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dsergison

Diamond
Joined
Oct 23, 2003
Location
East Peoria, IL, USA
and what would you have done differently?

I am researching what very small shops do when they become small -to medium size like 1 to 3 person becomes 5-20 person.

I have a very small (me part time) shop. and I could grow it...

And, I'm in an Industrial technology program and I have chosen to write a paper about this topic because it is near an dear to me.

more about my situation: I struggle to meet my current demand now, and organizing work to be done is a big drag. my product have a lot of variation, (too much to stock everything) and quantities are low (for now) but each product takes a lot of time... and I am trying to go to one-piece flow and quick set-ups, and streamline it all. maybe i should just keep batch producing? When do you decide that batch is not working out and it is time to revamp the system?

summary: if anyone can spare a minute to tell me about what they did when they grew... and what you would have done differently, I would love to use your input.

Thanks, Dan
 

Dave K

Diamond
Joined
Mar 21, 2004
Location
Waukesha, WI
I started out running my business on a part time basis. It was a great way to start, and I wouldn't change anything, because it gave me a chance to get my feet wet, without much risk. I could quit it at any time if I didn't like it, and wouldn't really lose anything. It also gave me a "feel" for the market climate. Once I started getting more work and it was too much to handle with my manual equipment in my garage, I figured out if I had enough work to support a cnc machine payment, and a small rented space to put it in. That was my next step. As I started to get more customers, (mostly by word of mouth) I saw enough potential to go full time.

Now I have 2 fulltime employees. Seems like growth just sort of happened all on its own for me.
 

nakedanvil

Aluminum
Size Matters

Things don't scale up as nicely as we would like. With 1-3 people (including yourself) You can get a lot of work done. More than that but less than 8, you will spend ALL of your time keeping everyone else busy. So you lose your most productive employee (you). Over 8 or 10 things get better because of division of labor. You can hire a shop manager or an office manager if you want to stay in the shop. With 1-4 people, they're all working together like friends. With more people shop politics kicks in and it can become "them and us". There are plateaus and even valleys on the way up. At each stage you will have to change the way you are doing things - what worked when you were small may not work as you get bigger. Be ready to revamp EVERYTHING at different stages as you grow. Make certain that the shop can run without you. Too many owners want people to come to them for everything. Learn to delegate and empower your people to make decisions. Never blame the employee when things go wrong. They are not trying to screw up - you either didn't give them enough information or the right tools to do the job. Taking responsibility ALL the time puts you in control.

Dave K makes a good point. Moove to automatic equipment and CNC with a passion. Much eaiser to find employees and if you are non-union you'd be suprised how many machines one man can keep busy.

Sorry, got carried away

grant
 

Dave K

Diamond
Joined
Mar 21, 2004
Location
Waukesha, WI
Excellent points, nakedanvil. There's probably so much to list for a proper answer, that there may not be enough room on this message board.
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
I think this is just something that each has to finger out on their own as everyones situation is diff.


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I am Ox and I approve this here post!
 

dsergison

Diamond
Joined
Oct 23, 2003
Location
East Peoria, IL, USA
OX, I know.

but I'm trying to figure it out. -as I hope to do just this....someday. The very next step for me is a faster mill with a tool changer, and a cnc lathe. and moving away from hand deburring & polishing.

I really value your guys experience.

-And I have to write an intelligent paper. The scope of the paper is about the next step, how people got bigger than one person.

-and i really want to make the right decisions if I get that far (several employees).

I don't wish to burden you asking you to outline your life.
Nakedanvils post is spot-on. he gave me several ideas I can incorporate.

all the articles I can think of from AM or even "how it's made" are success stories. i would like some reality :)

Thanks
 

adama

Diamond
Joined
Dec 28, 2004
Location
uk
i will agree with ox but i have seen it a few times were u take on more of a quality - final stage role in your product. that seams to work out well.
 

