Machine Shops – How to Make the Small Shop Profitable

According to the China cnc machining Census there are over 25,000 machine shops with less than 4 employees, not counting thousands of 1-man operations scattered across the country. Making a profit while owning a small machine shop can be tough in these economically depressed times. Here are some tips on making a profit.

Hire family or close friends and classify them as officers not employees. This will help with insurance charges. Check with your insurance agent and state for particular requirements.

Down size – Do you really need that 10,000 sf building? If possible run out of your shed, garage or barn. If not many self-storage facilities now offer storefronts.

Upgrade to CNC Milling – If you have all manual machines consider upgrading to a CNC.

Offer reduced rate services to local manufacturers. Locale manufacturers will have contracted large shops many miles away to machine their product. There are times when they need to rework, modify or make changes on the fly. They will turn to the closest, cheapest ship in the area.

Offer reduced rate services to local Hobby Clubs – Many hobby clubs including RC Model Clubs, Model Building Clubs, and Engineering Clubs require prototypes and custom parts and accessories built. Offering a group discount hourly rate to these clubs will insure all machining requirements come to your shop.

Quote on government work – The United States Government is the largest spending customer in the world for goods and services. There are hundreds of machining opportunities everyday.

Overflow Work – Find the largest shops in town and offer overflow work. Many large machine shops love working with small shops, the reason is they can instantly expand their workforce and machining capability at a lower rate then there own. This assists them in their tight deadline critical projects.

Raw Material – Group orders together as much as possible. Never order cut lengths instead of full lengths. Full lengths of material are always cheaper then cut pieces. If small pieces are absolutely necessary ask your vendor to quote you “Randoms” These are the pieces that are left over from a previous cut order and are usually offered at a substantial discount.

Cutting tools – never order the made in china cutting tools. A $25.00 Made in USA end mill will out perform the $10.00 Import any day of the week. Expect to go through 3 import Endmills to every one domestic end mill. This will add to your cutting tool overhead, lower your per piece volume and add to tool change cycle times. Also don’t be afraid to shop around for your cutting tools. Many tool vendors are in the same boat you are in and will sell you tools at a very low mark up. If at all possible talk to someone at your vendors inside sales department. Many tools can be offered at great quantity discounts if you pool your order and just ask for a discount.

Recycle your chips – Scrap your Stainless and Aluminum chips. Also don’t forget your broken and dull carbides.

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