[dfearnow]

Hello all,
I'm having a hard time with what I should do with my shop.
We don't make our own product. We are not ISO certified. We don't have contract work with any big companies. Pretty much we are a job shop. And I hate the fact our customers control my shop. We do have 1 BIG customer that keeps us pretty busy, but its usually re-engineering OEM parts and making them better.
Our shop is very young, and has done a lot in 7 years. But it seems all we are doing is bettering other companies, while my shop is just keeping the doors open.
We've been trying to come up with a widget that we could manufacture, but in 7 years, NOTHING. We finally got our machines paid off last year, and hired on a bad ass engineer. So I'm ready to make my own destiny, and take the control out of my customers hands.
I know its pitiful to vent on a forum, but I was just hoping someone has gone through the same situation and could give some advise.

[RICHARD ZASTROW]

Two things that will help. 1) get ISO certified. 2) find a niche.

In your neck of the woods that could be a turbine blade supplier. GE, Siemens, Pratt & Whitney, U.S. Navy, Caterpillar(Solar) all need QUALIFIED blade suppliers and they're near you.

Not easy to break into but, not all that many can do it. Less competition.

Or maybe parts supplier to BMW, Porsche or ???????

Here in the north country we have a lot of shops supplying Caterpillar, John Deere, Case-New Holland,and the auto industry. They all outsource rather than have to deal with there own (unionized) shops.

Are there any parts common to the gulf area fishing industry? We have a couple of people up here producing stainless steel fittings for boats. We even have a sailmaker that produces sails for regular sailboats and the really fancy race sailors.

Gotta keep looking!!!

Dick Z

[HorridHenry]

We've been trying to come up with a widget that we could manufacture, but in 7 years, NOTHING.

7 years?

I could sell you my patent but its whether you can afford to buy it?

This idea won't make you a millionaire overnight but it will sell like hot cakes within 6 months once its found its footing in the market.

Before I came up with the idea I searched and searched the net for something close to this design and no one seems to have made one and its so simple a design and costing the parts would be somewhere in the region of $65 and a sales of $170? per unit.

[dfearnow]

Were the problem starts is, everyone that works here has only been in machining. Its all we know. We have never worked else where and came upon a problem and said "WOW, if I can come up with a solution for this problem, I could sell this widget."
We have plenty of maintenance supervisors here every week, having us fix processing problems.
Our shop specializes in Blow Mold process tooling. Money is good when they first start up a new line. But when we get it running smooth, they ask us to keep (OEM) replacement parts on shelf for emergencies. Which is a pain in the ass. Because we never know how many or when they will need them. So I have around $50,000 sitting on the shelf. And wouldnt you know it, when they need 5, I only made 3 extra. Then we get mud on our face, because instead of same day parts they have to wait until we can manufacture new parts.

[txcncman]

I would not keep parts in stock for any customer just because they request (or demand) it. There must be some pay back. At the very least, the customer would be require to pay for the stock material. It is also good to consider demanding an annual contract for JIT operations.

[RICHARD ZASTROW]

Do you participate in that horrid idea of JIT? They tell you that means Just In Time. What it means functionally is Jumbo Inventory Transfer.

YOU keep the purchased parts, finished parts and raw materials inventory. THEY do not have to invest in the inventory because YOU did.

See if THEY will buy the inventory and YOU will stock it for them. Highly unlikely.

Add the going cost of money to your price in order to contribute to the cost of you carrying their inventory. The cost of money is what interest you would have to pay if you borrowed the money to pay for their inventory.

Just a thought.

Dick Z

[flyinchips]

I would fire the kick ass engineer and hire a kick ass salesman. I would send him out to find you eight customers that are "better" than the ones you have. Your life will get better.

Why are you supporting your customer to the tune of 50K??? There has to be some give and take here. No way I'm doing that unless he is 20 times that in business annually. If he is less, negotiate something reasonable; for instance if he is a .5M$ customer a 50/50 deal might be acceptable. I realize he has you "trained" to his ways at this point and you won't be able to change him. That is why I suggest the salesman and new, better customers.

[osphoto]

flyinchips, I certainly like your advice about getting a kick ass salesman.

I'd like a kick ass salesman. I'm a one man shop that puts in the hours after my day job. Hobbyist or not, I've got the products, just not all the time to make them and promote them. Word of mouth has been working very well for me. My "salesman" has been a few guys who use my products at car competition shows.

I also wouldn't be holding inventory for any folks. They purchase it, I make it, they store it. They pay by the job.

I'm a small sprout in this machine shop business but my ideas are big. Good info on this thread.

