Valuation of machine shop purchase. - Page 4
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  1. #61
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    Quote Originally Posted by huleo View Post
    As both an idea guy and shop owner,
    I agree with most of that. Your point though seems to be there is a lot of chaff. No doubt. When I was in corporate finance, a key skill was to very quickly separate the unskilled dreamers from well thought out plans that were fanciable. All the business points you raise and more had to be quickly assessed, mistakes meant you spent time on the dogs and time was all you had. But there's also the kernels of wheat that occasionally are found.

    Of course a good finance shop had lots of deal flow, lots of chances to the pick 1 in 100 winner from all the crap. A typical shop doesn't have that deal flow of course and just gets the flakes showing up. But I want the wheat and have long thought that applying my business vetting skills as gatekeeper to partnerships and incubation might be a way get into some great new stuff.

    Barely more than a notion, I haven't figured out how to do it.....but I sense potential for those who do and I don't discard the idea when some wants a discussion (I do when its obvious they're in flake catagory lol)

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    I think age and experience can be key, or at least it has been for me. having carried several products from idea, to engineering, to production and retail, I have a little more salt than a typical machine shop that want to "make to print". But for that reason, I can see through the BS usually. One thing I don't buy is "everyone is making this and it sells, so I want to make one too"... I have an education in business and that is a piss poor model unless there is a specific strategy. Every product we have released was either a new product to market, or has advanced features over existing designs.

    I agree with the "vetting middle man" but I might question which party will be willing to cut that check. I agree with it though! Locally there is a new "think tank" that is well funded by billionaires, that was setup for entrepreneurs to build prototypes and network. However, I don't see manufacturers in there at all!!

    Around here, we have a long list of green horns that got educated running CAD, and make models, and know nothing about something I actually teach, which is called "design for manufacturing" and I am in no way an expert! The only way a part or assembly is optimized for mfg is with an experienced manufacture that knows how to get it done! This is where the business side needs to step up. How many? Costs? margins? forecast? All this needs careful thought WAY before you start.

    In one product we are working on, we have to figure out if we use full color printing of membrane switches, or screen print. Each has its pros.

    The one 3 axis mini mill mentioned in the CNC area recently is a great example of a not-so-well thought out plan. Guys with ZERO machining experience making a mill, with no machines, and no clue how. Have not even studied the market! People in that market whine about the cost of end mills at Harbor Freight!!! NO!!

    In a similar area, I talked a family member out of some DIY beer making stuff. I LOVE beer, and we do DIY brewing in 30gal batches, BUT from a business perspective, people that buy that stuff want cheap and cheaper. They friggin make beer on the stove! You think that is cost effective? Thats why we do 30gal batches! We think in numbers here. I can probably be persuaded with the right market research but otherwise, I go with my own gut opinion.

  3. #63
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    Quote Originally Posted by Mcgyver View Post
    Barely more than a notion, I haven't figured out how to do it.....but I sense potential for those who do and I don't discard the idea when some wants a discussion (I do when its obvious they're in flake catagory lol)
    Don't most ... or many, anyhow ... shops do something like this ? I know I've given help to a few people who had good ideas that went on to become, not multi-billion dollar world beaters but at least decent products with a long lifespan. A couple of those people hung around and came back with the followon work, a couple took the production product elsewhere to save a nickel. I can see why many people refuse to give anyone a break but sometimes it works out. Not the wackos but the ones with half a clue.

    (Altho I did make a part for a perpetual motion machine once. 3' diameter 32 dp aluminum gear. He covered the costs and I got to make something unusual )

    I still wouldn't recommend buying a machine shop. Not if you want to do it to make money, anyhow.

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    Quote Originally Posted by genergy View Post
    My input is as an Inventor, Funder of small to medium sized businesses, and someone who spent 2-years in machine shops working on his project "HANDS ON THE LATHE" but NOT as a Professional Machinist. CAVEAT EMPTOR.

    Machine shops need to go after inventors with great ideas and help them build prototypes in exchange for a part of their business. I read a lot of discouraging comments that add up to; "Customers have zero loyalty." My humble recommendation is that you guys take your skill and invest into NEW businesses and become an owner of the business that drives work to your shops.