Michael Moore

Titanium
Joined
Jun 4, 2004
Location
San Francisco, CA
Dan, I think Grant has a good point (in so many words) about first deciding if you want to be a machinist employing other machinists, or if you want to be the owner of a machine shop employing machinists.

That could have a noticeable impact on how you structure things.

You also need to look at who you currently have doing the books and other "supercargo" operations that don't directly contribute to getting a part off the machine. I know of one-man shops that have the one man (or woman) working in the shop and the spouse doing the books, answering the phone, ordering parts, invoicing, calling up deadbeat suppliers/customers etc. As soon as you start adding employees you get an increase in the amount of paperwork that has to be done. You also start having to manage people instead of parts. Parts don't talk back, call in sick when hungover or angry, or quit when you've got 500 more parts that have to get out by Friday.

You've got to have customers, but I'm not sure if you are worse off having customers or employees. :)

Having both could easily make you a machine shop owner instead of a machinist.

In my last semester at university in business school we had a class called "senior seminar" where groups of students worked with an SBA employee to "consult" for one of the SBA clients. My main memory of that is of some skilled artisans who were horrible business people. :eek:

How many hours can you put in week after week after week? Do you want to make parts personally, or just make money by having someone make parts?

I know of a local guy who does stuff for the old Porsche speedsters. He designs and prototypes the parts and then farms them out to a job shop to get them made. If you're the "idea guy" then that makes a lot of sense. It is that old specialization of labor thing. Spend your time doing the R&D and let someone else pay for the $500K 5 axis machining center. Keep your investment manageable. Perhaps it is better to have $3-5K of parts that you had to pay to have made that might take a couple of years to sell sitting on the shelf instead of an expensive machine that is eating up your cash reserves every month when no one is buying anything.

As old and basic as your Tree now is, it would seem to put you a big step up from a lot of people. Add a smaller/affordable CNC lathe and you can start prototyping those kinds of part, or doing smaller production runs.

If you are doing bike stuff, like your Buell parts, you know how that stuff can be boom/bust/fad of the moment.

If you really need a tool changer and an enclosure I'd think that one of those small Sharp VMCs might be the ticket for you, based on what I"ve seen here at PM. You might be able to slide that in next (or in place of) the Tree at home and have enough of a boost in short-run productivity to make it worth staying free of employees, rented space, etc.

I closed my little side business at the end of December after about 15 years. Frankly, if I do something in the future (which is very debatable) I can't see ever holding an inventory again, or dealing with retail customers. Trying to sell dozens or hundreds of items is a lot of work, and you've got to start doing advertising and that kind of activity to get the word out.

What seems to me to be a better way to go for the small entrepreneur is to stay a "one wo/man band" and do custom stuff. Rich people often seem to have money to spend, even when the economy is down.

Ross' shop might be an example. He and his partners actually have a number of employees, but they target the folks that have very high-end vintage race cars and those people appear to be pretty happy to take their place in line, wait a year or two, and then pay however much is needed for however long the work takes because they know that there are very few other places to go to where they can safely entrust their mega-expensive vehicle and not have someone butcher it.

Or be someone like Evan Wilcox who has people who are happy to pay very good money for shiny aluminum bodywork,= and also are willing to deal with an 8 month lead time. I've met Evan and my impression is that he doesn't have a huge capital investment yet he seems to have no shortage of work to keep him busy, and people are paying his prices.

The drawback is you have to be good enough to build the repuatation, and that rep doesn't get built overnight. But if you can find a niche that doesn't have a lot of serious competition it seems like there is a lot to be said for NOT getting bigger and getting sidetracked from doing what you are interested in doing and instead becoming a manager.

That may have gotten a bit off your topic, but perhaps it will help you discuss both sides of the "getting bigger" decision in your paper.

cheers,
Michael
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
Oh yeah - I forgot - this is "for a paper or report".

