Estimating costs of starting up a machine shop?

I've always been curious. What is the cost of starting up a CNC machine shop for doing contract or custom work for industrial clients?

Surely it depends on the type of machines and the number of them. To be fair, lets say a good CNC mill and good CNC lathe is the bare minimum for this shop. Perhaps you can speak from experience also for your own machines?

Lets say someone gets a Haas CNC Mill and CNC Lathe with tool changers etc. Im guessing this already is around $300k? What about annual service contract fees?

Then you need to get a good CAD and CAM. Say Solid Works and MasterCAM. How much will this be (cant find prices)? Is it one off or yearly type license?

Then add in the real estate lease, electricity, other tools like saws. Maybe an extra 50k?

My dummy estimate is $0.5 million cash at least for the first year to startup?

First of all, in most cases a completely new operation should probably lease equipment, not buy it.

Secondly, you want to have a very specific idea of what kind of shop you are setting up and its target customers. That will define the equipment you need. If you don't personally know your customers, like their actual names and faces, you can plan on losing a lot of money.

I started in 1996 with 10K. Bought a Lagun FT2 knee mill, a Clausing 13" x 36" toolroom lathe, a Browne & Sharpe 6" x 18" surface grinder, and 5hp rotary phase converter.

The electrical was another 3K.
Air compressor $800.
Saw $700
Misc. standard tools and holders for each machine 1K.

As jobs came in, I bought more tooling as needed.



First year in business which started in April, I made a whopping 17K. Add in operating costs, and my loss that year wasn't too bad I guess!


My first wife left me after that, so I got to save on groceries though.......



Starting out in todays world with Cnc machines I'm sure you could get by with a decent used mill 16" x 20" and lathe 8" chuck for around $30-$35K. Add in electrical, tooling, air, saw, and a handful of deburring equip. for another $8-10K and you'd be on your way.

Now of course..........add in another half million variables...........and my figures all go to hell in a heartbeat.......but for the basics, I think you'd have a good start.

Later,
Russ

If you do not know people directly make sure you can do a wide variety of parts that are made in your area. If you know what is in your area and the people to get you work you can focus more a niche, that helps to keeps costs low and income high. In our area it is about 3 lathes to 1 mill in work that is out there for the oil patch. Half million would do 2 lathes and 1 mill, forklift, compressor, saw, and some extra cash. Leasing stuff can get very expensive and would only do that if you absolutely need to, go to your local bank if possible - you can get loans for prime + 3-4%, leasing companies will charge you about 20% interest. Make sure you have a good amount of reserve or it all will go for naught and the banks will own your stuff.

I wouldn't buy a Haas ever, but beyond that, get a good used machine. I started with $100,000 @ 4.5% for 48 months from an economic development loan. I got a 1996 mazak 10" machine with live tools and a Y axis. Last year I found a deal on a 4 axis mazak vmc (got it for $5000)

Have an order on a brand new Mazak and 12' magazine bar loader now.

It depends on how big you want to get, what sort of work you want to do. That will dictate the sort of machine you can buy.

I started in a 24 x 30 garage I already owned with a 17 x 40 engine lathe( czech made ) and a Bridgeport series 2. Had about 10k in equipmnt and tools alone. Moved to a 4000 sq foot semi industrial building with real 3 phase after that... 25k and it was bought from a relative. Bought my first smallish cnc, 20 x 20 x 20 vertical, 35k in 1999. Bought my first largish vertical $120k in 2000. It depends if you are talking new or used machines, real estate values, and what you want to make. If you want to do large heavy work $1 million won't touch it on new machinery.... so it depends on your niche.

Include in the start up cost, the five years of schooling / working for someone else, so you may have half a chance of knowing what the Hell you are doing. This is not a joke! You need to know how to be a machinist first. If you really want to start a business, you had better be a creator too. People who work for a living, work for the creator. When you see him, you will know him, as he is the one with the "spark."

Besides that, it's not what it COSTS, it's what you can EARN! You have to get on the other side of the fence and look at it as earning a livelihood, and the costs had better be subordinate to the earnings.

