Written By: Paul Van Metre
Without winning a job in the first place, you have no opportunity to make a profit on it. So getting a new RFQ quoted quickly and getting a price and lead time back to your customer is essential. But it’s also really important to know that the price you quote is both a “correct” market price and will also provide you with enough margin to make a profit.
The key to getting that “correct” price is an accurate estimate of cost, with the appropriate margin added on top. But many shop owners don’t do this essential step. Rather they “wing it”, shoot high, and just get that RFQ quoted, especially in busy seasons. It’s not uncommon at all for a shop owner to tell us this is the way they quote a new RFQ:
Admittedly, it’s fast to come up with a price and lead time like that, but it’s highly risky and makes it more likely that the job will be a loser, late, or both. It’s so easy to overlook a very expensive detail that’ll guarantee a loss.
Manufacturers work too hard to lose money on jobs, and the reality is that preparing detailed quotes doesn’t have to be a burden. So why would you choose to play it fast and loose like that and risk losing money on the job?
Avoid the Pitfalls
It sucks to lose money on jobs. This underscores the importance of having a robust digital process embedded in something like a manufacturing ERP system. (Please excuse the shameless plug for ProShop). Knowing which pitfalls to avoid also goes a long way. Here’s a few things to keep in mind:
A system that guides you.
ProShop’s estimating process guides you through three easy steps to ensure that you don’t miss the little details that can derail your profitability.
What are we quoting, and who are we quoting it for? Let's jot down the part number, part name, revision, client, etc. Usually, most of this info can be found in the title block of the part drawing. This makes the estimate record easily identifiable in the future and ensures that we are indeed quoting the correct revision. That Part Number based estimating/quoting history will be permanently tied to any Work Orders, along with the actual job costing. This makes it very fast and easy to get a complete picture of any part.
How will that component or assembly be made? Write out the ACTUAL routing steps required to successfully complete the job. This would include planning steps, programming, raw stock prep, machine operations, outside processing, final inspection, shipping, and invoicing just to name a few.
ProShop makes this easy by allowing you to create custom estimating templates for YOUR typical manufacturing processes. In this case, just plug in your set-up and cycle times, and you’re off to the races! You can update the specifics of a part, in literally seconds or minutes.
Based on the quantity (or quantities) that you are quoting, what are your out-of-pocket costs? This might include items such as:
What kind of markup percentage do you want to place on those costs? Depending on the quantity being quoted, what percentage scrap rate do you want to account for in the event that you produce some bad parts? Those defaults can again be included in your templates so you don’t forget them.
After you’ve determined your part, process, and costs, you need to determine the margin that will maximize your profit, while still winning the job. Consider what the different price breaks might be so you’re competitive across the quantity range. ProShop allows you to adjust pricing on individual quantities whether you’re quoting 1, 5, 10, or volumes of 1,000 to 10,000. That granular control allows you to sharpen your pencil where needed maximize the profit/volume equation.
How we’ve simplified things:
Being detailed and thorough shouldn’t equate to taking a long time. ProShop’s estimating tools allow you to create detailed estimates in minutes by leveraging a rapid estimating template system. You can customize and select pricing options for nearly anything you can think of:
This allows you to create better quality quotes in less time, resulting in higher overall job profitability. When RFQs are being quickly responded to, it can have a tremendous impact on your win rates. Don’t just take our word for it:
- Jim Carr - President, CARR MACHINE & TOOL
- Kevin Richards - Co-Owner, JJR Engineering & Fabrication
Set The Team Up for Success:
When you quote from the hip and just throw out a price, one of the major downsides is that you need to reverse engineer your process if you do win the job. Trying to figure out your time budget for each operation, what you can pay for tooling, material, outside processes, etc. It can lead to a ton of work and is very error prone. It’ll likely be a messy, home-cooked meal every time.
ProShop’s novel approach to incorporating the estimating process as the foundation of the production workflow, leverages your quoting process for efficiency down the line. In pulling estimating information forward to order entry and the digital work order, ProShop eliminates the need to enter manufacturing data more than once. It’ll set you up for success with planning, scheduling, outside processes, and much more. Further to that, the ability to build out complex BOMs for assemblies to manage both commercial and manufactured sub-component costs is a game changer. Once awarded, those same BOMs can be used to allocate inventoried goods and drive procurement for purchased items.