So instead of telling folks (students?) that the reality is that each situation is diff as far as the

1) Start-up person
2) The customer(s)/Purchase agent(s)
3) Real estate and local EPA and OSHA issues, Price of juice (REALLY fluctuates acrost this great continent of ours)
4) Type of parts - be they full blown machines engineered and built in-house, or high volume production (auto?), or one-off proto's
5) Kinda folks that you tend to git along and identify with. Are they also the type of person that makes a good employee?
6) Werk ethics in your area. (Is there any anywhere these days? But this could be a whole seperate board on the whole welfare system and I don't have enough time to fuss with that - although it pi$$e$ me off Royally!)
7) What outside services are local to your area? Shirely S Mich/N Ohio has everything withing a cpl hrs that could be needed for aboot anything be they material sources or finish subcontractors like Grinders, Gun Drilling, Honing, Heat Treat, Plating, etc... I am sure that there are a LOT of areas in N.A. that these issues would take more time and $.
8) Market trends that are well outta their control - even after they are/were well established in a sector.
9) I think you git my point....

What werks for one will be the downfall of the other'n.

So rather than tell these folks that would be reading this paper that they would need

A) To use some [not so common] sence to decide if they really think it can fly. When they look at a business idea and think that they should be able to make'r go that will not fly for certain as there are WAY more issues than you can find when looking at it on paper. If you think that you can't understand how you couldn't git rich overnight? Then there just may be an open market for your setup - and only then!

B) How many hrs a week/yr are you expecting to have to put forth to make it werk? Now dbl it! If that is not acceptible - $hit can the idea!

C) When I started my banker told me that 80% (actually I think it was more like 90?) of "new businesses" fail w/in the first yr. I did not appreciate being lumped into the overall picture of new businesses that also include a bunch of women with nothing better to doo that start some stupid a$$ storefront uptown and think they will make a "go" of it! :mad:


That is my take on it - but then aggin - as I have posted so many times - I never took nor doo I put any stock in "business classes" or the like. If those folks teaching such classes knew what they think they doo - they would be out dooing it - not teaching it. Same goes for those bloody "consultants". :rolleyes:


EDIT

Look at it this way:

Forbes Fortune 500 Companys have it fingered out right? They have "smart" folks on board right?

Any idea how many of them go out of business each yr?


If there was really a check list for "Making it" - wouldn't you assume that at least the "smart Folk" would have a copy and never fail?

Sorry - it aint that simple and life aint fair...



--------

Just another dumb farmer trying to eek out an existance!
Ox
 

dsergison

Diamond
Joined
Oct 23, 2003
Location
East Peoria, IL, USA
thanks Ox. I know.

I know the correct answer is "make good choices, not bad ones"

but I can't just write about sarcasm. :)

this isn't an outright "business class" it's a thinly veiled as "materials management" is about all sorts of hip acronyms like ERP, MRP, MRP2, ROTFLMAO .....just kidding

myself i'd never want employees.. but i might need them? I'm the idea man.
 

JZZ30

Aluminum
Joined
Dec 20, 2007
Location
CA
Just another thing to think about that I have seen time and time again - The faster you try to grow something into something big (or try to start off too big for that matter), the bigger and harder it can (and many times does!) fall down. Slow, controlled growth is usually best, no matter how boring or unfashionable it may seem. This is most beneficial when things slow down due to reasons beyond your control. Just buckle up and wait out the storm.

There is also another thing that people don't know about until they are in it - (and this depends on the industry and particular business of course) what I have found to be a "gray area" of business growth, which is a bad but also inevitable place to be in. This is the point where you have too much of something going on (customers, sales, volume, etc.) but you don't have enough manpower or capital to manage it as well as you'd like. And you can't really do anything about it because you need to be at the next growth level to solve the problem. The only real solution is MORE customers/sales/volume but of course that can come only with even more customers/sales/volume, which in turn can only come over time. And that's if the market cooperates fully! And of course, when you take the jump to the next level from your side, that usually means more expense (equipment, employees, whatever), which sometimes knocks you back down a notch or two until things stabilize.

