Starting a CNC machine shop can be difficult, especially when you consider the price of everything that’s required. Not only are the machines themselves expensive, but finding skilled machinists, engineers, and programmers to operate the facility is costly as well. In the United States right now, there are over 25,000 small CNC shops struggling to make ends meet. And most of them have four employees or less.
But having only a handful of helpers isn’t the only issue. In fact, there are several things that can affect a CNC machine shop’s profitability. For example, an otherwise hardworking crew can fall behind on orders just because they’re not equipped for growth. That’s why it’s important to start with these 10 essential steps:
What factors affect profitability at a small CNC machine shop?
According to the most recent market predictions, the machining industry is set to expand by as much as 3% in the next decade or so. That means smaller machine shops have a real shot at becoming major players on the field.
However, none of those shops will succeed without understanding the factors that affect profitability at a small business like theirs. So, here’s what you need to know:
A. Clients are looking for more automation than ever before. That translates into an increased need for robotics and cutting-edge technologies. Shops without enough advanced techniques will ultimately become obsolete.
B. Multi-axis tooling is pretty much the standard now. Believe it or not, machines that handle only three or four axes at a time are either pointless or used for special projects primarily. Everyone has moved to 5-axis or even 6-axis tooling at this point.
C. You can’t complete certain orders without very specific certifications. So, if you want to expand your horizons to work with the aerospace or automotive industries, you’ll have to get ISO9000 or AS9100 certified.
D. Mixed media machine shops can suffer many setbacks. That’s because your machines and software must be compatible for efficient manufacturing. If you have an old machine with new software or a new machine with old software, there could be problems.
E. Rapid prototyping capabilities help save money in numerous ways. Thus, CNC machine shops without this ability are often trapped by slower lead times and less accurate finished products. RP also helps clients visualize their projects, which results in better sales.
How to make more money as a small CNC machine shop
Keep in mind that most CNC shops start out by completing small projects with consistent quality. They might begin by manufacturing advertising signs, instruments, or furniture. Over time and with smart investing, though, even smaller facilities can move to more complex projects and start serving bigger industries.
In the meantime, here are 5 small ways to make your machine shop big money:
#1. Move away from manual machines.
Upgrade your facility with an automatic and/or multi-axis CNC milling machine for shorter lead times and better cutting precision, especially if you want to work within new sectors.
#2. Offer discounts to local clients.
Help build your business and fortify your community by giving money-saving incentives to nearby companies and consumers. It’s a minor investment with a major return.
#3. Submit bids on government contracts.
If you have the right equipment and certifications, you can get paid to complete important manufacturing projects for the state or Federal government.
#4. Choose a specific manufacturing niche.
Don’t be intimidated by other shops. Confidently define your professional parameters to become more searchable and authoritative in your particular niche.
#5. Send your overflow work to a bigger CNC machine shop.
Stop turning down orders and misquoting customers because your facility isn’t equipped properly. Instead, take the work and send it to an affordable liaison for completion.
DID YOU KNOW: You can also take extra work from a larger facility to help them meet tight deadlines on critical orders, thereby generating more profits for your own shop.
Pro tips for CNC machine shop profitability
Once you gain some momentum, start implementing these professional tactics in your routine:
1. Never purchase raw material cut lengths because they’re more expensive and ask for “Randoms” if you do.
2. Order your cutting tools from reputable US-based vendors to avoid import costs and ensure top-quality performance.
3. Recycle your chips, scraps, and broken or dull carbides to make the materials go even further and save more money.
4. Don’t underestimate the power of good marketing, whether that’s through word-of-mouth or paid advertisements.
5. Get a good CPA to help you handle the increased influx of profits after utilizing these tips, tricks, and techniques.