machine shop, which was born out of farm-equipment repair, mainly welding. Now, he has one of the nicest shops you'll ever walk into, and just spent over a quarter-mil on some pretty new Japanese machines. He has great employees that he can really trust too.

The odds are not really in your favor, but it can be done.

You need to be stubborn, frugal, and willing to go "without". You need to be well-connected with your customer audience. You need to have a good, and realistic understanding on what they're willing to actually spend.

Just a few observations. If you decide to take the plunge, best of luck...

What does your background in machining consist of? At 20 years old I thought I had a good grasp on this stuff and I had been working in my dads shop since 14 and in school for manufacturing engineering for 3 years. I can tell you now that It would have been a disaster for me to try and start something from scratch at that point. I only ask about your experience because I have seen plenty of people who think the can just plug and play when it comes to machining.

I would also look at some larger trends then just what you hear through grapevine regarding the future of small farming. I live in an area where there used to be tons of small farms, now they're selling off to bigger farms for millions and the new farmer is using high dollar equipment, not retrofitted or repaired in a barn.

Smaller farmers are hard working folks, it must be in your blood, so I'm sure you could probably get something that resembles what your talking about above. If you focus on some smaller aspects of it such as getting proficient on simple machines, learning CAD/CAM, and prove to potential customers that you have a mechanical brain that can design what they desire, I would think you would be better off in the long run.

Farming is automated and becoming more so. Heavy equipment is very, very capital intensive to manufacture.

Best route to becoming a manufacturer rather than a repair shop is invent something new and useful. Possibly useful to farming. Possibly not.

Guys shopping on price are tempting because they are always there. But as soon as you are a little bit established there will be a new you starting up who is hungrier and cheaper.

Being a manufacturer is easy. Come up with something people will pay for. Make some. Sell some. Come up with something new when you get knocked off. Doing that sustainably is the hard part.

You don't have the capital to make tractors. So find something you do have the capital to make and build from that. Haas started out making a rotary indexer.

Great info. Thank you.

As far as the smaller farm thing, I didn't say what we were. Yes. At one time we were, but now are one of the larger ones. We just keep buying up old farms and consolidating. What I mean by smaller farms are the livestock guys. Usually those guys still run old equipment. We are going towards all precision tech on everything and short of autonomous equipment. Cattle country starts to take over after 15 miles north and eaSt of me

Can't go wrong with equipment repair... big business across our province. especially makes sense since you're already positioned with the farm etc. Get reliable at welding and fab, get a decent lathe, drill press, manual mill, bandsaw... don't need much. just need knowhow, and your name out there locally (and hopefully no competitors that beat you to it and keep it cheaper)

Manufacturing though? now that's a tough call. Original product manufacturing means distribution, service, sales, plus design/engineering... that's a lot more than a couple guys jobs. We produce parts for guys like that, and stay the hell away from those 3 horrible words I just mentioned earlier. Dealing with local clients? no problem. Dealing with lots of customers whose main interaction with you is ordering, demanding, and eventually paying? ugh.

apoc_101 said:

Can't go wrong with equipment repair... big business across our province. especially makes sense since you're already positioned with the farm etc. Get reliable at welding and fab, get a decent lathe, drill press, manual mill, bandsaw... don't need much. just need knowhow, and your name out there locally (and hopefully no competitors that beat you to it and keep it cheaper)

Manufacturing though? now that's a tough call. Original product manufacturing means distribution, service, sales, plus design/engineering... that's a lot more than a couple guys jobs. We produce parts for guys like that, and stay the hell away from those 3 horrible words I just mentioned earlier. Dealing with local clients? no problem. Dealing with lots of customers whose main interaction with you is ordering, demanding, and eventually paying? ugh.

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Very good point. Manufacturing I think is still possible, but a long term goal. It may never happen, but nothing ever would if nobody had the idea or the dream

where are you located in Missouri? Do you have 3 phase electricity available now? or at least available along the street that is in front of your buildings?

Depends on where. 3 phase power runs by one of our farms, but the other two places that are potential possibilities don't. The one has high way frontage. If I get anything started, it'll be at that place with 3 phase and highway

PoorMan said:

Depends on where. 3 phase power runs by one of our farms, but the other two places that are potential possibilities don't. The one has high way frontage. If I get anything started, it'll be at that place with 3 phase and highway

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where in Missouri are you located? If your various farm locations are far apart, let's say where is the place with the 3 phase located in Missouri? Like most states they are fairly large and far apart places, maybe a member close by to you might react more if they knew you were close by?

another advantage most farms have to starting any shop apart from having space is transport. Since they have at least 1 truck (probably more) and probably have at least one fairly heavy trailer (again probably more), they can go pick up machinery as it might become available. If these younger farmers started helping family members they probably already know how to strap things on the trailer so they don't fall off. Might be basic for most of you but for me for sure everything in lifting and moving heavy stuff was a learning experience as my background as an Air Traffic Controller didn't help much!

manufacturing, vs a service business, implies a product. So its starts with something you can make and sell at a profit. There as trainload full of details that you have learn and figure out, thats why larger firms have so many mangers....but it is moot if you don't have a product you can sell. That means domain knowledge - understand a market and product.

Guys suggest all the time things we could make, sure, but they don't get that going from an idea to paying happy customers takes a heck of lot more time risk and money than being able to make it. Pricing, distribution, marketing, sales, competition, design....I've done it once from a standing start and its a huge, all consuming, effort to enter a new market.

Find the product/market mix where you can sell at a profit. Be the one band, do everything yourself, learn what you don't know yet, and work until you drop....and you can start small without much capital.

What's the product/market that will work? That's your job to find out. Its not easy. And then when get one, you'll realize that was actually bloody easy compared to execution

PoorMan,

I recall having similar ambitions about a decade ago finishing up high school. As a disclaimer, I have yet to earn any income from selling my own products.

I got into manufacturing by getting a degree in mechanical engineering and going to work as a design engineer for a manufacturing company. Over the years, I have built a decent collection of tools and machines for myself as well.

Mcgyver is absolutely correct in post 18 regarding the non-technical hurdles of launching a product, this is where I currently struggle. I think you can get a good overview of the challenges ahead by reading every relevant thread in the Shop Management and Owner Issues sub forum.

Unless you really want to do repair work, I would skip it. Repair will take time away from your current source of income and product development. Also, most of the tools and machinery will probably be different than what you need to be successful as an OEM.

On purchasing equipment with a limited budget, I would recommend only buying what you can afford to make your current products as efficiently as possible. Dont rule out utilizing existing shops, depending on your volume and what you are making, it can be more cost effective to hire out portions of the manufacturing.

Thoroughly research your product ideas...there isn't a whole lot out there than hasn't already been thought of, and can be brought to market at a small scale. There are many smart individuals in manufacturing - almost always the limiting factor is budget, not design or manufacturing limitations.

Hmm. Another rich farmer looking to set up his kid/dodge paying taxes...

I really hate farmer owned businesses.

I see trucks all the time around here dragging around trailers that say "so and so welding" or "so and so machine shop". Most of them are running farm exempt license plates (illegal). Many of them are overweight or lacking inspection and commercial license (also illegal).

Farmers get all kinds of nice pork barrel tax breaks that no one else gets. Put up a new "farm building" and take full depreciation the first year. Lots of commercial shops being run out of "farm buildings".

Also, a farm is the only kind of business that never has to make a profit. If I don't show a profit after 3 years, the IRS calls my business a hobby. Not true with a farm. Buying a bunch of machine tools is great way to never pay taxes.