Regards,

Stan-

wrustle said:

I started in 1996 with 10K. Bought a Lagun FT2 knee mill, a Clausing 13" x 36" toolroom lathe, a Browne & Sharpe 6" x 18" surface grinder, and 5hp rotary phase converter.

The electrical was another 3K.
Air compressor $800.
Saw $700
Misc. standard tools and holders for each machine 1K.

As jobs came in, I bought more tooling as needed.



First year in business which started in April, I made a whopping 17K. Add in operating costs, and my loss that year wasn't too bad I guess!


My first wife left me after that, so I got to save on groceries though.......



Starting out in todays world with Cnc machines I'm sure you could get by with a decent used mill 16" x 20" and lathe 8" chuck for around $30-$35K. Add in electrical, tooling, air, saw, and a handful of deburring equip. for another $8-10K and you'd be on your way.

Now of course..........add in another half million variables...........and my figures all go to hell in a heartbeat.......but for the basics, I think you'd have a good start.

Later,
Russ

Click to expand...

I started in '89 with a borrowed $10,800 for Bridgeport, Harig, saw, air compressor, and tooling.

Add as I went.

I thought that I was going to have that Bridgeport pd for this yr, but it looks like we're paying for my '78 K5 Blazer first (bought used in '85) and then it looks like we may be lumping back on top of that poor Bridgeport before Aretha sings...


However - we have gone through your $.5 a time'r three since then...


If you are running a toolroom, you may git away with jusy a Bridgeport and engine lathe.
You may not need a CNC ratt off?
But if you doo, they are a LOT cheaper now than when I started!
I would start with used if it were me. (which of course I did)

If you have $.5 to start with, I would stick to whatever got you that kinda ca$h, and forget the machine shop!


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I am Ox and I approve this h'yah post!

About 5 years of poverty followed by years of getting by.
That's about what it'll cost every time.

Doesn't matter if you started with $.5M or not, end result is the same.

I was told there was no way I could start a shop. I had a BP and a power hacksaw as well as a 1942 P&W lathe. I didnt know squat so I didnt know I wasnt supposed to succeed. I am no longer in the house and I have alot more machines I earned 9 grand my first year. I do much better now I actually pay taxes.

If you can get 500k, you have assets.

jscpm said:

First of all, in most cases a completely new operation should probably lease equipment, not buy it.

Secondly, you want to have a very specific idea of what kind of shop you are setting up and its target customers. That will define the equipment you need. If you don't personally know your customers, like their actual names and faces, you can plan on losing a lot of money.

Click to expand...

And, if you have any cash, a house, a IRA, a 401k, any sizable assets...DON"T Lease...

You belly-up they will take it all.

Start small and learn how to fix your own machines. Most all of us started small.

Steve

If you are worried about "service contracts" you've either got a rich daddy, your porking a nice rich milf(who had a nice rich
daddy, biological or otherwise) or you're a trust fund baby.

If I had a half million dollars, I'd never have to work another damn day in my life, and I could live comfortable.

I'm 99.9% sure that most don't start with a giant wad of cash, and even the guys that start on cash only, don't have a
giant wad of cash, just enough.

I didn't/we(business partner) didn't. Had a few nickles to rub together, only a few. Bought some machines on credit cards, $1800 for the
first VMC, $4k for the first turning center. The first shop rented/leased shop was the corner of a 1600sqft wood shop, literally, just the corner.

Kind of a progression, I couldn't even imagine starting out half a million in the hole, You'd either have to be really stupid, or really loaded
to begin with, or have a business degree from Harvard.

And starting out, you better know how to fix your own stuff, never had a tech in here, most likely never will. You're a fricken machinist,
you should be able to figure out the mechanical side of it. Electrical, still relatively simple and if you're a good machinist, you under
stand that crap too.

Really doesn't take much to make stuff and make money. When I was younger I used to make all kinds of crap and make money on it.

