Shop Start-up Funding

[Conrad Hoffman]

Do you know your potential customers, what they need made, quantities and how much they'll spend? I think trying this without either working in a shop or being a rep for a shop, is likely a disaster waiting to happen. Definitely avoid debt and avoid partners like the plague. I know you didn't mention that, but just wanted to get it out there. Most people start out in a very small and limited fashion. Then they grow or not. BTW, along with the machines, have you considered inspection equipment? It ain't cheap and you can't do business without it. Might need insurance too. Priced that stuff?

 

[dkmc]

Never underestimate the Luck aspect. You can line yourself up for Lucky breaks to a point.
But being in the right place at the right time, meeting the right people, and saying the right
words at the right time plays a huge part in the overall success of any business ad-venture.

I know a guy that moved several states away, he did part time machining in his garage for years.
At his new location, he took a full time job with Fastenal for about a year as an outside salesman.
Fastenal gave him a paycheck, a pickup with free gas, and he spent his time 'getting to know' all the
industrial accounts in this new area.....on Fastenal's dolla. Then he quit, and called on those accounts
on his own behalf. I thought that was a clever approach.

 

[Hebrewhammer8]

OMG this topic comes up every dang week!

Ok you want to start a shop and make parts huh....What makes you any better/different than anyone else out there? **ANYONE** can buy a mill and make sum parts in their garage. What can you offer that is different than every tom dick and harry out there?

IMHO you should start a business when you have the knowledge/talent/connections/etc to see how others (possibly your employer) are doing it wrong. You should start when you can see opportunity/efficiencies that others cannot.

So who do you know? What do you know? Can you actually do what you think you know?

As boosted has mentioned this industry is a grind. I mean eat your soul for dinner and then ask for dessert type of grind. Are you prepared to lose everything you have if things don't work out?

 

[dkmc]

OMG this topic comes up every dang week!

Ok you want to start a shop and make parts huh....What makes you any better/different than anyone else out there? **ANYONE** can buy a mill and make sum parts in their garage. What can you offer that is different than every tom dick and harry out there?

IMHO you should start a business when you have the knowledge/talent/connections/etc to see how others (possibly your employer) are doing it wrong. You should start when you can see opportunity/efficiencies that others cannot.

So who do you know? What do you know? Can you actually do what you think you know?

As boosted has mentioned this industry is a grind. I mean eat your soul for dinner and then ask for dessert type of grind. Are you prepared to lose everything you have if things don't work out?

I would tell a guy that if I wanted to discourage him. I was told this many times when I was a struggling noob. Most all of the 'friends' I had at the time disappeared when I said I'm going full time with my business. Not really sure why, oh well. I guess maybe they were afraid I'd ask them for help moving or fixing up the building I moved into.

This 'be different, find a niche' thing is a broken record saying that's been preached to new shop wanna-bees for decades. What examples can you give as far as the 'being different' part goes? Nobody ever has suggestions for that because there's not much to be different about. What, weld with a surface grinder? Mill parts on a Lathe? Fact is, there are thousands of shops out there all doing the same thing, with the same 5 axis machines, and now days maybe 3D printing, and all of them are getting their piece of the pie, some bigger some smaller. The WHO do you know, or "who were you able to connect with early on" part is probably the best chance of success a guy can have. An engineer or purchasing person that happens to take a liking to you can be worth gold. In reality about the only way he can be different from the rest is have attractively low pricing, and appeal to his prospects in a way that makes them appreciate his efforts to be self employed. So they give him a chance.

Edit: Another thing that can be a boost, is if you can help a guy out of a jamb. Fix a problem for a purchasing guy or engineer. I walked into a gas well support company's front door, cold call, asked the ditz on the front desk if they send out machine work or welding work. She said they do that, but they do it all in house. I handed her my card and left, oh well.
The next morning at 9am I get a call from the facility manager, and he says "Buddy I'm in trouble".....that was good for 3+ years of work from them at very good rate, and the checks came in the mail in 25 days. Yes he was in trouble, and I was able to get him out of a jamb quickly, using old worn manual machines and a welder. Total investment in said machines, as a guess....less than $5k. Just this customer paid for those machines and others many times over. My business card says "Solving customers problems since 1979" No 5 axis here.

 

[Comatose]

There's nothing inherently wrong with the "be different" mantra, because literally every shop is different. Otherwise quotes would all come back the same for the same part, rather than the order of magnitude difference (sometimes two) we see here.

