[gizmo_454]

Geof,

As far as our pricing criteria is concerned, it started out as the typical, "bid it low so we can get some work" philosophy as most small shops start out. And unfortunately, for us, we have gained the reputation for doing quality work, for a low price. And when I do attempt to bring the bottom up a little, some of our current customers tell me that the quality is expected of everyone, (I think it should be), and that price is all that really matters anymore.

I don't know if you have, or not, since you make your own product line, but when you get a minute, check out mfg.com. From what I have seen, a ton of buyers from companies all over the country are sourcing their parts on there. Having been a member on the supplier side for the last three years, I will tell you that it is competitive out there. Typically, jobs are getting awarded for literally 1/2 of the average price quoted. And no, most of them are not going over seas. After seeing the competitiveness of the industry, I don't see how a shop could afford a Mori or other more expensive equipment.

That is, unless they make their own product, or have what we call "the good old boys" syndrome. Meaning they have been making parts for certain companies for years and years and the buyer will pay whatever they charge for the parts.

Oh well. We'll get through it. It'll just take us until these machines are paid off in a couple of years to go the next step.

Gizmo

[Geof]

.....I don't know if you have, or not, since you make your own product line, but when you get a minute, check out mfg.com....

I haven't, and you know full well the reason...I don't need to. And I think it is obvious you recognise that I am sitting in a position where I can kinda preach at people.

It took a hell of a lot of work to get where I am and one of the things I never did was compromise on quality, or price.

And I do recognise that I preach at people, but if that goads them into taking an external look at what they are doing I think it can be helpful. If all it does is annoy them they should not be in business for themselves; one of the things that is absolutely essential when running a business is curbing the tendency to get annoyed, or urge to dump all over people......at least until you hang up the phone so they cannot hear you.

[Donkey Hotey]

Before the mill hit the door, it was taking 3 of us, 2 days, on 3 machines to make 1000 parts. ...

...There is no way my $75K SL is going to pay for itself that fast making $2-$3 parts. That's a ton of parts to make in 2 months!

Gizmo, forgive me for making the leap from one paragraph to another above but lemme' see if I've got this right:

• 3 guys spend 2 days making 1000 parts.
• Parts are $2-3 each. I'll call them $3.
• That's $3000 for two days of work. Lets say you get two of those jobs a week and spend one day maintaining the shop, chasing other work or whatever.
• So 3 guys bring in $6K per week.

Out of that, you have to pay the rent, utilities, phone, depreciation (wear), repairs, supplies (material too?), workers comp insurance, liability insurance and somewhere in there, pay yourselves for doing the job?

I've gotta' go with Geof on this one: raise your prices.

I quoted a custom job for a friend a few years ago. It was a pretty basic part: a two-piece aluminum sandwich with polished internal runners and threaded inlets and outlets. It was a manifold for a food production line. The company he worked for had the cash to pay but was pinched for schedule.

I drove 60 miles (one way) to look at it and discuss some things that I could change on the design to not only make it easier to produce but it would improve how it worked for them day in and day out (it had to be removed, cleaned and reinstalled once a day). It was still going to take me time to do it, time to deliver the part back to them, specialty taps and a bunch of other things that I included in the estimate.

The total quote came out to $1000. I figured it was going to take me two solid days to do it between driving, setup time, programming, cleanup, deburring and polishing. They were aghast. They had been quoted $750 by a machine shop down the street that couldn't do it for a week (and wasn't improving the design for them). I told them, "I can have it for you in two days but that's my price...sorry" and I walked away from it.

The deal was that the other machine shop had gaps in production that they could slip this job in. It was gravy. They could quote it lower because it was either gravy or no gravy. With all of my driving time, cleanup, depreciation, etc, I decided that it was cheaper to not even do the low-buck job (even as a favor) and let the machine sit with the power off than to risk a crash, scrapping their precision ground stock, breaking a cutter, etc, etc.

