Watched 2 of my vendors go under this week.

I had two shops that ran parts for me close up this week. The lazer cutter and the shop that did cnc turning for me. Both shops were taken out by the same problem. The lazer cutter had a cincinatti lazer that cut up to 3/4 in. That machine went down 6 months ago they couldnt afford to fix it and they still owed money on it. They got a loan for another lazer and started cutting with that one hoping to make enough to fix the the other. The new one was being run to death and it needed maintenance that they couldnt pay for. They were late paying the landlord and when I showed up today to get my parts the sheriff was there locking them out of the property. I got my parts since I could show the reciept for the steel, yes I had to supply the steel they were in the rears to the steel yard. The next stop was the machine shop that I have been using, I showed up today and no one was there except the owner and his wife. I asked him where everyone was, and he said they are going bankrupt and he let everyone go. This shop had 3 cnc haas lathes and 3 mills. They owed money on all of it, a motor drive system went out on one of the lathes and it cost 8 grand to fix, they lost the contract that kept that machine payed for when it broke down. He got it repaired but it drained his cash flow so he couldnt pay the rent. The mills were staying busy but a board went out on the vf2 and some other stuff it cost 6 grand to fix. He fixed the mill but fell behind on payments to the metal supplier and payroll. He let people go and then couldnt keep up with the work. The bank pulled his line of credit because he defaulted on a couple of credit cards and that killed him off. The creditors are going to pick up the machines and sell them off next week. I found new shops to help me out and they are even cheaper than these guys. I thought things were getting better, but I guess many of these shops were just too weak after years of struggle and small hiccups took them out.

"I found new shops to help me out and they are even cheaper than these guys."

And when you are operating that close to the edge, where the loss of one board can bankrupt you, how long will the new vendors be around? Cash flow management and that old bugaboo Profit is important. Survival of the fittest is still the law of the jungle.
Pricing things at a loss just to keep the doors open is not the answer. If you aren't making enough money to survive,you are doing your customer base a disservice.

I doubt that we know the whole story on these two businesses, but it sounds as if it was pretty grim around there for a long time, and my heart goes out to them. This is an unforgiving economy (actually, it always has been).

Lee (the saw guy)

That really sucks hey. Poor bastards.
Hope the economy comes back strong.

I hate hearing stories like this, but it happens all the time.
I do know the machine builders cut no breakes on the price of parts or labor, and
that sucks. It's very possible if the machine shop guy was running older retrofitted
machines that he knew how to repair himself, he would still be in business today.

I had a CNC lathe that I retrofitted blowup it's spindle drive back in 2009 when things
were nearly silent. I fixed the machine myself and drove on, albeit with $3500 on the
credit card I didn't need to spend on parts but had to...
If it was a machine I knew nothing about, and had to call a tech, and pay for OEM parts and labor......I would have been DONE and GONE shortly there after.

I hope things work out for those shop owners as best as possible....

Were either of them the guys I know Kevin?

Like mentioned earlier when the cost of one machine going down breaks your business...its already too late. Sucks to hear about though.

oldster said:

"I found new shops to help me out and they are even cheaper than these guys."

And when you are operating that close to the edge, where the loss of one board can bankrupt you, how long will the new vendors be around? Cash flow management and that old bugaboo Profit is important. Survival of the fittest is still the law of the jungle.
Pricing things at a loss just to keep the doors open is not the answer. If you aren't making enough money to survive,you are doing your customer base a disservice.

I doubt that we know the whole story on these two businesses, but it sounds as if it was pretty grim around there for a long time, and my heart goes out to them. This is an unforgiving economy (actually, it always has been).

Lee (the saw guy)

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Yep, a buddy commented "I didn't realize I needed to charge more for the Hurco......" Now it needs a board or two, or a sensor, and that Sony monitor duct-taped to the console should go away.

Kevin,
If the new shops are even cheaper, how long will they last?
Jim

magicmaker said:

Kevin,
If the new shops are even cheaper, how long will they last?
Jim

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Depends on their overhead I'd guess... Having your 6 money makers all financed has got to be tough.

I remember my x father in law running his shop when I was just dating his daughter (17 or 18 years old). I would go out to his shop and hang out. Watch what he was doing.....learn a few things. That is how I got interested in the trade. I remember talking with him about his machinery and tools. Everything he had was old. Much of it was worn out and you had to know the "tricks" to make a good part. He ground and sharpened all of his own tooling. When we went to auctions he had the ability to see what looked like a box of shit....and buy it for $20,,,,and there would be $500 worth of usable tooling. He said that at the level of work he was doing he made a good living for himself....but.....the minute he bought a brand new piece of equipment and all the tooling he would need for it, his world would change and he would then have to scramble to make the numbers work. He never bought a brand new piece of equipment.....he did fine for himself. Seems some of these guys could have used a sit-down with that grumpy old bastard....lol.

