How do you determine how well your shop is doing by gut or numbers?

Hi All,

I'm trying to get an idea on how shop owners determine how they are doing and when it comes time to making a decision like a new hire, new machine or facility what makes that choice? Gut or numbers? I know in a the majority it is both but what do you rely on the most?

Just my curiosity at play here, have been talking with the current owner here and he definitely seems to go with his gut as I seem to lean hard on numbers. What works best in the long run?

when my accountant tells me I owe the IRS a ton of money, then I figure I'm doing ok.

Typically the gut is the first notion.

Then I look at some numbers to tell me if my gut is right. I try to look at numbers to confirm the gut feeling, and I also try to look at numbers that would disprove the gut feeling.

If the numbers are unfavorable, I store the gut feeling in the back of my brain.

If the numbers look good, then I still like to do a gut check before putting any plans in motion.

Definitely both. Your gut or head usually notices the need for a new hire(at least in the smaller companies).

However you need to validate the numbers before hiring. Making sure bringing on another guy that is going to cost you $60k over the course of the year makes sense.

I figured this, you look at the jobs you quoted, and how many did you get ?

Of the jobs you got, what was the quote, and what was the actual cost to run the job ?

Did you make better than you quoted or worse ?

Numbers

When you ship a ton[as in a lot over average] you have just paid out a bunch in stock, and won't get paid yet, and you feel broke.

You look at your numbers and see your cash may be low, but your receivables are high, so, money is coming


When you then have a slow period, you are not buying stock the invoices get paid and you feel rich, but a look at your receivables tells you not to go spending a ton of the cash on hand because there is none coming next week.

AARONT said:

Definitely both. Your gut or head usually notices the need for a new hire(at least in the smaller companies).

However you need to validate the numbers before hiring. Making sure bringing on another guy that is going to cost you $60k over the course of the year makes sense.

Click to expand...

I quoted this because of the ironic serendipity of its being spot on, as well as its origin.

For us, my gut alerted me at first, but we waited until the numbers demanded it. Note that I did not say "when the numbers said it made sense." We waited until I simply could not work any more additional hours in a day and week, and it was hurting the shop ( only very slightly ) in lost throughput, or more correctly the missed opportunity of capitalizing upon the increase of it.

It was a fine balancing act of not spending the money to bring another expense in before reaching the point of that body paying for itself, while also increasing revenue in the form of more efficient throughput.

Of course, as with all things - it's a gamble. Things could all dry up, blow away tomorrow, and you're on the hook for someone else's paychecks, so we truly never know...

The ironic serendipitous part of that is that it was AARONT that referred his ex employee to us, and ultimately the one that we hired. So far, it's been one of the best investments and decisions we've made.

from shop floor perspective i would think a boss would look at
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1) work load projected 5 years ahead (tough to see more than 5 years)
2) how many employees leaving or projected to leave mostly by how many ready to retire. how many employees are in there 60's ?
3) if critical people leaving usually people are hired to back fill medium experienced people who will train with the near ready to retire people so their is a uninterrupted flow in work
.
but then since when do many shops analyze data and project future needs. some do but obviously many do not. its like guy who calculates feeds and speeds and the other guy who guesses or goes by his gut or feelings.
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also some shops got well documented work instructions or procedures and its easier to bring in a new person compared to shop where all the old timers do everything from memory and nothing is written down. this obviously will effect time it takes for new people to learn doing jobs
.
Polaroid wanted to restart a instant film factory, shutdown for years. they called it the impossible project. obviously their work instruction and procedures were not in detail enough to easily restart a factory with a large percentage of new people. bosses often under estimate time to learn or replace senior more critical employees
.
many a cnc is not working cause you got to press multiple buttons in a certain way or procedure to get it restarted. its like trying to call somebody 1000 miles away on the telephone and not knowing their telephone number, name or address.

best shops got a primary and a secondary or backup person for every machine in case the main persons quits or retires
.
you be amazed at the shops where this was not exactly recorded each machine and each work title or trade who can back fill or replace easily with 5 minutes notice. some shops a critical person is 66 and retires and then they struggle for years to hire and train or have new person figure the job out the hard way when a little cross training can easily save a lot of problems. obviously if you got employees near retirement how can it surpirese anybody when they retire

Zahnrad Kopf said:

I quoted this because of the ironic serendipity of its being spot on, as well as its origin.

For us, my gut alerted me at first, but we waited until the numbers demanded it. Note that I did not say "when the numbers said it made sense." We waited until I simply could not work any more additional hours in a day and week, and it was hurting the shop ( only very slightly ) in lost throughput, or more correctly the missed opportunity of capitalizing upon the increase of it.

It was a fine balancing act of not spending the money to bring another expense in before reaching the point of that body paying for itself, while also increasing revenue in the form of more efficient throughput.

