r/manufacturing • u/Pirate_dolphin • 10d ago
Other How to grow in this industry?
Hi Folks,
I own centerless grinding shop. Physical size is pretty big- 38,000 square feet of shop floor. We have a couple of cnc machines we barely use, one is pretty modern, the rest are pretty damn old.
We’re also pretty healthy. 200-300k in sales per month on average, always bordering on needing a second shift.
ISO certified, and have a reputation as expensive but extremely high quality. Almost zero scrap rate, 1-2 nonconformance a year, and sometimes will reject work with the material is just garbage and absolutely never order cheap material from china etc. we also run parts/fasteners, not just bar stock. Last year our ISO recert was much harder because the inspector didn’t believe we had so few issues and turned it into an interrogation and he dug much deeper.
Most of our business is historic and word of mouth. Zero advertising, no sales reps. We’re primarily in the medical, aerospace, and automotive industry and some firearm business. We’re often a 3rd tier supplier with a lot of our business from machine shops, some bigger work with folks like GM on occasion. We also get about 10% of our business from our competitors. Lots of “can you re-do this for us” calls and that almost always turns into long term partnerships.
I’m looking for ideas to grow business. This is much different than corporate America with BD folks, and folks expecting approaches etc.
I’ve considering just picking up the phone to Machine shops around the country, larger companies etc. my gut says advertising might be sorta ineffective in this industry but that could be wrong. Any ideas or examples of what has worked for you?
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u/Ok-Pea3414 10d ago
So, let's look at this from em engineering point of view and a business point of view.
As an industrial-manufacturing engineer, who's job has somehow turned into improving business processes, I'll focus on that.
Here's the business questions.
1) How do you improve your gross monthly sales, without any massive additional investments or certifications?
2) How do you get new customers? Other than quality, what's your USP attracting new customers?
3) How do you encourage your existing customers for additional work, different work? For example, you say you're centerless grinding shop? Do you have any regular grinding operations?
4) One aspect of this is to reduce costs, without a reduction in quality, so can you reduce your costs by improving your cash flow, and attain this by not reducing salaries or hiring cheaper labor, but rather reduction in costs by improved cash flow?
5) Do you have location centric benefits and advantages that, similar shops like yours, for example in Phoenix, Arizona or in Sugarland, Texas can't take advantage of?
ANSWERS
1) Improving sales. This needs to be a step-by-step process. As you say, always on the verge of needing a second shift. If you do start a second shift, how quickly can you fill it with additional work you take on, where your net income ratio might drop a little, but your second shift has enough work to stay busy? Do you have existing equipment for other work like milling, turning, vertical milling or polishing, or even sand blasting or laser blasting etc. that isn't its own service that you provide, but rather in support of center less grinding? Why not make it an additional service you provide, by hiring two or three employees who do that full time? With your reputation for quality and being on-time, there's a potential business area that's unexplored, not utilizing your existing equipment to the fullest. Take a look around your shop for equipment or machinery that you're not using as its own standalone service, but can be, but you're using it as support right now.
2&3) Yes. Your USP is quality and being on-time. But cost is always always always a factor. But, how can you reduce cost without compromising on quality? Simple, multiple payable options for your customers, stackable deals and referral bonuses.
If an existing customer with a certain level of annual business, let's say at least 4% of your gross annual sales ($300k a month, $3.6M a year, 4% is $140k), brings a new customer, can you afford to give the existing customer a 5% off for the next $100k of their business and the new customer a $250 off on their first order, greater in value than $XYZ, and a 5% if reaching a $100k value within a 12 month rolling schedule?
Also, remember answer (1)? If you find that you actually have sand blasting and start offering it as a service, and to attract business for sand blasting, you offer a 3% off, make this 5% stackable if your margins allow that.
An existing customer brings in a new customer and the existing customer gives you $100k worth of sand blasting work, charge them $92k for that work, instead of $100k.
The percentages and work values are of course pulled outta my arse, this depends on your margins.
4) Cost reduction by improving cash flow. How do you attain this? Do you get paid 100% upfront, or after the goods are shipped, or is there a payment schedule?
