Anyone ever hire a business consultant

I need business financial advice beyond what an accountant could give. We are in need of a larger building and larger more modern machinerey. I have been using antique machines and It has worked for the past decade but we are at a cross roads. I stay where I am and try to not grow or we grow and hope we dont grow to death. Anyone ever delt with this issue. We are up to 10 fulltime employees and we have no parking and it has become painfully obvious that using an 80 year old warner swasey turret lathe as our primary lathe is probably foolish. Someone is going to get hurt running it. The same can be said about the line of antique K and T mills that we run parts on all day long. We make our own products and what we have done is to set up each machine to do one operation. Believe it or not it works and it has been working fine for years. I am leaning toward doing nothing and just sitting tight. The other people who have say on this issue want modern machines and modern shop space. We currently own the buildings we are in outright so getting a mortgage is not my idea of fun.

Kevin -- the key issue, seems to me, is your potential market. Good case, the interest in your products is exploding, you have such a good name and designs that you're in line to grow your market share (even with lower cost competitors) and the new equipment will allow you to both grow and either increase profit margins or stave off lower priced competitors. Bad case, your customers are aging, you already have about all the share you're going to get out of a flat growth market niche, and someone in China has the idea they want to make cheap copies of your stuff. Then, the investment puts you in debt rather than create growth and margins.

Point being that you probably need more of a market analyst (with you maybe being the best judge) than a new financial advisor. If you have a good idea of the business that's yours to capture, the numbers should be pretty easy to figure out.

A wild assed-guess is that you're someplace in between and might find ways to affordably create a bit more elbow room (build up? rent some adjacent parking?) and update machines one production bottleneck at a time.

Don't know anything about who you'd hire, but from your description it seems like an industrial hygiene and safety person should be a high priority. Almost all accidents are preventable, and if you've failed to take obvious (in hindsight) measures to protect people, it could put you deep in a hole or out of business. Then you can think about where the business should go.

I noticed you used I and we. Does the We group desire to take responsibility for paying off the new incurred debt?

Why I ask is that it is very easy to desire to be aggressive in business expansion when the "We" does not have as much skin in the game as the "I".

It is wonderful to have business growth issues to deal with. Only you know what you really want out of life and out of your business.

From remarks that you have made in the past and in this post, I get the feeling that you are not so sure that you want grow the business to the same degree as the "We" group. If you go along with this, I suspect that you will have a significant probability of ending up unhappy with the new situation. So on this point I would strongly recommend taking a path that matches up with your life goals.

There is another side to this and that is analyzing what affects updating your equipment will do to your current business model. It is very likely that updating to the proper CNC equipment will free up floor space and man-power. This might resolve many of the other space issues such as parking. This would also allow you to increase production without increasing overhead costs outside of the equipment purchase dollars.

It is good to seek outside advice however I would caution you with consultants in that many or most will not actually know what it is that makes you tick and where you want to go. It is easy to give advice in how to grow a business but it is quite another issue when the current position of where the business is matches with your personal life goals.

Business growth is not always what is best for you personal life though it might be an excellent financial move.

Have you thought about an eventual exit plan for your business? This might be a good opportunity to allow your growth decision dilemma to actually help you with your future exit goals.

Some good insights given. I'll add upgrading equipment usually requires increased overhead (programmers, tool makers, etc) the new equipment has to support along with everybody already there.

Ziggy2 said:

Business growth is not always what is best for you personal life

Click to expand...

Exactly. How old are you and what do you want to do with the rest ?

As a compromise, you could upgrade a select few machines for now ... replace the K&T with a Fadal or change that WarnerSwasey for a Conquest, make one or two improvements here and there and see how you like it.

Gratuitous advice, I would not go blow a big pile of cash on new stuff unless you are mid-forties or under, and luvs luvs luvs that shop beyond anything else in the world. Cuz you're not going to be spending a summer sailing a small boat up the Nile when you have $10,000 a month payments to make.