    My shop did that and they helped me in the shop on 1 particular invention to build 5 different versions before we got a working Proof of Concept. They have my business. End of story.

    Apologize if I am speaking out of line. Blessings, Kurt
    And how long has this successful relationship lasted?

    I HATE the word "inventor". My experience is anyone who refers to themselves as an inventor is a dipshit.

    I built my shop from scratch to develop my ideas and manufacture any products that come to fruition. I wouldn't dare classify myself as an inventor because of how much douche weight that word carries in the manufacturing world.

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    Douche weight......

    I am stealing that one!!!!! LOL

    And from the above post, it seems like the machine shop needs to be chasing the inventor around begging for a piece??? Did I get that right?

    Understand that the shop owner did more than "dream" if they own a shop. The "inventor" on the other hand has, IMO, about an 85% chance of being a complete moron. You know, the ones that you ask what to make it from and they say "metal".....

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    Quote Originally Posted by Garwood View Post
    I HATE the word "inventor". My experience is anyone who refers to themselves as an inventor is a dipshit.
    This times a million!

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    Quote Originally Posted by M.B. Naegle View Post
    I'd also figure in how organized and documented a shop is (beyond the books: more in terms of process, job flow, storage, etc). If the owners or operators are keeping track of stuff in their heads, it may work well for them, but replace them with someone else, and you could be looking at a BIG learning curve trying to figure it all out.

    We bought 2 companies that were very disorganized and it literally took years to sort it all out. In the long run, it's been a good venture, but it took a lot of blood/sweat/tears to get it all back in the air.
    LOL! ISO 9001 certification is generally recognized as meaning quality products. That does generally follow, but the requirements for certification are that processes are documented and followed - be they good or bad. The fact that processes are documented is a major component of value and are typically difficult for small shops to achieve.

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    I have no problem with “inventors” as long as I get paid for all my time and labor in full upfront. I’ll make ya anything you want as long as it doesn’t compromise my morals and isn’t illegal.

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    Inventors, yeah, anybody who has been in business any length of time likely has had an experience with them. In my experience, typically they've come into a sum of money, maybe grandma's inheritance or an insurance settlement. Whatever the source of the money it was probably the only amount they'd ever see in their life and they were bound and determined to spend it.

    Once you've signed the usual NDA (and sometimes tried not to laugh at the idea) there can be an ethical issue. In good conscience should you take his money knowing there's slim to no chance of success? I resolved that issue by at least giving the inventors good value for the money.

    The real problem comes up when his money runs out. Few of them have any concept of the costs to get an item to market. Eventually you'll get the offer of shares in the concept in exchange for continued work. It's happened enough times I've got the answer on the tip of my tongue, "no, the idea is yours and you deserve all the rewards".

    Thinking back on a couple of inventor's ideas......,the self described lesbian hiker and mountain climber who wanted molds for a rubber device so she could pee while standing up like the guys. And, another from a sex researcher who wanted me and another guy to use our experience in high frequency medical devices applied to sex toys.

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    Like this complete, on the market product that's sold thousands of units at least?

    https://www.amazon.com/Urination-Ant.../dp/B003BEDUS6

    It doesn't matter if the inventor's idea is good or bad. It matters if they can market and sell. But if they can market and sell they're able to raise money from not you.

    Other than the free energy perpetual motion machine guys. They're always a waste of time.

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    Quote Originally Posted by Comatose View Post

    Other than the free energy perpetual motion machine guys. They're always a waste of time.
    Without unlimited free energy we can not stop wasting time going slow. This is from the same physics that wont give us a perpetual motion.

    Entrepreneur is the title that makes me grab the vomit mob.

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    Quote Originally Posted by otrlt View Post
    I have never seen or would sign an agreement that last for "years". Locking in a price can be very dangerous, there are many factors to consider.

    As to the ownership of the real estate where a business resides, does that make your business better? Do potential corporations care? the fact is it doesn't and they don't. For those that think so, good for them. They are now in the real estate business as well.
    I routinely sign fixed price contracts that have delivery dates 2-4 years in the future. In my field (mostly infrastructure and large construction projects) this is common.
    But my business would probably sell for auction prices of equipment- none of those contracts are transferable if I, personally, am not the owner or am deceased.


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