Interested in acquiring a established machine shop

Hello there
I work in tech industry and, my background is business operations & Program/Project Management. I do have Electronics Engineering (Undergrad) and Masters in Engineering Management. I do not have experience in machining(no hands on). But I understand the business and the business model.

Does not having any machine shop experience is a risk in buying and running a machine shop business?

What advice would you have for me to mitigate or reduce the risk if no prior background ?

Thank in advance

IME, you are the wrong person to own a machine shop. If you don't understand machining, you will make the wrong decisions and lose your investment, dragging a bunch of others down with you. I've seen it happen far too may times. Machining is not like any other projects you might have managed; it is bound strictly by the laws of physics, and cannot be swayed or faked by manager willpower, as I've seen lots of MBAs attempt. Every MBA that I've witnessed in charge of machining has attempted to take shortcuts and get by without making the proper investments in equipment, tooling, software, and skilled manpower, despite usually paying lipservice to the contrary. This ALWAYS comes back to bite, making things take significantly longer and cost significantly more than if those investments were made initially, or outright fail.

If you want to mitigate that risk and press forward, spend a decade or three learning machining first.

Wow!

Why?

I am following a similar path after my retirement. My reason was to establish a viable business together with my adult children. We all have good educations in engineering and business. We all have previous experience in industry. Basically, I am inviting them to earn their inheritance before I die.

We are two years into it and it is interesting but definitely challenging. The Devil is in the details. Just knowing what machines do is far from sufficient.

Machining is only one element of what we set out to do. It took us more than a year to learn the basics well enough to be capable -not good- just capable of doing what we wanted to do. I have the resources and interest to play. It was more costly and time consuming than I ever imagined. I enjoy it but we would not have survived if we had debt hanging over our heads or were unwilling to work hard.

We recently bought two local businesses. In both cases, the owners were the most knowledgeable and both wanted out very quickly after the sale. They are both tired and discouraged. The scarcity of skilled people was their biggest headache. They did not want to risk their retirement with further investments in automation.

The remaining people have skills but are not equipped to run the businesses. Small businesses do not have extra resources. You will need to add value immediately and be prepared to learn fast.

Get your name out with local business owners, brokers, bankers and CPAs. They know when clients are considering selling. Finding and closing a deal is a dance that takes some effort and access to cash.

Come on guys, why aren't you telling this guy the truth?? Owning a machine shop is one of the easiest and most profitable businesses to run. It should be even easier for the OP since he's an engineer. Let's face it, machinists aren't the brightest bunch which is why we never made it to engineering school so already the OP has a huge head start.

To the OP, I'm confident that if you spend a full weekend watching NYC CNC, Titan Gilroy and that slick hotshot Ian Sandusky on Youtube, you'll know everything you need to run a machine shop. Not to mention, you might get some new ideas for body art . I'm confident that you'll put every other machine shop around you out of business within 6-12 months.

I cant figure this out, why do we keep getting these questions? I see more people wanting to start a machine shop then anything else. Except restaurants and lawn care. my SBA guy says the #1 small business request (and failure) is lawn care.

I'm a fabricator, not a machinist by trade. But it would make more sense to manage a machine shop before purchasing one.

It's like saying you managed a McDonalds and you are looking to purchase a Michelin star restaurant. It shouldn't be hard since you already know everything about 1 food joint. But in reality, besides the taxes you pay a year for the building, everything is completely different. Such as the chefs, front staff, the building itself, decor, menu, and especially figuring out who your new clients are and how to get them.

Sent from my SM-G960U using Tapatalk

Thank you for being honest and upfront. This clears my doubt. Appreciate your responses.

AmbysMachineBiz said:

Hello there
I work in tech industry and, my background is business operations & Program/Project Management. I do have Electronics Engineering (Undergrad) and Masters in Engineering Management. I do not have experience in machining(no hands on). But I understand the business and the business model.

Does not having any machine shop experience is a risk in buying and running a machine shop business?

What advice would you have for me to mitigate or reduce the risk if no prior background ?

Thank in advance

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Despite what many say, you can't learn machining on a rainy weekend watching youtube videos. It takes years, as in decades, to learn this.
You can be the best office guy in the world, but if you have no clue what is going on in the shop - you'll drown. Sooner rather than later.
I strongly recommend working in a shop for a few years, minimum.
You'll be at the mercy of your competitors and the few employees you keep, if you don't.

You can own a shop without knowing machining....but you'll need a stakeholder that does.

I think with the older generations retiring the trade has a bright future for those remaining.

I'm in the Bay Area and we've been around 40 years. I'm grandfathered in to some companies that would be very hard to break into. I own my building and I'd sell for the right price. PM me.

When you think about it, what is a machine shop selling? It's the skill and effort of the machinists multiplied by the access to (the right) capital equipment. You can buy the latter, (though supplies are tight at the moment), but getting the former is much harder. Right now any skilled machinist that wants to be employed is employed, and if you're buying a small shop from a guy that wants to retire, much of the skill in the shop will retire with him. You'll have to search long and hard to find good machinists, and make them an offer they can't refuse to get them to switch to a new, uncertain company. Better have something shiny to inspire them, like some marvelous new technology they'd be helping to develop.