Either you have a niche that sets you apart from commodity shops or you don't. If you do, great, but you have to keep getting better and better at that to hold on to the edge, whatever it is.

If you're a commodity shop, that's totally fine too. But then you have to be really good at execution, because commodity pricing doesn't leave a lot of room for screw-ups.

The other real options are being a hell of a salesman, so you can sell commodity services at specialty prices, or be a cert collector so you can sell commodity services into protected areas, (TSOed parts for aircraft, defense parts, etc)

Every business that stays in business beyond the first few years has some reason why that has happened. It can be something interesting like "I'm the only person in the world that can successfully make left handed titanium dildo rivets' or something mundane like "I'm the only one with a bridgeport who can stand to live in this one-horse town." But there's always something.

 

[William Payne]

Since I'm like the original poster getting started myself I can only give one bit of advice. Do high quality work and hit the accuracy that you claim to be able to. Don't promise what you can't deliver. I got the idea for my own business because I got to see all the poor quality stuff we had to fix when we outsourced work. One day I said there has to be a market for people who can do really really good quality work. That applies to whether you are a welder, fabricator, cnc machinist, manual machinist, anything.

 

[john.k]

My first metal machines were from auctions that I went to buying earthmoving and trucks to repair and sell.........Any machining I needed done had to go out to local shops that took from weeks to months to do stuff they promised urgent...............I bought a big lathe at an auction,it was paid for in a month doing truck tailshaft alterations,and axle repairs..........The big lathe was always the biggest earner ,after the diesel repair shop......Mills ,grinders,small lathes ,never paid the returns ,but were nice to have.

 

[idacal]

My first metal machines were from auctions that I went to buying earthmoving and trucks to repair and sell.........Any machining I needed done had to go out to local shops that took from weeks to months to do stuff they promised urgent...............I bought a big lathe at an auction,it was paid for in a month doing truck tailshaft alterations,and axle repairs..........The big lathe was always the biggest earner ,after the diesel repair shop......Mills ,grinders,small lathes ,never paid the returns ,but were nice to have.

You were bringing unique skills to cheap equipment thats the only way to really get started in anything and people are buying your time not the machines time. Thats the hardest thing about starting something. It requires the owner to do and be everything. There is people that can start a business as a commodity supplier. But they are unique, great people managers, and salespeople and would make a killing any where else.

 

[boosted]

Let's see... 1985.

$10,000 ($28K in today's dollars) dedicated to the machining business startup. Backyard shop, 500 sqft. 11" Colchester lathe and Hardinge mill with m-head, drill press, etc. Only experience was hobby machining. ME degree, quit an engineering desk job I hated, no source of income. Wife was less than enthusiastic about the machine shop idea.

The first paying work came from local machine shops, small jobs they didn't want. Somehow it all worked out, but when you're in your twenties anything is possible.

Part of why I say it’s harder all the time is that the cost of getting a foot in the door is typically much higher now (even most repair shops now have CNC), and the market is much less localized. In 1985 you almost never had to compete with other garage shops outside your geographic location. You also didn’t have these purchasing agents who have been trained to only care about cost and have the ability to spam an RFQ to 50 different suppliers.

I think certain aspects of the journey were much easier back when things were more relationship driven and the markets were much more isolated.

 

[Dan from Oakland]

"Invest" ass_u_me' that he is expecting a return.

GFM is just personal grants.
No payback - other than "pay it FWD" schtuff.


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Think Snow Eh!
Ox

Was your 1st car a 700 series BMW? No different starting a shop...................

 

[Ox]

What?

Only "car" I ever owned was a "Smokey and The Bandit Special" T/A - for 4 months.
What does that have to doo with my post?


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Think Snow Eh!
Ox

 

[Garwood]

There's a difference between owning your own job and owning a business. If you set out to do this it should be for the latter. You can and will do far better working for someone else in the long run VS owning your own job.

My take on what kind of opportunities you should pursue has most to do with what you're good at.

If you're a really good salesman and people manager then you could possibly build an empire with job work and commodity machines. Your specialty is sniffing out customers and schmoozing them into buying from you. This is a rough arena to compete in.

If you're better at solving mechanical problems than people problems and selling you should find a niche or several and refine it. This is why products are brought up often here. All the people I know with successful manufacturing businesses that are not psychopaths have niches, mostly products.

 

[Hebrewhammer8]

What examples can you give as far as the 'being different' part goes? Nobody ever has suggestions for that because there's not much to be different about.

Ok I will bite.

