Consider the costs of growth

Author Cutting Tool Engineering
Published
December 18,2018 - 10:00am

Expansion, acquisitions, upgrades. The sounds of a growing business are certainly appealing and something most shops strive to attain. The thought of your shop becoming a powerhouse manufacturing enterprise sounds great, but along the path will be a minefield of obstacles and unexpected costs that any manager or owner should be ready to control.

Obviously, an investment should yield a return. Without a profit to show for your efforts, there isn’t a good reason to go through the motions. If, however, you have the stamina to wade through the hazards of growth, the fruits of your labor can be sweet.

Any growing machine shop will normally invest in new equipment, particularly CNC machine tools. The first hidden cost in equipment acquisitions is the time you spend to shop around and meet with dealers. With so many brands and options, this can become time-consuming and overwhelming.

Attending trade shows for a concentrated shopping experience can be effective, or you may require numerous meetings at your office. However the process is accomplished, think of questions, concerns and needs ahead of time, compose lists, and make dealers use your time efficiently.

While a sales presentation may increase your excitement level, get clarification—in writing—on any previously overlooked requirements, including power and wiring, software, networks and cabling, additional insurance, employee training, metalworking fluids, and freight and rigging costs. When these are factored into the total cost, you may have to adjust your plan.

What about facility improvements? The thought of a clean, lean machine shop is appealing, but it is not without its share of hidden obstacles and expenses. Adding to an existing facility or constructing a place can be a great investment and take your shop to the next level. It can also bust your initial budget.

Materials, utilities and labor are becoming more expensive. Really, everything costs more, including building insurance policies, city and county permits, compliance with the Occupational Safety and Health Administration, security and related services, and communications equipment.

Also, don’t hesitate to contact your local chamber of commerce or economic development board and inquire about potential tax abatements or grants. After all, you’re adding jobs and increasing the tax base. The worst that an agency can say is no. If you are declined, check availability outside your city jurisdiction. There are numerous tactics, so use them.

Insurance, regulation, taxes, freight, training and all manner of hidden costs will eventually end up in your lap and add to the risk factors when growth is part of your plan. Don’t be caught by surprise. If you succeed, one of America’s best machine shops could have your name on it.

As we close out another year, I appreciate your readership, comments and emails and look forward to an exciting 2019. Happy holidays to you and your family.   

 

Related Glossary Terms

  • computer numerical control ( CNC)

    computer numerical control ( CNC)

    Microprocessor-based controller dedicated to a machine tool that permits the creation or modification of parts. Programmed numerical control activates the machine’s servos and spindle drives and controls the various machining operations. See DNC, direct numerical control; NC, numerical control.

  • metalworking

    metalworking

    Any manufacturing process in which metal is processed or machined such that the workpiece is given a new shape. Broadly defined, the term includes processes such as design and layout, heat-treating, material handling and inspection.