Since you make your own product, this seems like a fairly straightforward calculation.
You must know what the cost is of each of the components that you manufacture in house. This cost must include material, labor, tooling, overhead, taxes and benefits for the operator, etc.
Now you can calculate the new cost using the cost of the machine and associated expenses.
Once you have the numbers in front of you, the decision would be fairly obvious.
There is also another option. You could see the cost in vending out some of the parts. Sounds like your process is very labor intensive. There may be components that you make that can be made faster and cheaper on newer equipment.
You might still be cheaper than manufacturing in house without having the commitment of purchasing new equipment.

Those who can, do.
Those who can't do, teach.
Those who can't teach, administrate.
Those who can't administrate, consult.

Tried to send you a pm, but you're full.

For your stated question, about consultants, I would suggest talking with your local Manufacturing Extension Partnership (MEP). Each state has one and they're funded by NIST. One of the big things they do is help companies plan expansions, learn about lean manufacturing, etc. My state's is, in general, staffed by very experienced people. A friend's company expanded production significantly, and he had MEP come in to help do planning and layout. I also had MEP help me get my AS9100 system set up.

Because they're nonprofit, they're less expensive, and the way their funding works they don't have an incentive to rack up the billable hours like most consultants do.

And now I'll put my own quasi-consultant hat on (I used to do a lot of studies deciding on the best way to make rate):

You're laying out a choice between the status quo and moving/getting new machines. There is a third option, which is to get new machines but stay in your existing facility. A line of K&T mills takes up a fair amount of space; if you can get the same production out of one VMC, that would free up a bunch of floor space.

A bunch of manual mills in a row gives you a great takt time in the mill section, but it takes a lot of manpower to raise rate. With limited parking, this might not be feasible.

The first thing to do is figure out what operations you're currently doing and how long they take. A made up example might be:

saw cut stock to length. 1 hour gives us 90 pieces
turn on lathe. 15 minute setup time, each piece takes 10 minutes
mill ops (each mill in turn). 0 setup time (you said they're pre-set for each op), each piece takes 30 minutes for all ops
deburr. 5 minutes
black oxide. outsourced

Once you know what your current process is and how long it takes, you can start looking at what happens if you raise rate or get different equipment. In your case, based on the little I know about your business, I might look at four scenarios: existing equipment, new VMC, new CNC lathe, and new VMC and CNC lathe.

Don´t hire a traditional consultant. Imho.

Look at ways of easing into a new system / paradigm - ways you can get out of somehow.
It is fine to lose money doing so - vs getting into permanent trouble financially while expanding.

About 90% of all new expansions, buyouts, etc. fail economically.
Most, over 50%, kill the original biz. over 5 years- unless financed by new "fast money".

Look at a way of paying off the expansion from the existing business.
Like leasing a new facility for 1 year, while renting your own.
Even theoretically.

Can the new one pay off the difference, plus costs of move (twice if you come back) ?
How much will sales or productivity need to increase ?
Is this likely ?
Will the extra profits continue ? And if they don´t ?

Most above are predicated on current profits and volume.

If you have good profits and volume and cash on hand, getting a bit bigger facility is almost always a good idea-given your sales skills and interests.

A 200k facility, owned, profitable, is easily rolled into a 400k facility where some subtenants pay more than the costs of the move+interest.

Loan/financing interests costs are actually irrelevant.
Even if you own your facility, you will have real costs in tax, upkeep, power, insurance etc. even with zero use.
The exact same applies if you own 60% and the bank owns 40%.
As long as you have 1 year of usage+lease cash on hand, you can always sell or lease the facility, or some of it.


Caveat:
I have done some work like that.
But not as a traditional consultant.

If you decide to upgrade out of your Rivett 1020...let me know right away!!

Proper exploitation of conventional CNC approach will need you to change pretty much everything about your production processes on top of all the investment in machines, tooling and programming. The really big win from CNC is the ability to make "anything" rather than be tied to what your machines and existing hard tooling, jigs et al can do.

In your position I'd be looking into a half way house solution essentially replicating your existing one machine per process using basic electronic controls and drives grafted onto a modern, but inexpensive, base machine(s). Think old style hydraulic tracer, EMI-Mec turret lathe or hydraulic table mill et al done with clean simple modern electronics. All the gear is out there its just a matter of whether anyone has put it together. Probably LabView is enough control with ordinary DRO sensors to set travel and stop positions. Doesn't have to be one machine per operation. Just like proper CNC switching programs is easy.