In the end, I think they still lost 2 weeks of production waiting for that thing from the other shop. That part was holding up a brand-new machine on a brand-new production line--all for $250 difference--but I digress. :withstupi

I've been asked many, many times since to quote jobs or been offered contacts of people who need machine work. I tell them over and over, "You're not getting it. I'm going to be a manufacturer of my own products. I don't want to be a machine shop. I don't want to do other people's work. No, not even if it means bundles of money. Again: I am not a machine shop."

Everybody wants machine work but nobody wants to pay for it. I've known a couple of other guys with ideas for hobby markets. They've told me what their ideas are. I've finally come up with a way to get them to stop asking me. I figure out what I honestly think I can make the parts for and if they have a prayer of selling them. I double that number and ask them if they think they can sell them for that. We'll say $20 retail.

"Okay, I'll make you the first 100 parts, materials included, for $10 each. You can sell them for $10 profit and you won't have any machinery, tooling, software or materials to buy. Pay for your eBay listing and the rest is pure profit."

Not one has been willing to tie up $1000 of their own money to buy a 100 parts. It's ironic how many want the use of $150K worth of software and machines but won't front any personal money to invest in their idea. They want 'Just In Time' manufacturing of $10 items--on demand. They think that eBay checkout should be tied to the Cycle Start button on my VF-2 so the part will just drop out the side of the chip auger and into an addressed USPS box.

Okay, I'm rambling now...I've gotta' get some sleep.

[Caprirs]

They think that eBay checkout should be tied to the Cycle Start button on my VF-2 so the part will just drop out the side of the chip auger and into an addressed USPS box.

They also think you hold the sample part in front of the CNC so it can scan it and make it. The idea that you will have to spend hours sitting at your desk with calipers trying to design the piece shouldn't be "paid" time apparently. You're supposed to do that aspect for free for the privilige of running the $1000 job.

I like digressing, it's easier than staying on topic.

[Geof]

.....Everybody wants machine work but nobody wants to pay for it. I've known a couple of other guys with ideas for hobby markets. They've told me what their ideas are. I've finally come up with a way to get them to stop asking me.....

About twenty years ago I came up with a method:

Them; "Geof can you make.....?"

Me; "Is it worth $3500 to you?"

Them; "What!!!?"

Me: "Go away"

They all stopped coming, actually stopped even talking to me which saved a lot of wasted time also.

[katiebo]

...Think long and hard about buying at least a fourth axis for it. We bought the HA5C just as a "just in case" precaution with our Mini. And to be honest, we wouldn't have half of the work for the mill we have if it wasn't for that. Hind sight being 20/20, I would have sprung for the extra 4" Z clearance and bought the 5th axis to tilt the HA5C. I have jobs that I have had to build special blocks to mount the rotary on to be able to do them. The 5th axis would have made it just a turn of the knob.

Gizmo

I have been considering both the 4th axis ready and the 4" of additional Z. While the goal isto get into high end work I am not sure the the Haas mini even with additional 4" of Z provieds enough room to make the 5th axis ready a reasonable option on that machine. I would love to hear from others on this.

Also I am not dead set on a mill either. I would actually prefer to start out wth a turning center if I had the work lined up.

[DareBee]

I have to agree with the posts 22 - 24 whole heartedly.
If the jobs you are taking aren't paying off the machine in 2 years or less, you will be out of business. Machines wear out and must be replaced.
I am slow in the machining end of my business right now and I will let me VMC sit empty for 6 weeks before I will ever prostitute my services.

I met somone that couldn't afford to replace an old machine, couldn't afford an employee but thought he was making good money on his parts. Said he was closing his shop. My machines may reduce his production time 10 - 15% but still at a severe low-ball rate and no contract on the parts to boot.
Made me think long and hard but my answer was more money, re-design or no way.

[katiebo]

...not charging enough.

Geof is right on the mark. I have been on the sourcing side of the fence (I have also been in sales). When having something made you can have fast, cheap and correct. Pick any two!

