The Perfect Business Plan: 5 Tips for Making Your Machine Shop Profitable

Based on information from the U.S. Census, there are now more than 25K machine shops with under four employees and thousands of one-person operations across the country. Being able to secure a profit while owning a smaller machine shop is challenging. While this is true, it is not impossible.

A machine shop owner can take an array of steps to ensure their business is profitable and protected. For example, they can apply for machine shop insurance. However, some steps can be taken beyond this, which are highlighted below.

Business plan

Understanding what to do and how to do it ensures a machine shop can achieve profits and growth that help secure ongoing success. While the process of achieving success isn’t easy, it is well worth the time and effort a business owner and employees put into it.

1. Develop New Partnerships

For quite a few new or start-up machine shop owners, the earliest days of running their business can be uncertain. During this time, issues related to client lists, volume expectations, and even floor plans for the actual facility have not yet been resolved. In these situations, calling on existing business connections and current friendships can be invaluable assets that should be used.

Consider asking friends to steer new clients to the machine shop or forming partnerships with local businesses. It can also be as easy as providing advice about business practices. By relying on a business’s existing connections, they can get that initial boost needed to ensure long-term success. Many business owners have also found it is possible to build and grow their network by using industry webinars and events.

2. Target the Right Segment of the Market

It is typically good practice to focus on the particular types of purchasers that are going to buy the products at the highest volume rates. An example of this would be a shop specializing in the production of gear shafts with a diameter that is under five inches. For this business, it is good to establish relationships with the companies and companies that are going to purchase this specific product at a price that is beneficial for the production cycle and the turnover rate the business has.

When a business targets its market niche, it will help them make the very best use of their specialty. Another marketing method is to leverage various innovative or emerging technology, such as social networking, videos, and the internet. Doing this can help to improve the visibility of the shop online and reach even more buyers. Why not share videos that include a tour of the CNC machine shop? This is an affordable way to make the business more appealing to potential customers.

3. Be Open to Using New Technology

While new technological innovations can be expensive regarding training and the initial setup, equipment that has been recently developed can have a positive long-term effect and simplify the production methods or provide the means to accomplish tasks that were considered impractical in the past. New technology may help a business remain competitive, especially if the innovation can gain widespread notice.

It may be wise for a shop owner to lease or finance manufacturing equipment to fulfill current and future orders. This is a challenging decision because future growth is never guaranteed, and purchasing equipment comes with several upfront costs. However, whether you lease, finance, or purchase new machinery, you will improve cycle times and increase production capacity. Additionally, you can consider equipment leaseback programs. These are an excellent way to infuse any business with capital and can be a solution to acquire the liquidity needed to expand. This, in turn, is going to create many new opportunities for the business. A business owner needs to weigh the rewards versus the risks and then communicate efforts to the team as required.

If it is not possible to invest in new machinery, it is good to see if updating or modifying the existing equipment is possible. Usually, this is an approach that will require a lower investment than buying new equipment outright. However, it will still help to improve cycle speeds and production capacity.

4. React to the Competition

Knowing who the machine shop’s main competitors are is invaluable in most situations. This is especially true when it comes to times of economic volatility. For example, there are situations where market fluctuations can result in a slowdown of commercial manufacturing and leave military production unchanged (the opposite is true, too). In this situation, competitors on one side of the spectrum might bring their operating standards to the other, forcing companies to speed up their production rates or reduce their prices to help maintain market share.

5. Initiate Scalable Growth

In some situations, successful business growth does not depend on the size of the products that are being manufactured. Instead, it is related to the depth of the actual fabrication process. It is often beneficial to evaluate the products or services provided to customers to see if it is possible to expand them. For example, if a company is now producing steel tubing for buyers, see if it is possible to offer them fasteners that are used for joining those materials, too. By securing more significant contracts based on current relationships, a machine shop can ensure a scalable and secure growth method.

Increasing Sales at a Small Machine Shop

It is now time for machine shop owners to do everything they can to begin managing and maximizing their growth. While this may seem daunting at first, there is some good news. Regardless of how small the company is, forming partnerships with industrial marketing experts can help any business grow using customized marketing solutions that fit how the business owner and customers do business.

When it is time to grow, several factors must be considered. Being informed, knowing the steps to take, and ensuring growth are things that any machine shop owner can do, but it will require time and effort. Using the tips here is a good starting point, but do not stop here. If continued growth efforts are not made, the growth and success a business achieves may become stagnant, which may result in devastating losses and the eventual closure of the business.

About Carson Derrow

My name is Carson Derrow I'm an entrepreneur, professional blogger, and marketer from Arkansas. I've been writing for startups and small businesses since 2012. I share the latest business news, tools, resources, and marketing tips to help startups and small businesses to grow their business.

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