I have the chanch to buy all the equipment I need to open a small shop. I have about 15 years experience(in about 15 shops) so I can at least pretend I know what I am doing. What I have seen in the past is that the leadman where I worked went out one day a week for a while and by going door to door(This was in KCMO) found work.
If I do this its going to be in rural Arkansas 100 miles from Little Rock. This means the businesses are far and wide. What I'm wanting from y'all is advice about how to approach people and get a foot in the door. Advice from people who have actually done this or who send work out and what they look for. Moving to the big city isn't an option.
I also wondered if going to a place, like California, where the shop rate is I'm guessing twice what it is in the backwoods around here if this strategy makes sense.
Before moving for financial gain, look carefully at the two tax structures; often rates are what they are to pay for local real estate prices and _taxes_ of all varieties. Free markets generally work, and if they settle on different prices, ask why.
I have read mixed reports on California, but the negative ones had higher credibility IMHO. Need to hire people? Find out what it will cost, etc. I also heard (no idea whether this is true) that California law forbids questions about immigration status, yet one can be hit hard for hiring illegals (that combination is more than a little unfair).
Also, California has made news by apparently having inadqeuate power infrastructure. Having reliable electricity is important if you are going to run a shop for a living. I suppose you could have a generator and fuel on hand, but figure on paying some of the highest fuel prices in the country, at least the last I looked - perhaps another reason the shop rates look so attractive??
Finally, you mentioned having the chance to buy the equipment. W/o prying, I'm wondering whether this is used stuff in Arkansas; the land of the Governator is a long way from there, so consider hauling all of the stuff, if appropriate, in your moving equation.
I suggest that you take a sales course or two first. When you are in business for yourself, you have to do everything and sales is first. If you don't like hearing "no", you won't like being in business for yourself. Note that the leadman who went out "one day a week for a while" was spending about 20 percent of a person selling. It is likely that you will have to spend at least 20 percent of your time or more, to do the same thing. And please realize: you will be very unlikely to be able to bill out over 50% of your time!
What kind of shop? General machining? What are your strongest skills that will bring your best return/hour? What are your weakest points? Do you have a sub that you can send stuff to that you can't do or can't do profitably?
Start with a business plan that includes realistic goals and numbers. Write up a catalog of your abilities in order of proficiency and profitability. Write up a history of your best work with pix. What do you WANT to do? What is your war chest going to stand? How much do you need to break even? What skills do you need to improve to be profitable? What suppliers do you have with what relationship? Are you proficient with all the software you need from CAD to accounting?
Finding work: Best advertising is a happy customer! Patience! Be fair but not cheap...no mater what! The job you give away is NOT appreciated. Do any of the last 15 shops job stuff out? Make companies aware of your available services with a quick visit and business card and keep following up. Network with people at community organization meetings. Build a web page.
The most important thing I forgot: Be professional!!! Make sure the customer knows EXACTLY what he is getting, how much it will cost at understood terms, and when he will get it. Get the drawings and contract signed and dated. Follow up after the job to make sure the customer is happy. Give him evxactly what he expects. If there are any variences in time or cost, contact the customer IMMEDIATLY. One misunderstanding looses you a customer and every potential customer from him.
Back in 1968 I borrowed money and bought a machine shop that was going out of business. The owner, an older guy, simply wanted to go fishing. There were a few accounts but not nearly enough for me to hire anybody, not even a receptionist, although she was there, and I kept her on because she knew the clients. Once my wife learned the details of the front office we let Norma go.. which was OK with her because she was getting married and her hubby didn't want her to work.
So, to answer your question, I went through the various directories at the library (you can now do this online with Thomas Registry and others) and made a mailing list of all manufacturers and related businesses that might need a general machine shop's services. I then created a post card which invited them to keep the card and use it for when they needed overnight or emergency services from my shop. I asked them to keep the card handy. Then, when I had nothing else to do, in otherwords: no business - I went scouting calling on these prospects and finding out who did the buying, who ran the projects, etc. I also milked info from the local supply house sales reps who called on my shop. So between the sales reps, my cards and calls, I was able to generate enough business to end up with 13 machinists and two tool & die masters. I ended up designing machines and tools for local manufacturers. And all was going well until the Maquiladora thing started and my customers moving south into Mexico because the unions would not let these customer automate or tool up to reduce labor content. I sold the shop and moved to San Diego and have spent most of my time running or setting up operations for American companies, in Tijuana.
Don't even think of moving to California. Workman's comp will kill you as will all the rules and regulations regarding time off, and the wages you must pay are way too high. Your fully burdened labor rate in California will be over $35 and exactly the same output per man hour can be had in Tijuana for $7. Right now I'm helping a punch press operation move from the Los Angeles area into Mexico because a few years ago one of their operators put his hand under a press and lost a finger. Even though the operator is back on the job, they lost their affordable rate for workman's comp and so can't hire anybody for less than a king's ransom. So, off to Mexico.
I didn't think he was considering a move Bill, just prospecting for business.
California requires proof of a persons legal status to work. It is against the law here for employers to pay you if you haven't got an I-9 on file for each of your employees.
California's power infrastructure isn't inadequate and is being expanded. The problem was with companies like Enron artificially manipulating supply in order to run up prices and margins. There is also what is known as a "pinch" in the distribution network between northern and southern California. California certainly has its problems but they largely fall into the category of a dollar of tax money going to Washington DC and 65 or 70 cents coming back to the state. We are the fifth largest economy in the world and a pretty fair sea port as well. We feed half the country to boot and that isn't something much appreciated.
