Subject: Help needed saving a business

From: Demon Buddha <[email-masked]>
Date: Tue, 11 Jun 1996 23:20:34 -0400

Hi folks,

I need some help and I think this may be the place to get it.

I have a friend, Stefan, that has a machine shop.  He's a very
capable machinist and does very good work, so much so that he's
unable to do all the work people want of him.

Most folks would think that this would be an enviable position
to be in and under "normal" circumstances I'd agree, but in 
Stefan's case it's not so good.

This guy's busting his hump to the point where everyone around him
is seriously afraid he's going to drop dead or worse, become 
extremely ill some day soon from all the stress.

I've known quite a few good machinists over the course of my life
and in fact I grew up with the finest instrument maker to have ever
walked this earth and the one thing they've all told me that in this
business you have to be doing something VERY wrong to not make very
good money.

Well Stefan, despite his endless volume of jobs, must be doing
something WAY wrong because he's barely paying his bills to the
point that for FY 1995 he had to pay his federal taxes from loans
off credit cards, which I'm sure you'll all agree is a way bad thing.

My suspicion is that he is grossly undercharginh for his work but I'm 
not absolutely certain.  Therefore I'd like to ask those experienced 
folks out there how might I determine the precise nature of the problem.
Also, do any of you know of any fairly well defined methods for pricing
out jobs?  I suspect he just eyeballs the parts and spits out numbers
off the top of his head without giving the prospect its due 
consideration.

Also, Stefan does nothing but special short runs (a job shop if you 
will) and I strongly feel he needs to start considering CNC capabilities
(he gets approached all the time for CNC jobs abd has to turn them down
because he doesn't have the equipment).  I've suggested he do a middle
man routine by handing CNC jobs off to his CNC buddies and adding a few 
percent premium to the price of the job but he seems reticent (saidhe's 
afraid of chasing things like this, leaving his machines idle).  Any
ideas on how this might be done effectively?  Also, anyone know any good
sources for leasing CNC equipment, perhaps used?  Any opinions on what
might be a good choice for, say, screw machine type jobs?  Any insights
are welcome.

Stefan is technically very adept but he is not a businessman of any
reasonable caliber.  He does very good work but is missing something
in his way of doing business.  Someone with his experience should,
AFAIK, be making a very comfortable living rather than working themself
to death, barely keeping his nose above water.

Any help you folks can afford is be greatly appreciated.  You'd be
helping save what I believe to be an essentially sound business and
quite possibly someone's life.  I'd really hate to see it all go up
in chapter 11 flames but I think it's getting close; it would be a real 
sad shame.

Thanks again.

	-Andy V.

---

From: "John R. Johnson" <[email-masked]>
Date: Wed, 12 Jun 1996 12:16:44 -0500

I would strongly recommend he just start raising his prices until the
volume of work he has to do, is doable without undue stress.  That 
should also considerably increase his income while relieveing his
workload and stress level.  
John

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From: [email-masked] (robert a barker)
Date: 12 Jun 1996 22:33:03 GMT

In article <[email-masked]>, [email-masked] says...
>in chapter 11 flames but I think it's getting close; it would be a real 

  I have owned and run a small machine shop for the last 13 years.This is 
my second shop.I owned and operated the first one from 1950 to 1955 when 
I sold it.

   I may be able to help?????

   Please E Mail me with more details if interested.

 Bob Barker   [email-masked] (robert a. barker)

---

From: "Ole Steen" <[email-masked]>
Date: Wed, 12 Jun 1996 21:43:36 +0200

Your friend has probably struggled for ages to make ends meet. It has 
been obvious to him that increasing his prices would save his business,
but never the less he continues as always. This is not resolved with a
simple advice, but is more deep rooted in your friend's personality.I
suspect that he lacks the courage and self respect it takes to ask a fair
price for his work. He may be unreasonably strict towards himself, maybe
feeling that his performance must be perfect, and charging himself instead
of the customer for any little delay or unforseen expence.

Ole

---

From: [email-masked] (Jonathan M. Elson)
Date: 13 Jun 1996 05:22:05 GMT

Demon Buddha ([email-masked]) wrote:
: Well Stefan, despite his endless volume of jobs, must be doing
: something WAY wrong because he's barely paying his bills to the
: point that for FY 1995 he had to pay his federal taxes from loans
: off credit cards, which I'm sure you'll all agree is a way bad thing.

: My suspicion is that he is grossly undercharging for his work but I'm 
: not absolutely certain.  Therefore I'd like to ask those experienced 
: folks out there how might I determine the precise nature of the problem.
: Also, do any of you know of any fairly well defined methods for pricing
: out jobs?  I suspect he just eyeballs the parts and spits out numbers
: off the top of his head without giving the prospect its due 
: consideration.

Well, if he's alone there, his overhead should be within reason.  But
he's probably not charging his customers for the WHOLE job.  He should
charge for :
1:	talking to the customer about the job
2:	calling around to get material and any special tools, ie. cutters
3:	setup of job, making fixtures, etc.
4:	I'm sure he is charging for the actual cutting of metal, etc.
5:	clean up and checking of parts
6:	tear-down of setup and clean up of machine
7:	billing, packing and shipping time

I am new to this end of the business, as well.  I do electronic systems,
and have often just given my customers drawings of the cabinets, panels,
etc.  Recently a customer had a backlog at their shop, and so I needed
to cost out the metal work for that.  I underbid it by a mile!  I figured
out the time involved in the metal cutting, but just completely ignored
all the other items above - and they added up to MUCH MORE than the actual
cutting time.  Of course, I did a really high-class job, and the parts fit
together vastly better that what my other customers had been doing, but
the time estimate (and consequently, the pricing) was WAY low.

I can't imagine how one guy could do all the things that need to be done
to keep a regular machine shop going.  You need to keep track of material
and tool orders, to make sure you have the stuff when you need it.  You
need to bill your customers, and MAKE SURE they PAY!  You may also have to
fish for work, although that doesn't seem to be the problem here.  And
you have to do all that DAMN paperwork for the state and federal tax
people.  In my work, I can work for 2-3 months on one job, so the clerical
stuff doesn't really eat into my time too much.  But the clerical end of
things could amount to a whole lot, if he is doing 2 or 3 separate pieces
a day. That could be 15 separate invoices generated a week, or 60 a month.
That can easily occupy a full-time assistant!

My guess is that your friend isn't getting paid for half or more of his
work, because there is no time to do the paperwork and check records for
what hasn't been paid (or even billed for).

---

From: Robert Bickers <[email-masked]>
Date: 12 Jun 1996 23:09:32 GMT

If your friend doen't want the hassel of charging more for his work maybe he should consider 
hiring someone to do the billing and work orders, a business manager. Cheers Bob

---

From: David Smith <[email-masked]>
Date: Thu, 13 Jun 96 21:15:56 -0500

A good accountant is a start.  Compairing his priceing to other shops is
another step, but I would tend to fall back to the oldest improvement of all -
Raise prices

---

From: Steve Wellcome <[email-masked]>
Date: 14 Jun 1996 16:20:29 GMT

Yep.  If he's winning *every* bid he makes, he's bidding too low.

And if he's really that good, people will pay more anyway.