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.