mistakes that doom job shops. · mistakes that doom job shops 7 MISTAKE 3 Many shop owners have...

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mistakes that doom job shops.

THOMASNET.com has relationships with thousands

of successful job shop owners from coast to coast, many going back to our days as the Thomas Register of

American Manufacturers – the “big green books.”

This eBook contains some of the anecdotal insights on job shop success and failure we’ve heard over the years.

6 m i s t a k e s t h a t d o o m j o b s h o p s

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Tens of thousands of job shops across America

form the backbone of the country’s economy.

Unfortunately, even though they may have the

right skills, equipment and people, it’s not rare to

see a job shop fail.

There’s no shortage of reasons why this might

happen, but there are a few common mistakes

many shop owners and managers make. We

cover 6 of them in this eBook.

You’re probably already aware of many if not all

of these decisions that can go bad. But hey, even

ace airline pilots take a refresher course now and

again. So here goes....


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MISTAKE 1

The temptation to use financing to fill the floor with

shiny new equipment has been the downfall of many

job shops. Whether a single opportunity to bid on

a new type of work has come along, or they buy a

machine with the plan (or hope) of attracting new

customers, many business owners simply take the

new equipment plunge – and the long-term debt that

comes with it – without fully considering the risk.

Unfortunately, the debt they take on is only sustainable

if everything in their shop, their customer base, and

the economy, goes perfectly. How often does that

happen?

Going Deep into Debt on New Machines


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“If your business isn’t as profitable as you’d like, it’s not

necessarily going to change with that new machine.

Reassess your existing processes and capabilities, address

the obstacles and opportunities you find, and think about

holding off on new equipment until your present capacity is

maxed out.”

“Most of us came up as machinists and know our equipment

inside and out. But if that’s not your background, make

sure you know everything your existing machines can do. A

dealer may tell you a machine is only capable of one type of

job when in fact it can handle many different jobs. His goal

is to sell you another machine. You may already own the

capability to expand the services you offer.”

“Pay cash if it’s at all possible. It really hurts sometimes

but you’re on much more solid ground when you own your

inventory. There’s no better sleep aid than being debt-free.”

Here’s some of the advice we’ve heard from job shop owners in regard to adding new machines:


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MISTAKE 2

A cash flow “crunch” is often the last sound a job

shop ever hears. Those businesses have done almost

everything right – they’ve delivered a quality product

at a good price, on time, along with the invoice. But

they’ve extended payment terms that the customer all

too often takes advantage of. And while that customer

takes its sweet time to pay, the job shop owner still

has to come up with the money for payroll, overhead,

financing costs and all the other expenses of running a

business. Extend those delayed accounts receivables

across the entire customer base and it’s a precarious

position to be in — one or two big unexpected

expenses can sink the business.

Being the Bank for Customers


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“Too many shops are afraid to ask for some payment

up front. Your customer is running a business too, they

understand the importance of cash flow. Tightening up your

receivables is critical — it eliminates a ton of risk.”

“We’ve required payment upon delivery for a few years

now, although we were even burned on that once when the

customer had found someone to make the parts 6 cents

cheaper, and refused delivery.”

“Depending on the customer and how long we’ve known

them, we specify a 25 or 50 percent payment at the start

of the job, with the balance on delivery. That way we both

have a vested interest in the job getting done as soon as

possible.”

Here’s what some of our customers have to say about handling payment terms:


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MISTAKE 3

Many shop owners have fallen into the trap of thinking

the boom times are the norm. Spending goes up

on things that don’t benefit the business, not-quite-

necessary equipment starts showing up on the shop

floor, operations and processes become less than

streamlined. But if you’ve been around long enough,

you know how easily things can change. A major

customer can dry up, a critical piece of equipment

can go down, a key employee can leave — so many

things beyond your control can negatively impact your

business.

Neglecting the Nest Egg


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“Stay on top of unessential spending, staff right so excessive

overtime isn’t required, plan and stick to an operational

budget so you can buy in bulk and negotiate discounts. It’s

easy to slack off on these things when you’re running at

capacity, but that’s the time to keep the belt tight and put

those savings into your shop’s ‘rainy day’ fund.”

“The temptation to draw more money out of the business

when it’s booming never goes away. It’s not necessarily a

bad thing – you’ve earned that money. But sometimes it can

be a long-term mistake for a short-term reward.”

“When things are going gangbusters I pour dollars into the

business’s cash fund. During normal times I’m more modest

about what I put in there but I don’t stop. The result is that

during lean times, I haven’t had to lay people off and they’ve

gotten full weeks and paychecks doing projects around the

shop before the work picked up again.”