The big problem with these gray areas is that any shortages or reduction in customer service have the potential to REDUCE your sales, and hurts your business. Of course this doesn't let you go to the next level that you need to be at to properly support that volume. And so the vicious cycle can go....... :mad:
 

mitty38382

Hot Rolled
Joined
Apr 18, 2006
Location
Trenton, Tennessee
There are lots of good sayings as well, that have been written through the years that apply - like:

Steady wins the race - If you flywheel the business then you are stuck with either excess inventory (which needs to be "converted" to cash), or excess employees (which are a drain on cash unless you have reached a steady state of production) or decease in jobs (which results in loss of cash income) resulting in reduction of cash reserves.

Scaling up business is about scale of economics, where you have native capacity to manufacture "X" amount of widgets. Beyond "X" is the cost to increase production along with cost to hire and train etc. those that will be responsible for maintaining that increase. In a typical shop each machinist and machine will be responsible for approx. 120K or more of income before expenses per year.

What is realized from the 120K is as our other farmer friend will tell you - dependent on input cost. Every business has input cost. Farmers look at seed cost, fuel, land rent, Chemicals, labor, machinery cost etc.
Machine Shop owners look at: material costs, power, rent, coolant chemicals, labor, machinery cost etc. - WOW! pretty much the same factors have influence.

There is also the other side:
Farmer - price per bushel for corn, wheat, cotton,or soybeans or maybe $/lb for feeder cattle/ 550lb 750 lb cattle or whatever your specialty is
Machine Shop Owner - $ per hour or quoted job, influence of offshore competition etc.

I guess the whole point is that no matter what the business line there are similar input /output considerations.
You would think that in a machine shop that it is more cut and dry, but not the case.

Should Ox invest in a Krone haybine or chopper at $400K or a JD 150hp tractor pulling linked MOCO's (Mower/ Conditioners) and what are the fuel savings and true cost of operation. Whats the ROI
Maybe he should invest in a new Mill/ Turn machine with subspindle and what is the actual net per hour taking into account electricity and other costs.

Our TVA Electricity is .08/KWH and when we generate by windmill they buy it at .15/KWH go figure.

In a shop it also matters if you are having to hunt for work to feed the faces or like us we manufacture our own product and are so back logged we can't see daylight. Remember steady wins the race and even we are not eager to expand, maybe just a little controlled growth. BTW we have grown at the rate of roughly 200% per year for the last five plus years. By capturing market share, improving quality and customer service. Growth is never easy or easily managed.

Frank in Tennessee
Hope this makes sense
 

Vern Smith

Aluminum
Joined
Dec 24, 2006
Location
Naples, FL
Owning and operating a machine shop or a bakery or a restaurant or whatever are all business'. The important thing about the previous sentence is the one term common to all the various endeavors, namely business. To expand successfully in any of these endeavors requires some basic knowledge about running a business. This is not necessarily intuitive and usually does not follow the strict formalistic two plus two is always four approach necessary to be a good machinist.

There are lots of folks in academia that know how successful businesses should be run. They don't do it themselves because most of them are risk adverse. If you are risk adverse don't start a business. To expand and grow you will need to borrow capital ( assuming you are not independently wealthy) and this will invariable involve pledging your assets. When start up businesses fail the owner often ends up filing personal bankruptcy. It's not a step to be taken lightly.

If you don't want to take business classes at your local community college at least get some books on the topic. Quickbooks, the accounting and bookkeeping program is relatively easy to use and if used religiously with detailed entries forces you to know what your economic situation is on a daily basis. I would consider a package like this mandatory. Hiring someone else to make the entries and generate the management reports you will need is quite acceptable. Doing it yourself at first is very wise.