Bobw said:

Having your 6 money makers all financed has got to be tough.

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And IMO not very business smart either. With this economy it's like your setting yourself up for failure.

Out of all the people who can make parts, there's only a small portion that can properly manage money and reality.
It's unfortunate but its business.

Never bet more than you're willing to lose eh.

they are just next in the line of people who have over leveraged themselves. machinery loan rates are dirt cheap right now again. when the economy first tanked, it seemed every other shop was going down because they were leveraged to the hilt. also there is no reason to pay top dollar for a haas repair service. I just had me vfd go out on my vf3. haas wants $4500.00 I found a repair outfit that will fix it for $800.00, money management is very important when your the owner. it seems that this would happen a lot, people taking the quick easy way out instead of searching around for a better solution.

there is always an element of luck that plays in some situations. Even the best managed businesses, with the best people, in the best market need a little bit of luck once in a while.

What is tough to see is people with NO business sense giggling or making comments on any type of business that has to close. They have no idea how hard it is to start a business and try and make it work.

powerglider said:

there is always an element of luck that plays in some situations. Even the best managed businesses, with the best people, in the best market need a little bit of luck once in a while.

What is tough to see is people with NO business sense giggling or making comments on any type of business that has to close. They have no idea how hard it is to start a business and try and make it work.

Click to expand...

I've had a small home based business and it is a challenge, especially now that it's part time. I closed the books last night, always keep everything up to date.

My wife has been helping, and "we're" behind on the mileage reports, I need to get that corrected this weekend. One thing, let a small thing go long enough, it becomes a monster.

When I first started this, having to write a check every quarter for taxes was an eye opener. Don't really feel it as much when it's already taken out of your check.

Anyway, I'm always sorry to hear about any business going under. The vast majority of the ones I deal with are doing very well. And over the years, you can see the signs.

Is everyone working or standing around B-S'ing?

The cleanliness of the facility can also be an indicator, but more so, how the place is organized seems to be more important. If people have to hunt around to find anything, that's time away from work and making money.

Plan for the worst, manage for success. There, my quote for the day!

Someone told me years ago that people don't fail in business because they are bad at their trade, they fail because of money

I would add a corollary to that, no matter what your business is, your business is money.

These guys did not know that. IT is astounding how many people do not understand cash flow. You need to pay for your machines every month. You do not buy machines you do not have the work for . YOu do not hire a bunch of people to feel like a real shop, you keep who you need to to the work that comes in. You have to bill the work out at a rate that will pay for the equipment now, not if you get 160 hours of work for it a month.

Several of the businesses I have seen fail have been busy, they just did not know how to make money.

gustafson said:

Someone told me years ago that people don't fail in business because they are bad at their trade, they fail because of money

I would add a corollary to that, no matter what your business is, your business is money.

These guys did not know that. IT is astounding how many people do not understand cash flow. You need to pay for your machines every month. You do not buy machines you do not have the work for . YOu do not hire a bunch of people to feel like a real shop, you keep who you need to to the work that comes in. You have to bill the work out at a rate that will pay for the equipment now, not if you get 160 hours of work for it a month.

Several of the businesses I have seen fail have been busy, they just did not know how to make money.

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Good points.

"People expenses" are generally the greatest expense of them all - people can make, or break a company.

And sometimes it is better to turn away work. When I managed a power-sports service department, some people would argue over the price of something. If they could get the job done somewhere else for less, I let them.

We had local garage mechanics turning wrenches, and I elected to not complete with them. They had little to no expenses/overhead, no insurance and generally, no warranty.

Pick your battles, and personally, look for long term relationships.

I'd rather lose a sale than lose a customer.

Most of us get all excited when things are busy and we're swamped with work. But if half of what we end up doing is to pay for the first half that didn't earn a cent... busy is no good.
It's easy to lose track of that. Many companies that try to grow end up taking work that isn't worth doing, just to have work, cause "making stuff is what we do and we want to do more of it".
I have to slow myself down regularly otherwise I'd have even more machines that do nothing.

SND said:

Most of us get all excited when things are busy and we're swamped with work. But if half of what we end up doing is to pay for the first half that didn't earn a cent... busy is no good.
It's easy to lose track of that. Many companies that try to grow end up taking work that isn't worth doing, just to have work, cause "making stuff is what we do and we want to do more of it".
I have to slow myself down regularly otherwise I'd have even more machines that do nothing.

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Reminded of the time I saw a guy obtain a lot of work at a loss and he told me he was going to make up for it in volume.

He did not last long.

I have a friend that was running wire EDM machines for $35/hr doing some kind of production work. Customer was constantly beating him up over price. He finally realized he was on his way to the bottom and separated from the customer before he hit bottom.

I constantly tell people they need to make enough money for themselves but also enough to cover machine repairs or replacement otherwise their business is only temporary.

My business is paying cash as I go. I even pay cash for steel and other materials. Simplifies my book work.
Jim