There are a lot of people out there in the world that spend too much time talking and not enough time listening and learning.

Case in point:

As an engineer designing components I would also have to source them. The local shop we used at the time had worked out a time and materials arrangement with the owner of the business that I work for. Some of these components were very small (1"x1"x1.25") with 6 setups. I would be asked to ball park the price for the owner. My response would be something like $400-$600 dollars for a quantity of 1 pc (which, for some reason is all they ever wanted to make). I would then have to listen to the "Whoa why so much..." and would then have to explain that there were 6 setups, 6 programs, 6... you get te idea. Well with drawing and PO in hand I would stop by the shop and make certain there were no questions. Two days later I would get the parts. There beautiful, just what I was expecting. 2 weeks go by an the owner comes to me with invoice for $500 and starts his whining. Again, I have to explain what is involved in making these parts. I conclude by telling that I would have charged more if I were the one making them (i will explain this in a moment). He walks away with a scowl in is face and the process starts all over again (literally).

The shop we were using has since gone belly up. The time and materials arrangement was for $60/hour. We were getting a bargin for the quality and response we were receiving!!! The company I worked for kept dangling a carrot of a huge order. Something that I am sure you could guess was never received.

Long story short,
The business I was working for was getting a great deal and was constantly complaining about price and using the carrot of a large order for leverage. Stand up to your customer look them in the eye and politely let them know that you can't do the job for x.xx per pc in a batch of yyy. Also, let them know that you still want their business! They may go elsewhere. And chances are they get burned and end up coming back. Once they get burned enough and you bail them out. Then you will have their trust. The ultimate foundation for a successful business relationship.

[Geof]

.......They may go elsewhere. And chances are they get burned and end up coming back. Once they get burned enough and you bail them out. Then you will have their trust. The ultimate foundation for a successful business relationship.

Yes!!!

[Rocko1]

I found that there are truly 4 types of machine shops out there. 1) Fixture shops that do 90%2d work 10% 2.5D work 2) Production Shops mid to high volume production runs that are all about speed and setup efficiencies to get both costs down and profit up after getting the business. 3) Tool & Die Shops They are about complexity and precision to the extreme 90% 4 axis & 3 Axis work 4) All others
I remember one time looking for a local shop to do some 3d mold work in mic6 or 6061 aluminum. We were extremely busy in our own cnc shop and needed a nearby shop to do some extra work along with some easy 2d work plus some easy assembly work. If I had a dollar for every shop that had 3axis equipment but yet did not have the software, programmers or knowledge to utilize it I could of bought that z1 corvette at the time. Also I find alot of shops that do not want to push themselves, their people or their equipment to its fullest. That is why you are seeing shops go out of business. They pidgeon hold themselves into a mindset of business they want or feel confortable with. The fact is in todays world and our economy that spells disaster. Just my 2cents. Oh by the way we just decided to add another bigger CNC machine instead of wasting our time with a local outside shop. Fact is someone lost out on a minimum of $40,000-$70,000 worth of work a year.

[joecnc1234]

we have a saying you get price, delivery, or quality pick 2 of the three and figure out whats most important. I wholeheartedly agree with geoff, don't ever compromise on price. I've been to rfq.com, we used it for a year a total waste of money. We bid on hundreds of jobs lost countless hours on quoting and never got close to (garage) shops bids. If anything keep moving up on your hourly rate. We've implemented a cell for one customer and I wish we had a hmc with 80 tools we have one vmc dedicated to our cell for one customer that has a basic part family. Our set-up times are down to 15 mins so we can cut set-up out of our quotes. and compete with smaller shops that don't want to make any money. But we have implemented 5s and lean manufacturing to be able to still make $60-$100hr but it takes time and investment. I'm not so sure the machine is as important as the process, and mindset of the ownership. Don't give up, keep looking for better work and exploring better processes.
Good luck
Joe

[mc-motorsports]

don't negotiate your prices. Let your customer know this is what it's going to cost, and if they can find someone who will work cheaper or can do that job more efficient, great. My personal experience is my customers always come back because they want my service. Every one of them complain about the customer service they get from other shops. I'm not saying that quality isn't #1, but customer service is #2 an price is #3. Probably my best customer does not give me any grief over prices. I quote the job fairly every time, and sometimes I'm a little expensive, but they still give me the work because they want to keep me happy, especially when they know I'll work a 24hr day to rush them parts on an emergency basis.

