Small Shop Contract Advice

[michiganbuck]

QT: ("they looked you up, and saw you were a pole building behind your house and immediately said no.")
A darn shame but odd things happen. Sometimes it is the buyer who is getting a free dinner out once a month so willing to miss a $10,000-a-month savings for the company.. to get a $150. dinner.
I witnessed that when I was the engineer, and the abrasive buyer would deliberately run out of certain grinding wheels for a free once-a-month dinner

 

[Fal Grunt]

Maybe I should qualify that when I said I'm not looking for 10k pc orders, I was not talking about long term high dollar contracts. I don't want them. I'm not good at them. I don't have employees, and I have no desire to run production. I have found I am good at development, but I am happy to develop a product to where it is capable of being produced in volume, but I am not a volume guy.

I'm looking for businesses that make products and need 100 pcs made. Or 1000 pcs made. Or 50 a month, 100 a month, etc.

Or ideally one business I am trying to get work from, has a product that they (in theory) need about 10 pcs a month. Problem is the company (from my perspective) is run like a continual train wreck. However, those 10 pcs are fairly high dollar, long cycle time, but stupid open tolerances. To me those are good money makers, and with their cycle time are unattended so I can be working on the 1pc 2pc 5pc orders that are currently a good portion of my work. Problem is the company is such a train wreck they can call me and say they need something made and it be another 2 to 3 weeks before they tell me what. By that time their due date has already passed. Then it is an emergency.

Damn rights I would have run.

There is literally not a single vendor or supplier that I work with whose name and address is publicly visible. All of the businesses you did work for were registered in the owners name with their home address available for the world to see? I think either we are miscommunicating, or you were in a exceptionally rare situation.

One of the companies I do work for is owned by 1 man. It is a billion dollar international corporation, I KNOW who owns it, but you cannot find a single legal document with his name on it.

I think there must be some form of miscommunication here, because I cannot possibly see how what you say is true.

 

[Joe Miranda]

Occasionally we get backed up and could use some help. PM me.

 

[Doug]

There is literally not a single vendor or supplier that I work with whose name and address is publicly visible. All of the businesses you did work for were registered in the owners name with their home address available for the world to see? I think either we are miscommunicating, or you were in a exceptionally rare situation.

If I said vendor or supplier that was a mistake, but I think I said customers. I didn't care who my suppliers were owned by. I bought from the suppliers I liked even if their prices weren't the lowest.

It's not rare at all to know who the owners were of all my customer businesses. I didn't have to look them up, they were introduced to me. One owner I knew before the machining business, he referred me to a customer who lives a few blocks from my house. My next door neighbor is a manager at the design firm another customer uses. The lady across the alley worked for a customer. Another customer had kids in the same school as ours. Another customer was started by my 8th grade teacher. I knew guys from engineering school at two customers.

Machining-wise Seattle is a very small city. Anytime I meet somebody in the business after talking a while we find we have a fair number of common acquaintances.

 

[Machinist_max]

I have a feeling this is a regional issue too. There is so many small garage shops in Milwaukee/southern Wi making parts.
I even know of a guy whos doing it under his attached garage, dug extra deep, and put span-crete for his garage floor. Flew everything in with a crane before the garage was put up, even 3 phase from the road, in a residential area in Milwaukee.
I was in the garage before and never had an issue, no website, nothing besides word of mouth. I did move into a small industrial building I bought and am currently thinking about taking down my sign at the road. Its too much advertising!
My Input is, if you don't mind shipping, look at other regions where small shops might be greater in population?
Word of mouth is the best method. Lean on other shop owners for information on who lost work and whos in a bind and looking. Work the crowd, but don't step on any toes.

 

[jlam]

I'd appreciate some input from you guys that are small one man shops who have contract work. I have been working to grow my business and bring on a few new customers primarily with repeat, contract type work. It's going to be a bit of a niche since I don't want 10k pc orders, but I need to diversify out of the 1pc, 2pc, 5pc market. I need jobs that I can setup in the Brother, and when I have an hour, turn the machine on and make a pile of parts.

I have run into what I consider is a bit of an odd problem. I know there are a bunch of guys on here that are 1 man shops with contracts. I have had 2 companies tell me that they can't/won't contract to a small shop. The third was ambiguous and didn't REALLY say why, but that was the implication that I got.

I'll use what I think is the weirdest one as an example. I bought one of this companies products, and it had quality issues so I sent it back. During the return process I mentioned to the guy I talked to on the phone that I had a machine shop, and if they were having supplier issues, I'd be interested in talking to someone to see if I could help. They are not a huge company(they are quite large), or the guy actually cared about his work, low and behold a week or two later I get a phone call from the head of their machine shop. We talked for awhile about my capabilities and background and the issues they were having. I was pretty up front about not being able to handle the volume they needed but I was confident I could meet their quality requirements. After talking about my capabilities the part they thought would be a good fit for me required 8000 pcs a MONTH. No way in hell could I supply that. The guy in charge of the machine shop said that is OK, we just need some that we know are good every month. 25-50% of their current suppliers parts were failing inspection. How the F&*( is that possible?!

So the guy in charge of the machine shop was thrilled and we made plans over the phone that they would send over a few of their most troublesome parts for me to look at and quote. I'd run a small batch for them to see my work and then look at larger long term contracts. Except I never heard from them. A couple months later I called back the head of the machine shop and got a short, but polite explanation that "they looked you up, and saw you were a pole building behind your house and immediately said no."

On one hand I get it... If I drop dead tomorrow, they loose a supplier and are caught holding the bag. If you are in a similar situation how do you handle it?