Of course, as with all things - it's a gamble. Things could all dry up, blow away tomorrow, and you're on the hook for someone else's paychecks, so we truly never know...

The ironic serendipitous part of that is that it was AARONT that referred his ex employee to us, and ultimately the one that we hired. So far, it's been one of the best investments and decisions we've made.

Click to expand...

Glad to hear things are still going well. I briefly talked to KG about a month ago on how it's going. He seems to really be enjoying where he's at. When he told me how it was working for you, I thought about firing over my resume...(half kidding) Keep up the good work! It sounds like you could grow really fast if you wanted.

AARONT said:

Glad to hear things are still going well. I briefly talked to KG about a month ago on how it's going. He seems to really be enjoying where he's at. When he told me how it was working for you, I thought about firing over my resume...(half kidding) Keep up the good work! It sounds like you could grow really fast if you wanted.

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It really has been good. I cannot complain. We were really busy before we got him and having him here has enabled us to take on twice the load now. As well, we've taken on a number of really large ( for us ) projects that we would not have been able to be nearly as comfortable with, without him being here. He's a really good young man with a solid head on his shoulders and good solid foundational skills we're building upon. If he stays for the long haul, he's the kind of young man I can easily envision taking over from me, years from now. So thank you for sending him our way. He's a good part of the family now.

We've already discussed the plan for once we move to the new location, and that includes hiring at least another person to help us out. Possibly even two. So, I wouldn't let the resume tarnish...

Numbers for sure.

A/R and A/P are critical for decision making. Not everyone uses ERP software we just transitioned 2 years ago from Paradox 3.5 (1980’s). Being able to track spindle uptime and costing let us know where the deficiencies were and allowed us to better plan which in turn increased output. Without numbers your gut can get you in a lot of trouble on rare occasion it can get you a big win to but the odds are like the lotto on that one.

If you gut is very much out of sync with the numbers, time to book an urgent meeting with yourself and get to the bottom of it.

By whether I'm jumping for joy, or jumping off the roof.

The look on the wife's face Sunday night after she has paid all the bills tells me all I need to know.

wheelieking71 said:

The look on the wife's face Sunday night after she has paid all the bills tells me all I need to know.

Click to expand...

Yep. Go back out there and make more, faster.

It comes down to where you feel OK enough either way.

I go strictly by my gut but that is because I always say I only have $500 in the account even if I had 500 million. It keeps me pushing on.

I feel stressed the most when I actually have time to do stuff, like change the oil in the press brake or move air lines or something like that. Even if I had 100 jobs to do, I still feel stressed if I'm not under pressure.

Sent from my 2PS64 using Tapatalk

Seems for most that the gut initiates the decision and numbers should confirm it. So when it comes to numbers what are you guys looking at? I'm not sure of the last time we may have stopped and looked at what the actual costs to run the shop are but we did briefly the other day and it seemed like we're not where we'd expect to be. A lot going out but not enough coming in... doesn't help that it seems like everything but our costs to our customers has gone up 25% this year.


How far are you digging into the numbers? Yearly, Quarterly, Monthly etc...

Bi-yearly, it’s not a process that takes long here so there’s no harm in it.

I looked up a former post I made on a similar question, here's my recommedation on how to track performance. Has to be done "systematically" (i.e. the same way at specified time intervals, ideally weekly). This is a direct "cut & paste" (ok, I made a couple corrections in italics) from that post so some things may not apply:

Here's the best thing to do:

1. You quote your work (or at least I'm assuming you do) so you have some idea on how long the work at least "should" take.
2. Figure out some way to track your performance, ideally weekly. Take the jobs that got done that week and then compare them to the total hours you paid people who make up the quoted work. If you can, break this down by department (saw, cut, weld, machine shop, etc.
3. Over time, you're looking for trends. Ideally, you want to show that "hours paid" (off your time cards) are less than "hours sold" (quoted) meaning that you're doing better than "par". But even if they aren't less, you can still monitor week-week on how they are trending.
4. If there is a downward trend, take those numbers and start real "systematic" problem solving. Where is set-up taking too long? Where is machinery braking down or are people waiting on info? Are some jobs just quoted too short or too long? Take all this info and relate it back to how you quote and how many jobs you win/lose.

The premise here is that the war (your business) is not won/lost over one battle. It's won/lost over a bunch of battles and you need to see what kind of mistakes are being made. Involve employees in the effort on the problem solving end which is "not having them make parts" time but is better then having them just track data.

This is just a very short description I'm writing with a severe head cold so hopefully it makes sense. Maybe I can add this: If you continually look at it from the "job by job" end, you'll end up with a bunch of rationalized excuses where you can easily say "Oh the mill went down", "we ran out of material", etc. where you want to find out which one of those are happening a lot in a what that' effecting your business.

Hope this helps. I know it works as I've helped several shops implement this kind of a basis for problem solving.

The Dude