[RICHARD ZASTROW]

There are many sales people out there that would love to represent your shop. Most are good honest folks. Be carefull of what their sales contracts include and what might be missing.

Example: A rep. beats the bushes and gets your shop a repeating job. Rep. gets 10% comission on profit. Should the rep. get the same 10% on repeat orders? There are many little items that should be included in an agreement.

Dick Z

[dfearnow]

Is that common? To give your sales a percentage of what he brings in.

[txcncman]

Yes, it is common for a commissioned sales representative to get a percentage of the gross, not net, income. But this is wrong, because sales representatives will underbid jobs and then they make money even when you are losing money. Some way you need to contract so that pay is tied to net profit, not gross income.

[flyinchips]

Osphoto

You sound like you need an affiliate; some one that is in your line of business where your products support/compliment his. The affiliate will be bigger and better staffed. They will see the advantage of offering your stuff. You aren't going to find them next door. you will, most likely, need to go to a trade show and wow them with your product. (Got any vacation time?). You have the resume; the guys at the competition car shows, photos of your stuff and a means to make it. Get someone to help you sell it that is big enough to make a difference.

[flyinchips]

dfearnow

You can negotiate anything. IMHO, if re-orders are the same price as new orders, your salesman should get the full 10%, after all you're still getting your full cut, why shouldn't he? Follow on support is important and you need the salesman to provide as much of that as he can. The commission is his incentive to do his best to keep the work flowing.

As I have full control of the pricing, I do not worry about the salesman short selling, IF you find a salesman that you think can quote and this is a concern, I would most certainly base the commission on net profit. However if they are smart, you will get push back, because you can now undercut the salesman by inflating the costs.

In a small shop situation "Keep It Simple" is the best policy. Fixed commission for every sale, you do the bidding. He doesn't get paid until you get paid. When you get paid you pay him promptly. You will amazed at his interest in collections and tardy accounts.

In no time, you'll be able to afford that bad ass engineer again. maybe you'll have a product in mind then, because you aren't worrying about the next job.

I know this isn't an easy road to follow. It took me many years to get the ducks in a row, but it works.

Just my opinion and your mileage may vary.

[harryn]

IMHO, as a salesman, you don't need to look for a "kick - ass" salesman. What you need is what we call in sales a "farmer".

A "kick - ass" salesman will do a quick run through the bushes, pick some low hanging fruit, leave a mess, take the money, and run. When you go back to get more fruit, you will spend all of your time and effort on clean-up.

A "famer" will work the soil, plant seeds, and take care of the crop and the shop. You also need everyone in the shop pulling together to make things happen.

Put together a team of 2 people to do sales:
- An old fart, semi retired machinist who knows manual machining
- A young woman, ideally with a mechanical engineering degree, but an artist might also work.

Have them work together as a team for 20 - 25 hours / week and pay them enough to be interested in working for you.

Document what you think it costs you to do 25 different jobs, and why.

Sit down with everyone in the shop, and tell them that your goal is to have solid, long term, happy customers. Tell them that at the end of the year, there will be a bonus, evenly split among everyone, of 1% of total revenue, and 10%of the shop's profit. The "bonus for everyone" will keep everyone in the shop moving in the same direction.

[jreillycnc1]

If you want a Saleperson, than find a good one and find a way to make it worth their while to bring work into the shop. A farmer is a good way to put it but Farmers often need to cover farming costs. I have no idea what 2 part time people that include and Older person and a young women will do for you. A good Salesperson will easily pay for themselves and will have connections to get you work or at least know where to work based on the skill-sets you have to offer. Of course you continue to pay on accounts that continue to yield profits. It sounds like your niche is machining whatever comes in the door. Provided its quality product a Salesmen to manage the accounts will be invaluable. The most successful companies have them, otherwise you will see work go away and have no idea why. Word of mouth is very important but you only have so much capacity so fill it with the work that best fits your skill-sets. What is the most difficult application that you can do very well? That should be the most profitible and don't be afraid to turn down work that others don't want if it is not leading to better work. Look at growing sectors and sharpen your skills. Medical is a growing sector. Firearms is a growing sector. Aerospace is good but not always good for smaller shops unless you can lock in LTA's. Right now, many of your prospects are unhappy with their current suppliers. You have to find a way in. Job shops get sucked into taking jobs that nobody else wants sometimes.
You have to identify your biggest obstacles between your company and where you want to be. A salesmen may or may not be the way. A Telemarketer might be good enough to get you some leads to follow up on. One thing is for sure: doing nothing will lead to unsatisfactory results.