So when I started my shop, some of my early customers were other machine shops, one of my reply good customers used me for making their tooling, such as Chuck jaw blanks and vise jaw blanks, they supplied material already pre cut and I made the parts, they also had me do the easy parts so they could do the harder parts, this got me going but I did alot of 5 and 10 PC orders for different companies I managed to get, 30 years later I have developed a product and am trying to get my product out there however my business partner fails to hire aggressive sales people so I am going to spin off and build similar products for an established market place. Just how I did it is all.

 

[joecrs]

I would categorize it as mild to moderate. I loathe salesman. I can count on one finger the number of salesman that I have dealt with that I consider honest, upfront, and dependable, ie, not full of shit.

There in lies the problem. I don't promise anything I can't do. I don't state lead times I can't meet. I don't do work that has tolerances I can't hit. If I have concerns about the part, design, features, I ask questions and for clarifications. I've talked customers OUT of giving me work because I wasn't a good fit and recommended them somewhere else to go.

I'm not aggressive in the least, and maybe I should be more aggressive. I had a customer contact me about making another batch of parts I made last year. I responded to his email, twice. I left two voicemails. Never got a reply. I've moved on. If they want the parts made, they'll get back to me.

The market is telling me that I am not good at onesies and twosies. I know that because I am getting less and less of this work. I did a batch of parts for a customer recently, they were very happy with the quality of the work, turn around (6 business days from receipt of material), and price. We even traded a few emails about more work. They wanted to "integrate" me into their quoting processes essentially meaning that all the work they quoted, I would be doing the machining for. They backed me into a corner and told me I had to give them an hourly rate. I told them $100/hr. I have never heard from them again. These are all plus minus .001 parts, typically all one off, special tooling, pain in the butt designs, pain in the butt materials, etc etc.

There is plenty of work out there... I just don't want it. The Tier 1 manufacturer I used to work for has plenty of work. Complex parts pay about $35/hr based on their time estimates. With 90-120 payment terms.

I discussed another job with a local company that they had quoted from another company. Problem was lead time. They wanted them faster. Based on the other companies quote, and based on my BROTHERS speed, the other company was charging about $24/hr. With $0 in tooling, setup charges, workholding, etc.


I am sure they are out there. I know there has to be. Finding them has been the problem. More than that is getting in through the bureaucratic BS to the people who know what is needed.

Another instance I had a company north of me ask to quote some parts. One of my best friends works there and told them to call me to do the parts. Basically they didn't have time to do them in house. They told me that my price was 3 times what they make them in house for. My friend told me that is TOTAL BS, because they only track the time the part is being machined on the 5 axis (totally unnecessary for the part) and none of the time it is in a manual mill, lathe, 3-axis, or surface grinder. They also don't "account" for the cost of any tooling, setup time, etc. Since he has made the parts in house, he argued that their cost is/would be HIGHER than mine.

35 bucks an hour they are either lying about the price or getting them made in china period and walk away from ANYONE asking for more than 30 days payment. I tossed every single customer out that tried to do that and it was the best move I ever made. If you are in this to make money then screw giving it away to larger companies charge what you need to charge. A rate of $100 bucks an hour is even low it cost you that much to get a lawnmower fixed and these PA's know that. Seems like they are trying to lowball you to make themselves look good and trust me you want nothing to do with them. I have been at this for 37 years I have seen that many many times and it just turns out to be a total waste of time quoting , they are looking for someone to make a mistake and that company will be rewarded the job.

 

[hanermo]

35 bucks an hour they are either lying about the price or getting them made in china period and walk away from ANYONE asking for more than 30 days payment.

I tossed every single customer out that tried to do that and it was the best move I ever made. If you are in this to make money then screw giving it away to larger companies charge what you need to charge. A rate of $100 bucks an hour is even low it cost you that much to get a lawnmower fixed and these PA's know that. Seems like they are trying to lowball you to make themselves look good and trust me you want nothing to do with them. I have been at this for 37 years I have seen that many many times and it just turns out to be a total waste of time quoting , they are looking for someone to make a mistake and that company will be rewarded the job.

Pretty much.
But very successful guys I know are offering 180 days payment.
To only to municipalities, similar.

I used to do even more.
The trick is to insure it via a broker/bank, and You get paid immediately.

As You said, if a medium client (new) expects to get 35$ rates and 90 days payments -- walk away.
The best money I ever made was often avoiding the problem customer.
And the pretty common hassle this type of customer often created.

Where I am buying as a new client, I usually offer 100% cash up front.
And ask for a rate similar to their large contract clients.
This almost always works.

Does not matter if it is 300$, or 3000$.
A new client offering cash up front, without the goods being delivered - is serious.

 

[PDW]

Where I am buying as a new client, I usually offer 100% cash up front.
And ask for a rate similar to their large contract clients.
This almost always works.

Does not matter if it is 300$, or 3000$.
A new client offering cash up front, without the goods being delivered - is serious.

I did this with an iron foundry. Told them I knew I was a small customer and likely not really profitable, so I was prepared to pay their price up front in full so at least they'd know I'd pay. And I'd implement any suggestions they had about my patterns. And time wasn't of the essence, get back to me when you can fit it in.

They are happy to do business with me and nowadays invoice me after the job is done, because I demonstrated I was serious and easy to deal with. I'm still chicken feed, but I'm not a PITA.

PDW

 

[john.k]

I used to do fairly steady work for the old phone co here (Telecom) when it was government owned ,truck and machinery modifications and like .........anyhoo,a TV reporter started a real long term hatchet job on another government dept that had a truck repaired in a non commercial premises.......typical TV show shock /horror beat up.....enough to panic politicians .,though.