So if getting more thorough, accurate estimates done in ½ to ⅓ of the time would help your shop win more, get in touch today to learn more about how ProShop ERP can be used to revolutionize your quoting process, and so much more!
When’s the last time you saw a successful manufacturing leader who was always stressed out, overwhelmed, and confused about what to do next? You probably haven’t. Successful people don’t allow themselves to be confused. They choose clarity above all else.
Manufacturing team members often balance a multitude of competing priorities. So much so that it feels nearly impossible to make meaningful progress on any one project. Feeling defeated by a lack of headway despite best efforts can certainly wear people down. Being pulled in several directions at one time has its limitations. One major limitation is a loss of focus and clarity.
Maximizing productivity in a manufacturing environment relies on the ability to focus on the right stuff. Focus can’t be achieved when you are being bombarded with new information or pulled in too many directions. This can be a tough cycle to break unless you have the right systems in place to manage it.
Unfortunately, while most of us can usually visualize the right path forward, it’s all too easy to become lost in a sea of distractions. Sometimes we might even choose to be distracted. But why?
Human beings default toward self-preservation and the avoidance of conflict. Sometimes the next right step might involve something difficult or risky. Perhaps in taking the next step, we risk offending a colleague or creating conflict. Maybe we’re worried about what people might think about us if we do the right thing. Despite what wisdom we have, we either make a bad decision or no decision at all. Though, per the 1980 hit song by the band Rush:
“If you choose not to decide, you still have made a choice!”
Sometimes the increased demand for our time and attention keeps us permanently distracted from moving forward on the important stuff. Other times, we might choose distraction due to personal pride, avoidance of conflict, or fear of the physical and financial consequences.
Are you allowing yourself to operate in a fog? Allowing yourself to be distracted by the small stuff won’t move the business forward. Whether it's a hiring decision, a firing decision, a bold new initiative, or a new revenue goal, it all starts with taking the right first step. Have a disposition to take action. Doing so is a game changer. Progress is always met with resistance, and while I have no supporting evidence to prove it, I'm convinced that this is magnified in a machine shop environment more so than anywhere else. Here are some tips to keep you focused:
How Does ProShop Help?
What could you accomplish in the next 3 months if you had less distractions and more focus? ProShop ERP allows you to define detailed processes, plan and execute on complex workflows, handle specific job training, and provides visibility on which tasks to work on next, eliminating confusion and distractions. Specific information placed at each step of the manufacturing process keeps jobs moving towards completion. Defining specific customer requirements such shipping and QC preferences and having that information flow automatically to each work order means that specific customer requirements are being met with each job. If you’d like to understand how ProShop can provide clarity on your most important goals, get in touch today! We’d love to hear from you.
Written by: Paul Van Metre
I am very fortunate to have visited and toured hundreds of machine shops in my life. I never thought as a kid that machine shops would hold such a deep, meaningful place in my heart! But I’ve come to realize that they are the bedrock of our world economy. Nothing physical in the modern world could exist without machine shops. Please send me a comment if you don’t agree, and let’s have a healthy debate!!
In my hundreds of shop tours, there is one common theme that rises above all else. The most successful shops are the most process driven! Hands down, this is the most common theme I see. There are many other common truths, like the industries they serve, how strong their culture is, and how diverse their customer base is…but to be honest, all of those things can be heavily influenced by process. Process-based thinking is the linchpin to a successful business!
I just finished up a trip to Australia and got to visit 8 clients here. They are all very successful shops, but the ones that are clearly thriving the most are also the most process-driven. It could be that there is only a correlation, but my money is on causality. It holds true for the vast majority of the most successful companies I’ve had the honor to visit.
Great employees come to work with drive and a growth mindset. They are eager to do well and work towards the company mission. But they aren’t mind readers, and they need direction and guidance from the leadership of the company about what and how to do it. That guidance comes in the form of business processes, among other things. Here are a few key reasons why business processes are so essential to a successful business:
The companies I’ve visited that had the least amount of process invariably had a lot more chaos, higher employee turnover, lower business performance (delivery, quality, profit, etc.), and just a lot more stress. It’s immediately apparent once you’ve seen so many shops, and you can build a database in your head of the common traits of great shops! The shops with less success are the shops that shoot from the hip and reject standardized processes. They just want to” get ‘er dun” and think that going quick is the fastest and best way to run a business. I’m here to tell you that’s categorically not the case. But don’t get me wrong, the most successful shops are very action-oriented, make decisions quickly, and execute like nobody else. They just do it around a standard set of business processes to guide their actions.