Let's put it this way. No other state in the union copuld afford our piss poor state government but we manage that too. LOL
You might try using the internet/web. Dwg files transmit as well as any other files and you can have a big edge if you are in a low rent/tax/wage area and can sell into the high rent/tax/wage areas [ask China]
Very astute observation. My Father kept telling me "its not what you net, its what you gross." I was 40 years old before I figured out he was right.
Also environmental laws -- disposal of cutting oil and chips for example.
and 26 years later I still can't get it right. What he said was "its not what you gross, it's what you net."
Another thought -- machining should not be your life, i.e. you should have outside interests. Be careful that you don't move to an area where these interests such as shooting, hunting, camping, horses, etc. are prohibited, excessively regulates/taxed, or available only by traveling back to where you came from.
The maxim is "you should work to live, not live to work."
can you afford to take no money out of your business for a year? this means everything you make will go back into teh business? i live in a very small community. farmers, hobbyists, rental stores, and lots of really weird places keep teh guy busy. but the guy is good, and doesn't seem to rape anyone on price, and does what he says when he says he will do it. it took him a while to get going though.
Angeles area into Mexico because a few years ago one of their operators put his hand under a press and lost a finger.< How the heck did that happen? Press accidents like this are getting pretty rare these days; not like the old days. At my first industrial job one of the first people I met was named "Lefty"; you can imagine how he got his name.
on the job, they lost their affordable rate for workman's comp and so can't hire anybody for less than a king's ransom.< And I'll just bet OSHA (calosha?) had a major cow as well. Can't imagine why.
Yes California requires stuff - but the local support groups print up stuff and get documents made easily.
Many a time I saw middle aged White female buying tickets for 3 or 4 'travelers' using cardboard boxes as suitcases and can't speak a lick of English. San Jose airport. (oh - Norm Maleta International airport ).. Remember the CHPs Sargent that went to jail - stealing thousands of licenses. Fraud every place possible.
In Santa Cruz there was a time IMS would run a van in and take out a bus load of people. The population grew so fast and large a large area called the flats - went from artist types to 'travelers'.
Laws are being ignored and circumvented every day. These people are not grape pickers. They displace young people an many a workman making a living. The liberals just are blind and don't want to see or think - they know their open boarders is right. It just isn't.
Martin Martin Eastburn @ home at Lions' Lair with our computer lionslair at consolidated dot net NRA LOH, NRA Life NRA Second Amendment Task Force Charter Founder
I hope I'm not going to far afield on this, but I was in business for myself years ago and it's a very different life. I already made one post on this subject today, but after I made it, I got a call from a friend who is a professional archetectual blacksmith and has been one for over 20 years. He just emailed me with some advice to pass on and here it is:
Peter,
While working on these drawings, I have been thinking about your e-mail to the man who is thinking about becoming self employed. Very interesting. If he were to ask me the questions, I think I might answer like so ---
Studies have repeatedly shown that people who are self employed because of a passion or cause, do far better than people who go into self employment for money alone. The people in pursuit of money do not have the passion required to work the many hours it takes to pull something like self employment off (usually). So, my first question to the man would be, would he be willing to take a cut in pay and work more hours per week then he is working now? Because that is probably where he will start out and may never be able to rise above that point (although the sky is the limit). What kind of lifestyle does he want. Self employment is a lifestyle, not a job.
Can he do this without burning any bridges?? This is no longer 1965 and good jobs are not as plentiful as they once were. Does he have a safety net?
Is he married? If so, he should work with his wife on this one. Make sure there is a good safety net and that Mama is behind you. If you go off half cocked and sever your income or reduce it, if Mama is not working with you, you may have jumped into water that is a lot deeper than you think.
Sales will be harder for him than for a full time salesman. I feel one of the hardest parts of being self employed, is being two different people. One person needs to be the caring person who sees that the customer gets what they want and their needs are met on both a product and personal level. Then, the self employed person has to change hats and be very aggressive and charge, not what you want to, but what will keep the ship afloat in this day and age. This amount is always more than the customer wants to pay and you have to do it. When was the last time you were pleasantly surprised by how little or fairly priced something was (that was American made)?? When was the last time you purchased gasoline or fuel oil for your house??
Switching hats is learn-able, but for most people, not a natural skill as one hat runs contrary to who you are.
The last question I would ask is, can he delegate successfully? If he thinks he is going to pull this off all by himself, I doubt that it is going to be very successful. Economy of scale and marking up someone's labor (the more people the more money he will make) and keeping a continuous flow of work being produced, is how money is made (I believe). Conversely, if he is a one man band and hurts himself, the buck stops right there.
And then the down side to delegation, is that if he enjoys being a machinist, he will have just put himself out of what he enjoys and into management, which he better also enjoy, because it will now be his either part time or full time job description.
Develope some sort of product, get the reaction, improve it, market some more, and some more. Then you will have a basis for buying the most effecient machines.
The "shotgun" may work sometimes, but not often IMHO.
I think you are doing this backwards. Don't buy a bunch of machines and then HOPE you'll find somebody that needs parts made. This is a recipe for bankruptcy. Find the customer FIRST, then buy what equipment you need to do THAT job efficiently. Nothing like buying a 13" lathe and then the first job you get needs a 14" swing! This holds true for every category - an EDM won't do you any good if the part needs to be made of plastic, a punch press can't make 1" deep holes in aluminum castings, etc.
Now, if you already HAVE contacts at various manufacturers, and have some idea of what kind of work you want to pick up, that is a bit better. Maybe it is just that I'm not much of a salesman, so opening a job shop wouldn't work well for me. But, I have some products that I do all the machine work on in-house. That works fine for me, and I can design stuff such that I can build it with the machines I have.
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