Financials - What is Normal?

We've been machining for about 24 months and we are evaluating an expansion.

Over the last three months we've had the following expense mix:

Revenue 100%

Total Expenses: 74.8%

Supplies and Materials: 40%
Shop Payroll and Benefits: 17.9%
Machine Interest & Depreciation: 3.7%
Utilities: 1.9%
Rent: 3.79%
Capital Expenses(Fixtures/Holders): 3.9%
Other: 3.69%

We are an AS9100/ITAR job shop dealing in high-mix low-volume.

I've been trying to find industry benchmarks and the best I can find is Modern Machine Shop Top-Shops data which isn't as detailed as I would like.

Does anyone have aggregate industry data on what these %'s should be?

Good luck.

This is going to vary so widely it's not even funny.

I look forward to AS9100D chiming in to let us all know that his shop somehow generates more revenue than it takes in sales.

As Dicken wrote in David Copperfield:

"Annual income 20 pounds; expenditure 19 pounds, ought, and six-pence; result- happiness.
Annual income 20 pounds; expenditure 20 pounds, ought, and six pence; result- misery."

You're ITAR and AS9100, so whatever you profited is 12x more then those of us doing shitty garbage work that should be done in china.

luckykid said:

I've been trying to find industry benchmarks and the best I can find is Modern Machine Shop Top-Shops data which isn't as detailed as I would like.

Does anyone have aggregate industry data on what these %'s should be?

Click to expand...

This is the best source I've found: Annual Statement Studies

They're organized by NAICS code and each report has responses from companies with different revenue ranges, so you can benchmark to businesses with similar top line sales.

I have some old reports (from around 2010) I could show you to see if you want to pay for current versions.

That looks like a pretty healthy business to me. Just as a check, what are your profits after taxes and anything else not counted above?

As others have said, things like the ratio between materials and labor cost will vary widely depending upon just what you do.

Another factor is your current size and cash on hand. If the above numbers are for a 3 man shop you obviously have less access to capital than a 300 man shop.

As to expansion - the next few months could be anywhere from very bad or very good for a manufacturing business. More than anything else, customer demand should rule your decision-making.

Given you said you're doing a bunch of low volume jobs (basically a job shop?) I'd guess you'll be in the middle somewhere. A hit over the next few months. Possibly a return to normal after. If you are willing to take the risk and have the funds to ride it out, could be expanding now might be a bit cheaper in terms of building and machines than later?

Whole different thing if you're chasing a once in a lifetime opportunity, where the first couple of suppliers able to reach scale are the winners.

FWIW, the "endowment effect" means that prices (new and used machines, construction services) may not drop early in a recession, then start falling faster when people realize they are stuck between a rock and a hard place.

luckykid said:

We've been machining for about 24 months and we are evaluating an expansion.

Over the last three months we've had the following expense mix:

Revenue 100%

Total Expenses: 74.8%

Supplies and Materials: 40%
Shop Payroll and Benefits: 17.9%
Machine Interest & Depreciation: 3.7%
Utilities: 1.9%
Rent: 3.79%
Capital Expenses(Fixtures/Holders): 3.9%
Other: 3.69%

We are an AS9100/ITAR job shop dealing in high-mix low-volume.

I've been trying to find industry benchmarks and the best I can find is Modern Machine Shop Top-Shops data which isn't as detailed as I would like.

Does anyone have aggregate industry data on what these %'s should be?

Click to expand...

These percentages look great to me for a high mix/low volume shop. I think the payroll and benefits line item is very impressive, especially since your kind of shop needs more higher-end machinists and fewer operators. The only one that didn't track closely with what I'm used to was rent which seemed high.

The time from December has been widely affected worldwide by the virus and worldwide quarrentines. So those numbers are going to be very skewed. and we have no idea when or how long it will take to recover from this.
I read that 50-60 years after the Spanish flu the heart attack rate of unborn babies whose mothers had been exposed was higher then those born before or after the flue. They say some middle eastern and Asian countries have not yet fully recovered from the black death.
Bil lD

The percentage spent on supplies and material is going to vary widely depending on the type of work you do. I am working on a job right now with about 3 pounds material between 17-4 and 304 that I don't think will use more than $75 of inserts, the billed amount to the customer is gong to be around $3,000. I figure my material and supplies won't top $200. I would say on a yearly basis my supplies and materials are around at most 20%. I attribute that to making small parts that you can fit dozens to hundreds in a shirt pocket.

Quantities will matter also, short run CNC shops will be sending bills that are heavy on programming, fixturing, and set-up time, material cost will be minuscule.