I started my shop because i "Felt" many other shops are leaving lots on the table as they live in business's with "Islands of Functionality." That is highly functional systems separated by integration challenges. So. What did I do? I developed my own in-house ERP system that is fully integrated into my shop. Tooling, WO, SO, PO, all integrated fully(or as much as I've had time for). New features other software has that looks like it would fit well in our shop. Instead of paying $$$$ of dollars for software that is 80% functional and still takes time to integrate into existing systems, I build it myself.

How much does it "cost" to purchase ERP?

How much does it "cost" to develop it inhouse?

How much does it "cost" you when the software does not conform to how you do business but makes you conform to it?


The main point being If I had not had the experience with other shops/consulting/seeing how everyone else is doin it I would not have been able to make that insight.

I could write a novel on this topic but that would only be to pump my ego

 

[Ox]

How many souls in your shop Hammer?


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Think Snow Eh!
Ox

 

[Hebrewhammer8]

How many souls in your shop Hammer?


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Think Snow Eh!
Ox

Currently 2. Maybe 3. Place feels haunted sometimes! Do robots have souls?

 

[Ox]

Doo you really handle that much work to need an ERP?

Seems that would come into play more when there are different people in different departments having reason to access that info?



Per robots:

Not sure. I feel guilty thinking about selling or scrapping any machine that has been here long and pulled it's weight.
Don't see why a bot would be different?

I did own and store a cpl bots during The Crash, and sold them on the other side, but our app never happened, so they didn't run here. So no guilt. Besides, the factory bought them back, so ...


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Think Snow Eh!
Ox

 

[Hebrewhammer8]

Doo you really handle that much work to need an ERP?

That is a really subjective question. It makes it alot easier to get top tier customers when you do things in a top tier ways.

By ERP I really mean: "Ultimate Overlord Shop Software That Controls Everything in My Shop"

 

[Covenant MFG]

Try to get rich quick and you'll get poor quick.

Simplest "what makes you different" answer is to get an old old machine, pay cash, and undercut the big dogs. Doesn't work for everything but all those onesy and twoesy parts that customers needed yesterday that no other shop wants to do? Grab those.

All the time is programming and setup anyway so a fast machine gets you nowhere really until you can't keep up with the customers banging on your door. By the time that happens, a $50/hr shop rate that you don't have to use towards machine payments adds up fast to get you a better machine.

If you're not smart or connected or responsible or honest or hard working enough to make $$ with a cheap machine, you ain't gonna do it with a financed one either. More money only makes stuff happen faster, including bad business decisions.

 

[john.k]

The catch with starting a backyard shop is you gotta have a backyard ,and a majority of young people cant afford a house,so to start a shop they are hit with rent .

 

[dkmc]

Let's see... 1985.

$10,000 ($28K in today's dollars) dedicated to the machining business startup. Backyard shop, 500 sqft. 11" Colchester lathe and Hardinge mill with m-head, drill press, etc. Only experience was hobby machining. ME degree, quit an engineering desk job I hated, no source of income. Wife was less than enthusiastic about the machine shop idea.

The first paying work came from local machine shops, small jobs they didn't want. Somehow it all worked out, but when you're in your twenties anything is possible.

Not even sure, maybe a few thousand bux, 360 sq ft, Van Norman No2 Horiz. from the scrap yard, Craftsman-Atlas 12" lathe, BP round ram W/ "M" head, Crapsman drill press, buzz box welder. About the first job was drilling cross holes in "tow poles" for Stow towable mortar mixers. Around 500 of them as I recall, delivered in metal tote boxes via tractor trailer in a residential neighborhood. Luckily I did have a small forklift even then. Truck driver was not happy, not sure why, no real problems unloading. Next day purchasing grump calls and asks if the shop is in a house. Ah.....well, in a garage behind a house. He says "nope, we can't send you anymore work unless you're a 'real' shop". The job went pretty smooth, I ground up a step drill so I could drill the 3/8 hole in one side and the 3/4 hole in the other side in one shot. (This is prolly the 'think out of the box' part) I feel they were doing it a harder way in house, and that's why I got the relatively trivial job. It was 60 miles one way for them to ship them to me. They closed up a couple years later anyway.

I could write a novel on this topic but that would only be to pump my ego

I'd read it. Years ago I got frustrated with the price of ERP software as well, did some research, talked to a local database vendor. Had daydreams of writing my own program, and heck, maybe even selling it. Then more work came in and my enthusiasm petered out. It was a fun thought.