Then there's the client side. For the easy work you'll be competing with China and every guy with a 1993 Fadal in their garage. But you have to get good at the easy work before you can take on the hard work that pays; that's a hard hurdle if you have to be profitable in the first few years. So if you could wave a magic wand and have a few good 30 year experience machinists, some well paying high challenge jobs lined up, and the right machines for those jobs, all at once, then you could maybe have a go at it. Otherwise, how most shops start in my experience is one expert machinist with a machine in his garage. No MBA needed, he gets the work, he does the work, he bills for the work. Then he buys a second machine, and hires someone part time to help out, and it grows organically from there.

Reputation is huge as well; few companies will place orders for anything important with a brand new company, unless maybe they know the people personally, and know them to be capable. So you could have the perfect company presto poof into existence, and still fail.

AmbysMachineBiz said:

Does not having any machine shop experience is a risk in buying and running a machine shop business?

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Yes.

What advice would you have for me to mitigate or reduce the risk if no prior background ?

Thank in advance

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You really don't want to buy a machine shop as a primary investment. Most people that buy shops do it for a reason. Some buy out competition, A customer may buy out a vendor who is retiring, a larger company may buy a mold shop for prototype work, an oil/gas company may buy a job shop for service or repair work...ect.

If you buy a shop, it should be a tool to support another aspect of your existing business ventures. You should have an intimate knowledge of the market they are in.

barbter said:

Or in my case, because I was fed up working for idiots
(genuinely)

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I don't remember you working for me.

it works tho......when MBA s bought J.R. Cootes Transport ,with their business experience they quickly identified a major loss making centre,and cut off the wastage .....they eliminated all the maintenance mechanics and closed the workshops.... the MBAs then sold out to Investment Bankers at a big profit,who parcelled out the deal to savvy private investors.........and it was they who fronted the court when a woman was incinerated when one of the fuel tankers rolled and caught fire....brake failure ,zero maintenance......worse for the investors,the major client ,an oil company ,took all the fuel distribution away,and Cootes went bust.

thermite said:

That's why he classed you and idiot and quit.

Wudda had a paycheck if you haddna' been so forgetful.

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I didn't forget to give him a pay cheque, its a system that I have.
Don't pay them and make a fortune.

I have no idea why someone with no experience in the business would want to get into it. Quite honestly its a terrible business. The only reason I started my shop is because it is all I know. You will be in a different position since you appear to have money, but here is a synopsis of my day as a small shop owner ( 3 cnc lathes, 3 cnc mills-4 employees currently ) I delivered a hot job a customer wanted over the weekend, ( quoted and PO issued Friday.) Finished a job on my big mill, set up, ran 5pcs while quoting 3 jobs, wrote 7 programs, set up again, stressed over where the matl is for the next job on my big lathe, sent 3 invoices, cleaned, boxed and did the paperwork for 5 jobs to deliver tomorrow, met with customer here ( thank God that was only about 20min ). Tomorrow will be the same.

BTW, Im running a machine because the guy that ran this mill refused to stop scrapping parts and I cant find anyone even remotely qualified.

I dont know, maybe its different if you come into the business with money.

The other posters are wrong. You are qualified to buy and run a machine shop. So long as that shop employs about 100+ people, including a full complement of skilled salesmen and estimators. The owner of such a shop can be a businessman first, and not a machinist at all.

You are not qualified to buy and run a small 2-10 man shop as you have no clue how to sell work, bid work, or run the jobs. The owner of a small shop must be a very experienced machinist first, and a businessman only second.

If you have 10+ million to buy a big shop, go for it.

If an established machine shop has the right people already in place, then the shop should pretty much run itself. Buying a shop like this could be a possibility for a sharp, driven guy like yourself. Expect the owner(s) to want a mint though, often too much to make it workable. Don't be afraid to throw out a reasonable-lowball offer though, as commercial and industrial properties often sell for way less than asking price.

If the established shop doesn't run itself, then that's probably not the shop you want. Because this kind of shop requires the owner to be directly involved every day, often running machines and doing whatever is required to get the job out on time.

As the owner of this type of shop you will have to quote the jobs, create the machining processes, figure out what machines you will need, what tools? How are you going to hold the part, locate it, machine it, flip it, inspect it, clean it, pack it? Often special tools and gaging are required...how to design and where to get made??

What about programming...and material handling, and chip control? Are machine accessories required, for example 4th axis, 5th axis, live-tooling, sub-spindle, bar feeder, pallet pool, extra-capacity tool magazines...? Outside vendor processes, accounting (it is a business, after all), documentation, setup and work instructions...??

You get the idea!!

It is no exaggeration to say precision machining is probably the most complex of all the trades, requiring years of education and experience to be competent. Machining is such a broad technical field, it's almost an improper use of the word to simply call it "machining".

ToolCat

Q: [Does not having any machine shop experience is a risk in buying and running a machine shop business?]

Superbowl nailed buying a big machine shop/business because you are managing people.

A smaller shop
Read the books/ perhaps pay an account to have a look because you are managing people.

Then case it out to see that the number of employees and output looks logical to match the numbers.
Consider the cost or payments against the price/expectations.
Consider that there is no guarantee that accounts/customers will continue. .

Did I hear somebody say they wanted to buy a machine-shop?!

wheelieking71 said:

Did I hear somebody say they wanted to buy a machine-shop?!

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I'll give ya tree-fiddy plus whatever's in my wallet!