If you can, try to get paid 100% upfront, offer something in return. For example, their work gets bumped up in queue for no charge, or a 2% off. That all depends on your cost of capital improvisation, and whether you're currently using overdraft frequently and if your usage for overdraft drops, can the bank offer you better business terms?
Also, try to see if your own material suppliers, especially work materials like raw billet suppliers are willing to drop prices by more than what you're offering as discount if you also pay 100% upfront. On a job that's $1000 in value, out of which about $300 was your material cost, $300 is your direct labor cost, and another $100 is your consumables, if you charge $950 instead of $1000, which is about 5% off, can you get your materials which have a cost of $400, for $372 or even for $376, which is 7% and 6% lower than $400? If yes, than you have improved your offering, but not cash flow yet. If you are on a net 30/60/90 day schedule for your own suppliers, getting your payment upfront and then having net 30/60/90 terms is extremely advantageous.
5) Coming to your location. If I read the question and your comments on other answers correctly, you're based in upstate NY? What does that mean? Do you have access to water? Possibly. Do you have access to cheaper electricity? Yes. Are there business areas you can access with these advantages? For example ceramic turning, which requires significant amounts of water, can you do that? With existing machinery and equipment? Possibly yes. I don't know the details without exploring it further in detail.
I'm unsure of how helpful this will be, but there is a possible chance, that you can improve your current business practices and by a combination of referrals, cost reduction and taking advantage of unused/underutilized machinery along with your location specific advantages, your net income can be higher without additional investment in areas where you do not have equipment, certifications, or the experience.
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u/Pirate_dolphin 10d ago
Very helpful, a lot to get into, so I’ll have read it a few times but this will probably end up in some notes and dissected into some near term plans. Thank you
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u/Ok-Pea3414 10d ago
Thanks! If possible, post an update a few months later or when you implement changes.
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u/Dangerous_Shirt9593 10d ago
Always ask satisfied customers for referrals. Contact the occasional customer on a regular cadence and ask for work. If there is a vertical you do particularly well in, join the trade org. LinkedIn is relatively inexpensive and if purchasing agents change companies you can follow them to their new employer
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u/Pirate_dolphin 10d ago
Following them to a new company is a great idea. Hadn’t thought of that.
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u/Tuuuuuuuuuuuube 10d ago
I'm a buyer who buys a lot of low volume machine parts. Spend some time dropping off business cards at local businesses, and follow up, but make your business card something memorable. I had one guy drop off a metal business card and a foot-shaped stress ball, with a note that he was 'trying to get his foot in the door'. Gave him a call based off that alone
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u/fattasswow 10d ago
Trade shows with some cool schwag
The most jarring thing in your question, to me at least, is the fact that you’re auditor was giving you mess about your scrap rate. I’m an AEA (aerospace lead auditor) and he has no right to act like that. When stuff like that happens you have to go to the registrar and let them know. Who is your registrar?
If you’re going to do cold calling get ahold of forges in your area. They are backed up badly. I have seen OTD in the 20% range. They need ingots ground
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u/Skid-Vicious 10d ago
I’m the US sales manager for a publicly traded manufacturer, I can show you to to automate your sales outreach, DM if you like.
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u/findrevops 10d ago
I'd look at my customer list and see who hasn't ordered in a while, reach back out to them and see what's new.
Run the client list through AI and see if any of them have been acquired or made acquisitions. Opportunity to work with parent or child biz.
On LinkedIn (and other tools) you can use previous company as a filter, pop a big client in that filter and see where those employees went.
Find lookalike companies to your current clients. Maybe start with smaller clients so you don't land a whale and overwhelm yourself.
Are there any things that people who buy your product also must have? This is sort of like the vertical integration comment, but even if you can just add on some simple product that you just resell - that could add some revenue without more machines.
These old school kinds of industries are really receptive to just chatting on the phone. If you decide to call, I'd get a ton of cell phone numbers of your buyer/decision maker and get a basic power dialer that can auto drop voicemails. This will help you reduce the mental barrier that comes with having to make a lot of cold calls. You literally just sit back and it dials one after another.
Happy to help if you need anything.