Seriously limited compared to normal CNC but, if done right, far cheaper. But has anyone put it together for you? I took a very good look at things of this ilk best part of 10 years ago for potential purposes of my own and concluded that the price / performance / hassle factor didn't add up then. Think it does now.

Clive

Over the years I’ve been asked by various customers to some consulting for them. It’s because I have a reputation for noticing things that others don’t. It is as if when I walk in the door the things being done wrong seem to jump up and down yelling “look at me!”.

I think when you do something long enough you become blind to things someone would notice right off.

Whoops didn’t finish. Was going to suggest you simply have some other manufacturing guy take a look. Might see something you didn’t think of.

Are you already running three shifts?
Is there someone in the group qualified to oversee two additional shifts? Not a permanent solution, but it can both verify whether an increased market exists, and generate additional cash that can improve your reaction time when acquiring machines and buildings (possibly from distressed sellers.)

I'd arrange to invite motion guru for lunch and a stroll around the shop... if he's not too busy on his own new digs.

But while you're waiting there in the dentist office ... pick up a copy of The Goal Eliyahu Goldratt. It's fun reading, extremely practical, and might open your eyes to some other possibilities.

In fact, anyone with a shop should read it at least once. It's a touch overdone in places and no sex, booo, but lots of out-of-the-ordinary but common sense ideas.

IMO this isn't BC territory, its roll up the sleeves and figure it out....the crucial questions you want answered only you can answer. I think you have to get your head in the weeds, learn a bit of finance and come up with answers. Besides, consultants don't set strategy, business leaders do and our size can't afford consultants worth a rats ass, so like most things we do, we roll our own. imo the value of a business consultant really doesn't start to make sense until the business gets big enough that the CEO can't see into the corners properly.

There are lots areas to think about. Basically the BC exercise is to uncover exactly "whats your strategy" and then pick apart every aspect of the organization and assess whether or not it supports that strategy. Then you prioritize where fixes would have largest impact, the low hanging fruit, and make recommendations on how to fix those. In a small business you don't need an outsider for that....in a bigger business, and I've done them, the stuff you come up with is often surprising to the C level because they don't have visibility into all the nooks and crannies

The other thing you asked about is finance. Accounting is not finance and in my experience pure accountants run out of tricks pretty quickly. Lease vs purchase, where the capital comes from and how to take it, succession/exit planning, etc...its more finance than accounting. The right professional is a corporate finance investment banker (what I used to do) but again the challenge is getting a good one for a small business. So we roll our own. Given that we are talking small businesses, what the entrepreneur wants for his personal future matters a great deal (vs giving corp finance advise to Consolidated Flange), so really its something that is hard to outsource.

I don't know if that helped much, basically put on your best Yoda voice and say the answers lie within they do.

Consultants are usually going to suggest grow, grow, grow. It's the standard procedure for any profitable business.

What you need to hire is not a consultant, but a manufacturing engineer or highly experienced CNC machinist.

This person can come in, study your parts and current processes, then recommend modern machinery, tooling, and methods to dramatically increase your production and capabilities.

Put him in charge of what machines to buy, the tooling, programming, training your people, workflow, etc.

The right guy can probably triple or quadruple output in the same building you are in now.

Yes, it will cost you a several hundred thousand for the right stuff, and you will have to pay him the better part of 100k per annum.

But after finding the right guy, all you gotta do is write a few big checks, then set back and watch the place print money.

ToolCat

What's changed that you now feel the need to manufacture so much of your own stuff as opposed to outsourcing much of it to hungry local shops?

I'll admit to not spending nearly as much time as I used to on this site but I seem to remember you posting how the old business model was to keep expenses low by using older in house manual equipment to prototype and then outsource your production to shops with the CNC who could piss out a whole year's worth of widgets for you in a day's run for relatively low money. Where did that fall short?

I dont want to change anything, the we part of the company wants safer machines. I still farm out lots of the production but the tool and die part is all done in house. I dont want to bring the production in house because I doubt I could hire machinists who can run the machines and do the programing. I really appreciate the advice. I have seen businesses change and die. I know manual machines and can keep them running forever. Borrowing money to buy machines I dont know how to run doesnt seem like a good idea.