So if your shop is struggling to find success, consider my advice here. Focus on building efficient business processes in your company! I offer it freely with the goal of helping lift up the machine shop industry because it’s so important to have a strong manufacturing economy in our world. Nothing else compares with helping to ensure that creating significant value out of raw materials can lead to lots of jobs and prosperity in the areas that we all live in.
How Can ProShop Help?
At its core, ProShop is nothing more than a set of really efficient software-driven business processes designed for precision manufacturing. Each process flows smoothly into the others and is taken in aggregate, and they create a highly efficient set of best practices that have been proven hundreds of times to be very effective and highly profitable. I’ve even had long-term clients tell me that at the start, they pushed back on our process and tried to mold the workflows to their own way of wanting to do things. But they've learned over the years that the more they buy into our method of running a shop, the more success they have in their business. And that success fuels growth, value, and jobs. It’s exactly what our mission statement is and why we’re convinced it’s so important to the world.
We deliver powerful manufacturing software by deeply understanding our clients’ challenges in order to meaningfully improve their businesses, and in turn, their communities.
We’d love to talk with you if you need help building proven processes to help drive your success.
Written by: Paul Van Metre
If you don’t make the time to plan, you’re essentially planning to fail. There’s a better way.
Proactive shop owners understand that doing it all themselves will only go so far. If you’re going to achieve your goals for growth, you must have a plan for how to organize and scale your team into one that is both effective and unified. A well-crafted org chart serves as the basis for that plan. Shop owners who are committed to making 2023 their best year yet shouldn’t overlook this valuable tool.
As workload and revenue increase, a wave of adaptation flows across the entire business to meet this increased demand. Put simply, It can be hectic to manage. This is especially true when you’re wearing many hats. How can you stack the deck in your favor so those changes don’t cause a chaotic mess? Org charts can help with that.
As someone who wears many hats, pretend that you’re a different person in each of those roles, and give each role a box on the org chart. Define the requirements, responsibilities, and hourly rate for each one. Doing so will provide a clear picture of which roles you’ll need to hire for as you grow. When you hire employees to fulfill the more basic tasks, you’ll have the capacity to focus on the business-building tasks only you can do! Those might be worth $100/hr+ to the business. Mapping out your company structure in an org chart eliminates the confusion, and you’ll know which hiring decision to make next.
With that in mind, let's walk through some of the top problems an org chart can solve:
Where to start.
If you are considering this for the first time and don’t know where to begin, here are a few tips to keep in mind:
Use org charts to map out your future success.
Do you have an ambitious plan to grow your machine shop over the next several years? Awesome! Leverage the power of org charts to map that out. If you have a goal for increased revenue over the next 3 years, perhaps the timeline would look like this:
Leveraging org charts to map out future growth in a visual way will give you the needed clarity to make decisions that support your growth plans.
Ready, Set, Go!
A well-crafted org chart can have a massive impact on your business’s success. When you define the specific roles and responsibilities for the different departments within your business, you gain the needed clarity to make hiring decisions, delegate tasks, and take the right next step. Proactively leveraging these tools to plot a trajectory for growth and success can be a key differentiator that puts you ahead of the competition. When you fail to plan, you almost certainly plan to fail. Embrace the power of org charts as you place the right people in the right seats of your machine shop business. In doing so, you’ll be sure to make this your best year yet!
How ProShop can help
ProShop’s built-in Org Chart functionality makes defining the organizational structure of your business a breeze. Not only will your team have clarity regarding their role and the accountability structure, but you’ll be able to link each unique role with its respective training requirements, making new employee onboarding a breeze. Training progress is easily recorded and monitored to ensure compliance with company policies and procedures. Get in touch and find out how ProShop can take your business to the next level. We’d love to hear from you!
The finite nature of life provides us with the motivation to find meaning in how we live it out, so that our personal story is meaningful. All stories have a beginning, a middle, and an end and that applies to your story as a machine shop owner, too. How do we ensure that your story has a happy ending? That’s been the focus of this blog series.
