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Starting a Machine Shop? Here are 5 Tips to Help You Succeed

Do you love making things with metal? Do you thrive amid the sights, sounds, and smells of a modern-day machine shop?

Maybe it’s time to transform your passion into a business.

Assuming you have some solid experience in machining, setting up your own machine shop can be a great adventure. It’s a chance to showcase your skills—and put them to the test. Instead of just doing what you’re told, you can take control of your professional destiny. Create a lasting legacy with your life’s work. And if all goes well, turn a solid profit that supports a family.

But of course, as with any business, starting your own machine shop comes with plenty of risks and challenges. For inspiration, here are five tips to help you succeed.

1. Find Your Niche Industry

A little soul-searching is always healthy.

Take the time to bring some focus to your new machine shop business. Look for a niche at the intersection of your capabilities and interests and a market with strong, underserved demand.

For example, you could specialize in custom motorcycle parts.

You’ll have fewer but better prospects. And a lot less competition. These customers may be willing to pay more for your quality work, and they’ll have fewer choices to consider.

One caveat: Make sure you choose a niche that isn’t too narrow. Review your niche strategy regularly to ensure it remains viable (and you’re still happy with it).

2. Running a Business Comes First

You’re starting a machine shop because you love machining. You probably aren’t embarking on the journey because you like writing business plans, balancing books, sorting through tax issues, applying for permits, etc.

But you can’t have a business without all that business!

You will need to familiarize yourself with all it takes to run your shop above board. Nowadays, digital tools make many aspects of business management easier. Ask other business owners you trust about the tools and processes they use.

As your business grows, you may be able to delegate or outsource some of these functions and focus on the work that makes you happy.

One way or the other, you still need to take care of business.

3. Assess Every Contract and Turn Down the Ones That Don’t Fit

Many anxious new business owners are tempted to take on every job that comes their way. It’s understandable; you want and need the work.

But chasing and saying yes to everything isn’t a sustainable strategy.

A lot of the jobs you win with an anything-goes approach won’t be the best fit with your skills and knowledge. Nor will it be the most profitable based on the equipment you have in your shop. Or worse, you might go out and buy specialized equipment to do the work, after which those machines will just sit there eating up space and your budget. Before long, you’ll find you’re overworked, overwhelmed, and unhappy.

It’s OK to say no if a job doesn’t make sense.

As we mentioned in point #1, staying true to your niche will be much more satisfying and profitable in the long term.

4. Implement Processes and Maintain Good Quality Control

You know how crucial precision is to success in machining. Don’t overlook how difficult maintaining this precision can be as you scale up your machine shop’s business operations.

Now is the time to establish robust practices for:

  • Quality control – Set and keep to calibration schedules, inspection and measurement practices, and documentation and record keeping every step of the way.
  • Inventory management – Assuming you don’t have unlimited space and money, you need processes to help track inventory, minimize excess, and avoid shortages.
  • Process optimization – Ensure consistency and efficiency by developing clear and detailed standard operating procedures (SOPs) for each manufacturing process.
  • Customer relationship management (CRM) – How will you communicate with customers, understand their needs, keep their orders on track, and keep them coming back? A good CRM is essential.
  • Financial management – Ultimately, your balance sheet will make or break your business. Every machine shop needs accurate estimating, optimized pricing strategies, and accounting systems.
  • Human resources – If you take on employees, you’ll need recruitment, training, and retention programs. You’ll also need to ensure safety compliance to protect your people and minimize risks.

5. Choose Your Equipment and Tooling Wisely

One of the key reasons to think through the points above is to avoid mistakes in equipment investments for your shop.

Machining tools are expensive—especially the latest, greatest, highest-performance stuff. It pays to be sure what you really need.

Run a careful cost/benefit analysis on every potential purchase. Going right to a state-of-the-art new machine may not be the smartest move if a high-quality used model is half the cost.

Whatever you choose, most of the heavy-duty equipment you acquire will run on 3-phase electricity. So another important decision will be how to power these machines.

A rotary three-phase converter may be a great solution—and American Rotary makes some of the most reliable, efficient 3-phase power converters available. Our USA-made phase converters produce balanced 3-phase power to keep your whole shop running (including your single-phase equipment, too).

Need help sizing a converter? Contact us anytime. In any case, good luck building your machine shop business!