[mc-motorsports]

Ok, I'm going to rant here for a minute, hope I don't offend anyone, please accept it as an opinion.

GARAGE SHOPS.
Busted, techinically I own a garage shop. WHO CARES? I don't work out of my garage because I try to undercut everyone and I don't make enough money to buy/rent a shop. You guys are *****in about garage shops taking business from you? Your talking about 5 axis mills and 6 axis lathes? I own bridgeport retrofits and a conventional lathe. I charge a minimum of $42hr per machine per hour, want precision? I charge even more, minimum $60 if the tolerances get under .005". I make a lot of money doing precision work, but mistakes are expensive. And honestly, I'm not going to give away my secrets, but I make up to $100hr doing 2D open tolerance BS work, that is BY FAR my favorite jobs. I make that because I have a very cleaver way of fixturing and I make multiple parts at the same time. Enough about that.

So do I have to rent a shop to earn your respect? For the size of my operation and my physical location, $1000/mo would be an expensive shop. And I can safely say I work 200 hours a month, probably minimum on an average month, so that's $5/hr to pay the rent. Wouldn't dent my pocket book.

Wait! Do I have to hire employees? I pay my friends when I need help, maybe I don't want to deal with "workers' comp" and taxes and all the other crap that comes along with that. BUT! If I did hire a couple of guys and pulled in some new equiptment, I could push myself into a cushy office job where I stay clean and make $100K a year barking out orders and dealing with crap like workmans comp, heath insurance benefits, quartly tax withholding, I could hire an overpaid accountant to write paychecks every week and be responsible for tax payments and all that good stuff! Um, no. Don't get me wrong, I'm not trying to mock anyone here and if you do own a larger shop and your doing good that's great. But that's not how I want to spend my day. I almost broke 6 digits last year and I will this year, no problem, so I guess I don't need employees and accountants for comlicated tax situations and an insurance agent to manage a group health insurance plan. Granted, I can't make too much more money on my own, I'm happy and I can live off of that. And yes, I understand that the people who are willing to deal with the employees and all the crap that comes along with it, which I personally believe takes talent to properly manage, you will have a somewhat limitless income potential, and you will earn it, congrats, but it's not for me.

And I realize that there are guys who work out of a garage for peanuts because they can, because they don't carry overhead and they get work just by undercutting other shops. I don't. And I realize that you guys may not be *****in about every one of us, but concider that just because I work out of my garage doesn't mean that I'm not skilled in CAD/CAM, I am a certified welder and pretty much every one of my customers claim I have the best customer service out of any of thier suppliers. And if someone submits a quote cheaper than mine, that's fine, my prices are what they are. A bigger shop with faster equiptment may be more efficient, a small shop may work cheaper, or sometimes I just turn it away because I don't own the equiptment such as ID/OD grinders. Doesn't bother me, I quote the job and I don't negotiate. I had to learn that one the hard way, I may work out of my garage, but that doesn't mean that I work for rice, and I'm to the point that I don't have to beg for work, not that I would.

If your complaining about the guys who get work because they work for next to nothing just to get a job and have no overhead and can work cheaper than you can, your dealing with the wrong customers, or getting work from the wrong place's. MFG JOKE dot COM? Yea right! I will spit on Mitch Free if I ever meet him in person. Back when he started that company, he was all about opening up the RFQ freeway for busy american shops to outsource to the american shops who weren't so busy/struggling in this economy. Now what? That fat bastard sold out and opened a super-highway for outsourcing american jobs, made him millions, good for him, I make enough to put him in court if ever givin the chance, I'd love to see him starve to death... I wish someone could outsource his job.