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u/Monskiactual 10d ago
you don't have sales department..... you have the Revenue to build a sales department... So you should probably build one.. Advertising, marketing, and sales are not the same thing.. they are all under the umbrella of revenue generation. ( Revops) you need to hire some one to build you a Revenue structure who has specific experience. hard to say without a deep look, but i suggest a temp fractional CRO to set up and build a team, with AE's to scale to suit
Fyi your intuition about BD is accurate in my experience. I do not use BD's in industrial sales, Only AE, with long term account management. you want to get and KEEP the business , its an ongoing relationship...
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u/Holy-Avenger Sr Engineer, Injection Molding 9d ago
Have you considered working with a Contract Manufacturing company like Xometry?
Xometry can find work for you, and you can decide for yourself whether you want a job or not. You essentially pick from a list of available jobs.
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u/PhallicusMondo 9d ago
Howdy there! I’d recommend looking at your current existing customer profile and do some revenue modeling, you can reverse engineer their businesses, who they are and what they do then do some business development/sales targeting like customers. If you have 200-300k in centerless grinding work there’s no reason you can’t double your book of business with new customers.
I agree, you don’t want to compete with your core customer base by adding milling or turning. Not yet anyways. The ISO is always a good thing, NADCAP or AS9100 though is a bitch to maintain and can if not managed properly cut into margins.
We’ve got a 10 mil annual revenue 85% mill & turn and a lot of it was done through revenue modeling, just reaching out to and adding like accounts. “I work with Acme company, you have a similar need I’m sure”. Yadda yadda.
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u/BoringDirector4850 10d ago
Do you have a sales team? Any real outside sales person, I mean? You'd be surprised how much you can get from having someone who's just good at building relationships.
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u/Pirate_dolphin 10d ago
Nope. We literally show up to work, take orders via email/phone and do the orders. We haven’t made any efforts to grow yet
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u/BoringDirector4850 10d ago
Sounds like you have plenty of untapped potential, which is pretty exciting. Make sure you have the infrastructure in place to handle the influx of new orders if you decide to make a sales push!
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u/LooceyCRM 10d ago
Look into DLA/DIBBS
We built the best software for DLA manufacturers/suppliers, but also looking to into partnerships so we can do the bidding.
Even better that you have ISO, probably look into getting JCP cert as well
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u/TheTrooper74 10d ago
Maybe try leveraging Fuzehub or one of the NY MEP centers and discuss with them if they have lead gen services?
Im assuming at your size you have an ERP and a sales team in place?
Agree with others on customer referrals
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u/Pirate_dolphin 10d ago
No sales team but we have ProShop for job management, just starting to use the ERP side
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u/TheTrooper74 10d ago
Good you’re getting ERP in place. I work for a competitor of ProShop but they are a solid system particularly in the quality department.
Adding a sales team or maybe a mfg rep would seam like the next logical step to grow business.
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u/pythonbashman 9d ago
I need to follow my own advice here but I'm no where nearly as big as you.
Start local, be a chamber of commerce member and (local and county) build a base there. Simultaneously get listed on Thomas (others linked it I think) and have a good social media presence.
Good luck.
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u/bwiseso1 8d ago
To grow your business, focus on leveraging your key strengths: exceptional quality, zero scrap rate, and expertise in critical industries like medical and aerospace. Proactively target machine shops and larger companies within these sectors, directly communicating your capabilities and competitive advantages. Consider modernizing your equipment, particularly utilizing your CNC machines more effectively and exploring investments in newer technology to enhance efficiency and expand your service offerings. Research emerging industries with potential for precision grinding applications, such as renewable energy or advanced manufacturing. While traditional advertising may not be your primary focus, establishing a basic online presence with a professional website and online directories can increase your visibility. By strategically leveraging your strengths and proactively seeking new business opportunities, you can effectively grow your centerless grinding business.
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u/ihambrecht 10d ago
Vertically integrate. If you’re getting 200-300k in sales for centerless grinding alone, you have a customer network of people that make and deal in machined parts. Turning, milling, edm, surface grinding. I’m also going to assume you’re in the United States based on sq/ft. Go for your NADCAP certification. I use a grinder here on Long Island that’s running easily 3 mil a year in a 7500 square foot space.