I worked in a nursing home (previous life). I made tons of money, just fabbing stuff up for the kitchen and maintenance and the laundry(repairing stuff too). $80 arc welder
bought at a swap meet, some hammers, a drill, a vise, die grinder. There was no half million dollar investment and over the last 3 years I worked there,
I averaged about $150 a week extra, 1099'd of course, about $75 an hour, and all the tools... I already had, from just doing my own damn thing. Kind of wish I could go back to doing that now.

You're just making stuff out of metal, its not rocket surgery.

noobimachinist said:

I've always been curious. What is the cost of starting up a CNC machine shop for doing contract or custom work for industrial clients?

Surely it depends on the type of machines and the number of them. To be fair, lets say a good CNC mill and good CNC lathe is the bare minimum for this shop. Perhaps you can speak from experience also for your own machines?

Lets say someone gets a Haas CNC Mill and CNC Lathe with tool changers etc. Im guessing this already is around $300k? What about annual service contract fees?

Then you need to get a good CAD and CAM. Say Solid Works and MasterCAM. How much will this be (cant find prices)? Is it one off or yearly type license?

Then add in the real estate lease, electricity, other tools like saws. Maybe an extra 50k?

My dummy estimate is $0.5 million cash at least for the first year to startup?

Click to expand...

You're not too far off.

Of course a few corners can be cut. I started with used equipment instead of new. This saved a considerable amount of money, but used up more time as I had to shop through dozens of junked out CNCs to get the good ones I wanted.

I had actually been "setting the table" for a few years before I made the jump. I began buying tools, gauges, machines, benches, etc. I bought almost everything used. Auctions were invaluable help as was ebay and old timers retiring and wanted to think out their collections.

The first CNC I bought was a P&W TriMac VMC. I still have it and it makes money every day. A well used, but well cared for machine.

I had a few junkers in the CNC lathe department, but eventually got my hands on the two mint condition CNC's I ran when I worked for the family biz. Now I'm set in that area.

My biggest challenge now is buying the carbide indexable tooling I need to speed up production.

Shop around and you can shave at least 50% off of your 1/2 mil figure.

For space, there are a few routes.
Using my home was out of the question. So I rented space in the bad part of town. It didn't matter as I don't have customers coming in, nor was I trying to impress anyone.

Eventually I moved to a nicer place a bit further away - but still less than what a lot of people here are paying.

I wonder how much Gary's hotdog carts cost?

david n said:

I wonder how much Gary's hotdog carts cost?

Click to expand...

Purty sure .5 will pick you up one of those - even new, and with a service contract...


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Think Snow in PA eh!
Ox

Having more $ up front will shorten the process by a few years, but there's many ways to do it.
Cost wise, personally I like to buy new, so there's a bit over 200k in equipment/tooling in my little shop but I do mainly manual work, and quite frankly wouldn't trade it for 40yr old stuff at a tenth of the cost. When the time comes for a turning center it'll be new too.

How about purchasing a company? Instead of starting from scratch and not having any income over the first couple years, you may be able to pick something up that is turnkey and making money as it is. Work on getting the owner to take a note on a portion of the purchase price with a lien against the assets and you can save some cash up front.

troyscrew said:

How about purchasing a company? Instead of starting from scratch and not having any income over the first couple years, you may be able to pick something up that is turnkey and making money as it is. Work on getting the owner to take a note on a portion of the purchase price with a lien against the assets and you can save some cash up front.

Click to expand...

This.

If you have that kind of jack to throw at it, why not take a shortcut? Of course it has to be a *good* purchase, not a ripoff.

scadvice said:

And, if you have any cash, a house, a IRA, a 401k, any sizable assets...DON"T Lease...

You belly-up they will take it all.

Click to expand...

Retirement accounts can not be seized. Not even the IRS can seize those funds.


Gary

Retirement accounts can not be seized. Not even the IRS can seize those funds.

Click to expand...

Now that is funny. The current administration is discussing that very issue: combining all private retirement funds into social security. Its a brave new world Komrade...