Lifestyle of rich and famous machine tool dealers

MY advice would be to wait a while. Manufacturing in this country has tanked again. My electronic assembly business was great through July, but we have almost no orders for August or any time in the future. The reason given by our customers is they have no orders for their products. At the same time electronic part distributors are saying the ordering of components has dried up.

We build small quantities of products for a major assembly house in Portland because it's not economical for them to build small quantities. They report their orders from their big customers has also dried up.

I am meeting with my GM tomorrow to plan for layoff and shorter hours for the crew. This feels like 2008 all over again.

I am sure anyone you might sell to will be holding onto their cash, right now. Keep watch of the level of manufacturing in the country and when it begins to rise again, then go for the refurbished tool business. People will buy the refurbished before any new tool. Ask me how many times I have been there!

Good luck, Paul

Wow thats a lot to ask. There are many variables in what you want to do. I had the type of bussines you are describing in chicago for 32 years. If you want to talk about the details i will be happy to discuss them with you via email. Retired in 2003.

Best Regards Tom.

I am very interested, send your email to ichudov at domain gmail.com.

Thanks

i

Paul, this is what I want to sell, used stuff, not new stuff.

i

Note that the machine tool business is extremely cyclical, and that probably extends to accessories and tooling, also. I know several people who have gotten into it in a big way, it looked to them like a full-time occupation, and then suddenly had the bottom drop out and no sales for many months.

I think anyone who can get a good reputation in circles of interested folks, knows their way around the internet, and can identify and fix up gear, ought to be able to make some money at it. Whether that can be a full income, I just don't know. You seem to be able to turn over a lot of stuff pretty quickly, and definitely have found sources to buy the stuff at what must be bargain prices.

I think a warehouse is pretty essential, as some items will just sit a while until the guy who needs that particular item comes looking for it.

Jon

Hmmm, very interesting! I have a small enough business that the fluctuations dominate, and I will go a month without orders, and then get 3 within one week. So, it is hard to identify trends until they are months old. But, your report does seem to fit with slow times at my business, also.

Jon

Hi, Jon. We decided to go to 4 day work week and lay one person off. Only small orders and prototype builds coming up.

Paul

Jon, selling used stuff is not nearly as cyclical business as is selling new stuff. I went through this in 2008-2009. Machines that previously could be bought for $500 and sold for $1,000, could be sold only for $500. The silver lining, though, is that they could be bought for just $150. I loved 2008-2009.

i

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He understands that -- and says that businesses are not even in a position to buy used stuff right now.

And consider the recurring cost of the mortgage on the warehouse you were talking about. It would likely force you to increase your selling price from what you are currently doing.

You *might* sell to some hobby metalworkers, but not to businesses at the moment.

So be careful, DoN.

I am not taking any mortgage. I would, however, have to pay taxes on the building and heating costs.

I believe, very strongly, that being able to sell almost anything, except toxic waste, is just a function of asking price.

Check this out:

If you look at completed ebay listings for "CNC Lathe", priced between

1,000 and 20,000 (excluding "sherline" crap and the "machinre" asshole), about half was actually sold.

This is the kind of stuff that I have in mind.

I do not beileve that being a surplus dealer in a recessionary environment, is a bad thing. This has not been my experience two years ago, and this is also not what my economics education tells me.

i

Keep good records...and maintain a good relationship with your accountant.

--the IRS isn't particularily shy when it comes to seizing assets.

I don't know any machine dealers personally, but I can tell you that there used to be a few of them in our small town phone book 25 years ago. Now there are none. It must not be an easy way to make a living.

Right now you're doing ok because you're in an industrial area and have lots of inexpensive product to choose from. You'll do OK for awhile, but eventually the majority of good deals for those attending auctions and factory closings will end.

On top of that, the bar to entering the business isn't very high. If the economy turns around there will be competition from other small dealers for the machinery, and your profit margins won't be as good.

I'm glad you're around to help those of us hobbyists, but don't quit your day job.

RWL

and another reality check. Gunner has been doing this for awhile and isn't getting rich at it. He occasionally runs across similar deals, although not as frequently as you.

RWL

Maybe I will do something else, then.

i

What I mean is not that you convinced me not to do it, but that if reselling becomes less profitable, I would do something else.

I have been able to make money in a couple of pursuits, reselling is one. Websites is another pursuit and they have been paying me very well.

i

Sorry I didn't follow this thread, but keep in mind that the weakest part of commercial metalworking in the US is the marginal players who buy a lot of older used machinery. Downturns tend to kill off new, small, and otherwise undercapitalized shops first. The used machinery dealers who do well in downturns are the ones who sell relatively new machines, which solid buyers purchase to save on the price of new machinery. They're looking at relatively smaller marginal savings than someone who buys a 20-year-old Bridgeport or an obsolete CNC machine.

I don't know how well that pattern holds through non-machine-tool products, like welders and compressors, etc. But I tracked the figures on machine tools for decades, and the pattern is always the same. The bottom end always is the most vulnerable and the first to fall.

I think you hit the nail on the head. In chicago there used to be 100 used machinery dealers on lake street. I knew most of those guys, they were for the most part a product of the post WW2 industrial boom. A lot of them were father son bussineses. Had dinner with a lot of them, they all had the same problem of the boom or bust cycle. Some of the younger guy's insisted that globalazation was just another down turn and things would return to normal eventually. They actually believed globalaztion was just a fad!!! Some of them had an emotional attachment to thier business and would do anything to save it. They used up thier line of credit and at the very end were paying thier bills with credit cards. Eventually the banks took over thier property because they had taken out loans to support thier business. In 2000-2001 i was getting calls, hey tom you like that XXXXX come and get for free before the bank takes it. The smart ones seen the wrighting on the wall and changed thier bussines model. A couple of guys i know scraped everything they could not sell right now. They converted thier buildings ( some of these places

3 to 5 stories high filled with machines and tools) to lofts or condos. One dealer junked his entire inventory and is now a fine arts dealer and converted his wharehouse to a gallery. They survived because they were able to change thier business model and didn't beat a dead horse.

As far as buying cheap and selling cheap, it's a great hobby. All the guys i knew ( the real machinery dealers ) would buy low and sell high. Your not going to make a living making selling something for a couple of grand every 3 months. The basic mode of operation for decades in used machinery was to buy a machine bring it in to the warehouse. Clean it up paint and repair if nessesary. The margins for decades was 10:1 Min. often times more than that. And you have to cutomers for your machines that are end useres ( factories). Developing contacts and buyers is very hard to do in manufacturing. The purchasing agent has to know and trust you. Cold calling won't work. Most of the time your gonna need an intro from someone they trust before they even talk to you. Its like a big family within a given industry, everybody nows everybody and they talk to eachother. If you get a bad rep your done. In todays ecconomy with outsourcing and globalazation there is not much of a market for used machinery, i don't think you can make a decent living (Long Term) selling to the HSM market.

Just a small offering from my point of view after 32 years in business.

Best Regards Tom.

Specializing in one area might be proffitable depending on what the compition looks like.

Your gonna have to have a alternative in place should your specialty become obsolete.

The problem as i see it is, does igy have the contacts to get in the door and sell his expertise?

What igy is considering is a very complex with a lot of variables.

Best Regards Tom.