Starting up or growing a machine shop can be extremely challenging and involves making numerous crucial decisions regarding financing, location, choosing the right machines, targeting specific market segments, and setting the right team in place. Here are a few tips and strategies that some of the MFG.com members have applied in order to expand their business:
1. Select a Target Market
Becoming an expert in machining medical components and devices or working with exotic materials are two examples of niche manufacturing that can help you easily target some of the most desirable customers. Stay focused on what you do best. Having a clear target will help you easily decide on all other aspects of your business – machines, man-power, supporting technology, marketing, etc. If your target industries require it, make sure you obtain all the appropriate certifications, so you can meet the standards of even the most exigent of customers.
2. Choose Your Allies
Your network of friends and business contacts can be an extremely valuable source for information and leads, particularly when your business is new. Talk to everybody you know about directing customers your way, ask for advice about best business practices, and develop strategic partnerships. Create word-of-mouth among your peers and use their connections and knowledge to expand your business.
3. Stand Out from the Crowd
What makes you special? Make sure you know the answer to this question before you have your first conversation with a potential customer. Having a general machine shop is fine, but make sure you are prepared to communicate your added value. Be ready to tell them why you are a better choice than any of your competitors.
The last few years have affected most small businesses tremendously, but the ones who managed to weather the storm are the ones who were able to adapt to all the major changes in the market. In example, machine shops that switched their focus from commercial manufacturing to government work during the storm, may still be here today because of that choice . Understanding how demand evolves and being able to adjust to it, is vital and can help you land on your feet when other businesses fail.
5. Diversify Your Services
Accepting jobs outside of your core capabilities can be risky. However, if your current capabilities support growth in new directions, make sure you consider the possibility of diversifying. In some cases, changes in the market will force you to diversify.
The easiest way to expand is to look at your existing range of services or products and see if you can go one step deeper into the manufacturing process. For example, when you are quoting machining opportunities, make sure you inquire if there are any assembly needs, and extend that additional service to your customers. Becoming a one-stop-shop for them can result in significant savings and reduce the time-to-market tremendously.
6. Diversify Your Customer Base
Focusing on one large customer and developing your shop around that customer's needs seems like a logical way to grow your business. However, that strategy can easily backfire if your customer goes out of business or decides to work with one of your competitors. Maintaining a customer base that is relatively diverse in company size, geographical location, industry and volume, will make you less vulnerable.
Technical innovation can be extremely costly, but not keeping up with it can be costly as well. Purchasing new equipment can create additional costs including initial set-up, hiring and training the right personnel, maintenance, etc. These costs cause many business owners to be weary of investing in new machines. However, if you choose to stick to the basics, and not keep up with technology, be ready to lose a few customers to some of your more innovative competitors. How much is one customer worth to you? Can you afford to lose them?
For those of you who have been in the business a long time, remember when computers and CNC machines were first introduced in the industry? Many people fought the change and some of them never adapted. Industry leaders easily adopt new technologies, while followers fight to keep up, or fail. Something as easy as updating the software you are using, can make the difference between being competitive and profitable, and going out of business.
Keeping a tight production schedule. Prioritize jobs. Try to be as independent as you can from outside suppliers. These three things can help improve your output and create a more seamless workflow. This will also allow you to better estimate your future cash flow and identify specific aspects of your business that need improvement. Achieving full vertical and horizontal integration is not always possible, but moving the manufacturing process in-house can be quite beneficial.
9. Be Flexible and Creative
Finding creative ways to use your equipment can help you save time and money. It's a great idea to invest in equipment that can incorporate secondary work in its primary function. Take a waterjet cutter for example. If you choose to buy your raw material in plates and not blocks, you can use a waterjet to cut part blanks.
10. Grow Sustainably
Taking a giant leap of faith often proves to be more detrimental than beneficial, and can significantly hinder your business in the long term. Invest as you go and always make sure that every machine purchase you make is cost-efficient. Consider all the collateral costs that purchasing a new machine will entail (training, new hires, etc.), and make sure you have the right sales and marketing strategy to keep your new machine busy. "Build it and they will come" does not count as a strategy.
Last but not least, make sure you have VISIBILITY. Regardless of how you approach the development of your business, make sure enough potential customers know about you. Don't be a "secret agent". With more and more customers using the Internet to identify new suppliers, an online presence can help you get the exposure you need and direct customers your way without too much effort on your end. Feel free to contact one of the MFG.com representatives for additional details and support.