I'm not trying to discourage you or paint an overly black picture. I've started, owned, and operated two reasonably successful businesses in the last 35 years and would not want it to be any other way. I'm sure you spent a lot of time learning the skills necessary to become a competent machinist. I'm suggesting it would be a good idea to do a little of the same in the fields of economics, accounting, tax law, employee relations and motivation, inventory control, liquidity and so on. Good luck

Vern
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
You thought that my tongue was in my cheek as I wrote that? :confused:

You better read aggin. While I (my family) use sarcasm a LOT, there was nun intended in that post.

I really doo feel that telling (teaching) someone that there is a check list for a successfull business is dangerous ground, when the reality is "it depends:". Better off teachine aboot Evolution and Global Warming.

As far as your "choices" statement - that is seldom ever as easy as that! I LOVE Black & White, 'cept'n fer there is a werld of grey out there. I make my choices at the time with what info I have AT THAT TIME. I doo not ever look back and say that I "Shoulda, coulda, woulda" as hindsite @ 20/20 is quite irelivent. But with the grey factor you can make the best decission today and find out as quickly as tomorrow that it was the wrong one and then hopefully the repercussions (I looked that up and I actually got that one rat the firth time!) are not detrimental, but they may be. And at times - NOT dooing something may be worse than dooing something - even the wrong something possibly. So even the most conservative can leave room open for someone else to git a foothold in. ???

"It all depends"


---------

Mitty - that font size on the new software solves your issue quite well eh? Caps not needed! (No smileys available on edit page?) I hate reading this small print myself.


------

I am Ox and I approve this here post!
 

dsergison

Diamond
Joined
Oct 23, 2003
Location
East Peoria, IL, USA
Ox, i guess that came out wrong. I didnt mean to offend you, I agree with you. i thought your post was funny and true. i was just saying i cant write a paper titled "Make Good Choices and Don't Be Stupid" but i would if i could. it would be funny. sarcastic i thought was the appropriate word? :)
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
On the radio just now:

"No second and possibly no third shift at Toledo Jeep Plant today"

Doo to supplier filing bankruptsy and them scrambling to find parts supplier.

Wifey called me with this info laughing at the thought of "Who will they charge the shut-down time to now?" LOL!


One would like to assume that a tier one automotive supplier would have had that list of "How to Run a Suck-cessfull Business" eh? Maybe there will be one more copy of it on E-Bay tomorrow?

----------

This is the only funny post I have made in this here thread. Sorry if you read differently. :o
Ox
 

dsergison

Diamond
Joined
Oct 23, 2003
Location
East Peoria, IL, USA
well my guess is they were squeezed out of profitibility by either:

#1 forced discount per year.

#2 somebodys got too many yachts and 2nd and 3rd homes.

#3 blame the union.

pick any three.
 

Metalcutter

Titanium
Joined
Sep 14, 2005
Location
San Diego
While you're small and have a thumb on all the pulses, define as best you can what portion of machining you want to play in. I had my best luck in machining miniature milled pieces.

I refined by having all the machines the same. Once a machinist learned one he know the whole shop. I set each one up with different basic tooling. That made the setups more than 70% done.

I did mostly free machining materials and mostly bar stock. There wasn't a lot of variety so the learning curve was short.

You do have to shop more to get work, but you'll be able to do the work at a more reasonable cost.

Anyhow, that's what I did.

It's hard to do everything and then do anything well.

Regards,

Stan-
 

SDConcepts

Stainless
Joined
Mar 1, 2007
Location
warren, mi
one thing to consider... if your at peak capacity of the widgit you manufacture and you can;t keep them on the shelf then maybe its time to raise the price. this does two things. 1. allows you more capital to further the growth later.
2. will decrease your volume a little so you can keep up with the equipment you have while maintaining your profits. if you go to high the market will tell you and you will have a bunch sitting on the shelf. then its time for a sale to spur some interests.
 

Michael Moore

Titanium
Joined
Jun 4, 2004
Location
San Francisco, CA
Doesn't that go along with the "if you have too much work raise your prices and encourage the customers at the bottom of the "willingness to pay" scale to go elsewhere?"

cheers,
Michael
 








 
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