Sick of competing with small shops? Go ISO 9001. Name one GARAGE SHOP who is ISO certified? There are a lot of companies I can't do work for because I'm not ISO and I wouldn't dream of trying to get ISO certified in my gargage.

And so on and so on. And yes, my customers know I work out of my garage and they don't care, I could work out of a cave and they wouldn't care. I have 4 walls and a concrete floor, just like you. I like it because I work only foot steps from home and there is pleanty of room for my small operation which can't get much bigger unless I hire some employees, which I don't want to do.

[Donkey Hotey]

Busted, techinically I own a garage shop. WHO CARES?

Okay, don't take this as an attack (really, it's not) but since you pose the question: who cares? The law cares. I don't know your situation, your zoning (residential, agricultural, etc) but believe me: somebody cares.

If you're in a neighborhood, I'm sure there is zoning against running a manufacturing business in your garage. If you're in an agricultural area, there still may be some kind of restrictions. I'm not pointing a finger...just saying that they do have such laws on the books. That means that the advantage you gain by not having a shop, is done illegally.

As for hiring friends when you need them: technically, that's not legal either The government wants that income tax, social security, etc. Yes, you'll get away with it but you shouldn't brag about it being a choice. It's not 'legal' and is therefore, an unfair advantage.

Hazardous waste? Oils? Coolants? Disposal? You get the point.

After one or more of the things happen above, you'll be forced into the same mold: a shop, insurance, employees, an overpaid accountant. If you look at all of the laws, liabilities and restrictions, it's amazing that a shop can survive at all.

You also choose to run without worker's comp insurance. Ask yourself what would happen if one of your friends heard something fall over on the other side of the shop as he was operating the bandsaw and 'brrrzzzaapp', off comes his thumb and a finger or two. Yeah, they're your friend until you're earning $100K a year and they can't pick their nose with that hand anymore. Do you really think they're just going to tip a beer to you and say, "No sweat, Bro...it's all good."?

So again, it's a choice you make but guys with real shops, in the real world have to protect themselves from this kind of liability.

[slatern44]

MC, what you are doing is illegal, even if you can justify it in your head. But I will say lots of have done it or know someone that is doing the same thing you are doing. It's a temporary position or a stepping-stone to a shop. If you start a fire on your band saw or mill by accident and it burns down your house you just lost your house. NO homeowners insurance it going to pay for it when they find out you had equipment in your garage and you were excepting payment for products you were making. So now you have no house and a mortgage still to pay. Like Donkey said if one of your friends gets hurt he will sue you for alot of money or at least you will loose a friend. To me that not worth 100K per year. And not to mention that you are not paying taxes like you should. But hey your happy!!! Things are good now but if something should slip, No house, No friends and the government will be all over you.

[katiebo]

So how many business owners started their business out of their garage?

[Donkey Hotey]

So how many business owners started their business out of their garage?

Agreed 100%. But as already stated: it's a stepping stone, not a way to do business forever. I think that's why the government/city/town looks the other way--for awhile. Eventually, you have to become a responsible business.

[katiebo]

Agreed 100%. But as already stated: it's a stepping stone, not a way to do business forever. I think that's why the government/city/town looks the other way--for awhile. Eventually, you have to become a responsible business.

Understood!

[PBMW]

We're in the Garage. Have been, legally too, for about 10 years. We've only really gotten busy and grown it in the past three years though. Five CNC's in the garage...
Need a building and are about to move. I think...
Nobodies ISO certified in a garage? Wanna bet? I know four shops local to me that are. We are working on it and will be certified inside of a year.
Better check your zoning and licensing requirements really carefully...The state will HAMMER you. Pay someone to run your machine and don't pay L&I...They will fine you senseless

[katiebo]

PBMW, that must be one tight space. What are the dimensions?