When the story began, everything was new and exciting. Perhaps you started a shop from scratch or took over the reins from someone else. In either case, you likely spent the first part of your journey keeping your head above water as you found a rhythm for how you thought things should operate. Eventually you hit a ceiling on your growth and found yourself at a fork in the road. It was this time of pause where you first realized that this story would eventually come to an end.
In the middle of the story, you moved beyond the fork in the road and defined what a successful endgame would look like. From there, you cast a vision for success with goals that are specific and measurable. You took that vision and reverse engineered the steps to successfully achieving it. Only then did you know what needed to be accomplished on a yearly basis in order to reach the destination. From this point you shared the vision with the team, deputized them to help you accomplish it, and installed an operating system whereby your hard-earned methodology for business success is now able to be taught to and learned by someone else.
Now we arrive at the end of the story. How do you know if you’ve gotten there, or if you’ve been successful in executing the plan? If your goals weren’t specific enough, it’d be hard to know. Vague goals are elusive and confusing. They often are never accomplished because there’s never any urgency to accomplishing them.
To illustrate this point, consider this scenario which involves a shop owner who is five years away from retirement. The shop owner wants to retain ownership of the business and hire someone to run it on their behalf. Here are two approaches to goal setting for that particular endgame:
Scenario 1: Vague Goal Setting (Low likelihood of success)
“I need to hire someone to operate my business before I retire”
Scenario 2: Specific Goal Setting (High likelihood of success)
“In order to retire in 60 months, I need to:
Do you see the difference?
As previously discussed, one shop owner's end game might look different from the next. Perhaps your goal is to simply step back from operations and focus on the strategic work of building the business. Alternatively, you might be ready to depart from the business entirely to focus on your family and your hobbies. Your endgame might include the sale of the business to a key employee, family member, or perhaps someone new. In any event, the importance of leaving the business in a good position can’t be overstated. Not only are businesses worth the most when they are running well, but your team deserves a good continuity plan.
In last week’s installment of the blog, we discussed the importance of developing and installing an operating system whereby the business can be learned and operated by someone else. In this week’s installment, we’ll discuss the indicators which communicate that things are going well and that you’ll be able to make your exit as planned.
Long term goals are being achieved. You’ve done a great job at casting a long term vision for business success and have broken it down into measurable, specific, and achievable goals. Those goals have been documented and shared with the team. Team members have been empowered to execute on the goals and push the business forward with gusto. As a result, amazing things are happening in your business without additional input from you!
You aren’t a part of new processes. Your goal in approaching your exit is to reduce and ultimately eliminate your involvement in daily operations. As I’ve said before, if your name is part of the process, then it needs to be revised and delegated to someone else. When you notice this happening organically as a result of a well-installed operating system, you’ll know that you’re on track for a successful exit.
People are being hired, nurtured, and managed effectively. You’ve got the right people in the right seats. You’ve established a great company culture and you’re seeing those values be lived out on a daily basis. Team members have clear expectations and are properly equipped to thrive in their roles. You’re seeing the results on the bottom line. Managers are providing regular feedback so that everybody is focused on the right tasks.
KPI’s and Measurables are Looking Good. Not only is data being regularly recorded and analyzed, but the indicators are looking great! You’ve worked hard with your leadership team to get to this point. When you notice poor performance, the team is able to react quickly to overcome the issue without requiring your help.
There’s a new Sheriff in town. This one will look different depending on how you make your exit. The key point is that someone else will be taking over. Your goal might be to remain tangentially involved, or to walk out the door for good. The important thing is that you’ve communicated this to the team and have shown care to leave them in good hands once that takes place. This might be the hardest step of all.
Some stories live on and on.
As I often point out, machine shops might be the hardest kind of business to run, but also one of the most rewarding. As the protagonist of your own story, perhaps you feel like the underdog who is constantly inundated with new obstacles to overcome on the path to success. Despite the odds being against you in this high stakes game, you’re still here.
If you take away only one thing from this series, I hope it’s this:
Not everyone has been born into a meaningful legacy, but you do have the opportunity to leave one behind. As you live out a meaningful story as a machine shop owner and operator, you invite others to do the same. Those who follow you can build on your example and make it better because you’ve done the legwork. Perhaps you already have a strong end game in place or maybe you’re considering this for the first time. There will be hard days along the path to getting there, but success is yours to make.
Go for it, I’m rooting for you.