Job shop owners have talked with us about nurturing their nest egg:


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MISTAKE 4

It’s great to have a niche in a particular industry when

that sector is humming along. But history has shown

that pretty much every industry is cyclical at best, or

impermanent at worst. Countless factors can disrupt

the good times – the economy, new regulations,

offshoring, consumer demands, you name it. The U.S.

manufacturing landscape is littered with the ghosts

of job shops that went bust because they were over

reliant on an industry that went into decline.

Being Too Reliant on One Industry


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“We have a good number of customers in the automotive

industry. While I’m not inclined to turn away work, I do try

to make sure that 30 to 40 percent of our customer base

represents non automotive-related work at any given time.”

“Breaking into a new industry is not easy – those customers

typically want to see work you’ve done for companies like

theirs. We landed new customers in the aerospace industry

by being persistent and attaining ITAR certification.”

“We made a business decision that the latent risk involved

with serving only one type of customer outweighs the

benefits of ‘specializing’ in that market. We gear our sales

and marketing efforts towards maintaining a diverse

customer base.”

We’ve heard a lot about customer diversification from many of the job shops we serve:


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MISTAKE 5

On Madison Avenue, the “better than” is called the

“unique selling proposition.” It’s the special sauce

that sets one company apart from the competition

– the reason why Mr. Customer should choose you

over everyone else. The reality is you could take your

nearest 100 CNC machine shops, and besides their

logos the impression most of them give is likely to

be virtually identical. When nothing about a shop

stands out as better than the others, it’s basically a

commodity that can only compete on price.

Not Figuring Out Your “Better Than”


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“Zero defects, guaranteed, thanks to our proprietary

monitoring equipment.”

“The only ISO 9001:2008 certified supplier in the tri-county

area able to vapor polish parts over 24” in diameter.”

“We’re the only machine shop in the state to receive HP’s

Excellence Award for exceeding their on-time standards.”

Here’s an example of some “better thans” that work for the job shops we serve:


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MISTAKE 6

When the customer base shrinks and the capital isn’t

coming in, a job shop’s marketing budget – if there

was even one to begin with – is often the first casualty

of the belt tightening. As counter-intuitive as this

might seem, it happens every day simply because

many shop owners have no idea whether or not their

marketing is working. This decision all too often just

accelerates the business’s death spiral. Relying on

word of mouth, referrals and increased business from

existing customers is rarely the formula for success.

(Just a heads up: we’ve made it to page 13 before breaking out the

following shameless plug for THOMASNET.com – but if you’ve read

this far we’re pretty certain you’ll be interested in hearing it.)

Slashing Marketing Rather Than Demanding ROI


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“THOMASNET.com simply delivers the purest industrial

audience on the internet, and being there has helped us

connect with new customers in new industries. Our program

absolutely pays for itself and more.”— Pete Elzer, President, Apex Plastic Finishing

Custom manufacturer of finishing/decorating services

“I don’t have a sales team on the street – I have

THOMASNET.com. It’s an efficient way of getting qualified

leads, and my program pays for itself every year.”— Jim Holland, President, Moore Addison

Custom manufacturer of precision machining for plastics and non-metals

“About half of our new custom work comes from

THOMASNET.com leads. We could not have competed

for – and won – all the new business we have without our

strategic THOMASNET.com program.”— Alli Cravens, Sales and Marketing, Granger Plastics

Custom rotational molder

Job shops that promote themselves effectively on

THOMASNET.com see a measurable return on investment

(ROI), and a tangible impact on their business goals. We

know this because they tell us so – see for yourself:


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“Qualified leads are coming to us now, and since prospects

can easily search our capabilities and qualifications, those

who contact us are more inclined to do business with us.”— Bill Boyer, CEO, Boyer Machine & Tool Co., Inc.

CNC machine shop

“We are extremely pleased with the activity generated by

our THOMASNET.com program. New RFQs come in so

often we have trouble keeping up. Even more astonishing is

the quality of the leads and the number of new customers

we have converted.”— Norman Rodriques, President, Springfield Spring Corporation

Custom manufacturer of engineered mechanical springs and stampings

“As a small machine shop, it’s critical that every marketing

dollar I spend attracts the right kind of customers – those

that I actually want to do business with. My THOMASNET.com

program paid for itself within the first 3 months.”— Richard Barnard, President, Eaglestone Technology, Inc.

Machining shop


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Want indisputable proof that the customers you need

look for suppliers like you on THOMASNET.com?

We will deliver a custom Lost Opportunity Report

showing you the names and towns of companies that

have recently visited our platform, looking specifically

for suppliers who do exactly what you do, where you

do it, but weren’t able to find you.

Click here or call 800.879.6757

FREE Lost Opportunity Report

http://thomasnet.co/1QM1CED

mistakes that doom job shops. · mistakes that doom job shops 7 MISTAKE 3 Many shop owners have...

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