6 Common Mistakes That Job Shops Make

For more than 120 years, Thomas has created trusting relationships with thousands of successful job shop owners from coast to coast. Job shops across America form the backbone of the country’s economy. Unfortunately, even though they may have the right skills, equipment, and people, it’s not rare to see a job shop fail. 

In this blog post, we'll review the common mistakes job shops make and some anecdotal insights directly from job shop owners and managers.

Worker in shop

1. Going Deep Into Debt On New Machines

The temptation to use financing to fill the floor with shiny new equipment has been the downfall of many job shops. Whether a single opportunity to bid on a new type of work has come along, or there's a plan (or hope) that a new machine will attract new customers, many business owners simply take the new equipment plunge and the long-term debt that comes with it without fully considering the financial risk. Unfortunately, the debt they take on is only sustainable if everything in their shop, their customer base, their business and marketing plans, and the economy, goes perfectly. How often does that happen?

Here’s some of the advice we’ve heard from job shop owners regarding adding new machines:

  • “If your business isn’t as pro table as you’d like, it’s not necessarily going to change with that new machine. Reassess your existing processes and capabilities, address the obstacles and opportunities you find, and think about holding off on new equipment until your present capacity is maxed out.”
  • “Most of us came up as machinists and know our equipment inside and out. But if that’s not your background, make sure you know everything your existing machines can do. A dealer may tell you a machine is only capable of one type of job when in fact it can handle many different jobs. His goal is to sell you another machine. You may already own the capability to expand the services you offer.”
  • “Pay cash if it’s at all possible. It hurts sometimes but you’re on much more solid ground when you own your inventory. There’s no better sleep aid than being debt-free.”

2. Being The Bank For Customers

Many job shops try to do almost everything right. They deliver a quality product at a good price, on time, along with the invoice. But other job shops make the common mistake of extending payment terms. Other job shops extend payment terms more than once and the customer all too often takes advantage of it. 

And while that customer takes its sweet time to pay, the job shop owner still has to come up with the money for payroll, overhead, financing costs and all the other expenses of running a business. If you extend those delayed accounts receivables across the entire customer base, it’s a precarious position to be in — one or two big unexpected expenses can sink the business.

Here’s what some of our customers have to say about handling payment terms:

  • “Too many shops are afraid to ask for some payment upfront. Your customer is running a business too. Tightening up your receivables is critical — it eliminates a ton of risk.”
  • “We’ve required payment upon delivery for a few years now, although we were even burned on that once when the customer had found someone to make the parts 6 cents cheaper, and refused delivery.”
  • “Depending on the customer and how long we’ve known them, we specify a 25 or 50 percent payment at the start of the job, with the balance on delivery. That way we both have a vested interest in the job getting done as soon as possible.”

Dive Deeper: 3 Financial Risks In The Manufacturing Industry

 

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3. Neglecting Your Savings

Many shop owners have fallen into the trap of thinking the boom times are the norm. Spending goes up on things that don’t benefit the business, not-quite necessary equipment starts showing up on the shop floor, and operations and processes become less than streamlined. But if you’ve been around long enough, you know how easily things can change. You lose major customer, a critical piece of equipment fails, a key employee resigns — so many things beyond your control can negatively impact your business.

Job shop owners have talked with us about nurturing their nest egg:

  • “Stay on top of unessential spending and staff right so excessive overtime isn’t required. Plan and stick to an operational budget so you can buy in bulk and negotiate discounts. It’s easy to slack off on these things when you’re running at capacity, but that’s the time to keep the belt tight and put those savings into your shop’s ‘rainy day’ fund.”
  • “The temptation to draw more money out of the business when it’s booming never goes away. It’s not necessarily a bad thing – you’ve earned that money. But sometimes it can be a long-term mistake for a short-term reward.”
  • “When things are going gangbusters I pour dollars into the business’s cash fund. During normal times I’m more modest about what I put in there but I don’t stop. The result is that during lean times, I haven’t had to lay people off and they’ve gotten full weeks and paychecks doing projects around the shop before the work picked up again.”

4. Being Too Reliant On One Industry

It’s great to have a niche in a particular industry when that sector is humming along. But history has shown that pretty much every industry is cyclical at best, or impermanent at worst. Countless factors can disrupt the good times — the economy, new regulations, offshoring, or consumer demands. The U.S. manufacturing landscape is littered with the ghosts of job shops that failed because they were over-reliant on an industry that went into decline.

Success Story: How Thomas Prevented One Business From Going Out Of Business

We’ve heard a lot about customer diversification from many of the job shops we serve:

  • “We have a good number of customers in the automotive industry. While I’m not inclined to turn away work, I do try to make sure that 30-40% of our customer base represents non-automotive-related work at any given time.”
  • “Breaking into a new industry is not easy — those customers typically want to see work you’ve done for companies like theirs. We landed new customers in the aerospace industry by being persistent and attaining ITAR certification.”
  • “We made a business decision that the latent risk involved with serving only one type of customer outweighs the benefits of ‘specializing’ in that market. We gear our sales and marketing efforts towards maintaining a diverse customer base.”

 

Hidden Markets-New Industries 2

 

5. Not Figuring Out Your “Better Than”

Another phrase for the “better than” is called the “unique selling proposition.” It’s the special sauce that sets one company apart from the competition. When nothing about your job shop stands out as better than the others, it’s a commodity that can only compete on price.

Here’s an example of some “better thans” that work for the job shops we serve:

  • “Zero defects, guaranteed, thanks to our proprietary monitoring equipment.”
  • “The only ISO 9001:2008 certified supplier in the tri-county area able to vapor polish parts over 24” in diameter.”
  • “We’re the only machine shop in the state to receive HP’s Excellence Award for exceeding their on-time standards.”

Communicate what sets you apart from competitors through everything you do. When you place certification logos on your website, publish blog posts highlighting your awards, and create videos that showcase your shop floor — prospects are more likely to do business with you. Learn what else buyers are evaluating you on in our eBook, How To Make It On The Industrial Buyer's Shortlist

6. Cutting Marketing Budget Rather Than Demanding ROI

When the customer base shrinks and the capital isn’t coming in, a job shop’s marketing budget (if there was even a budget to begin with) is often the first casualty. As counter-intuitive as this might seem, it happens every day simply because many shop owners are unsure whether or not their marketing is working. This decision all too often just accelerates the business’s failures. A common mistake is relying solely on word of mouth, referrals and increased business from existing customers.

Job shops that promote themselves effectively on the Thomas Network see a measurable return on investment (ROI), and a tangible impact on their business goals. We know this because they tell us so:

  • “Thomasnet.com simply delivers the purest industrial audience on the internet, and being there has helped us connect with new customers in new industries. Our program pays for itself and more.” — Pete Elzer, President, Apex Plastic
  • “I don’t have a sales team on the street. I have Thomasnet.com. It’s an efficient way of getting qualified leads, and my program pays for itself every year.” — Jim Holland, President, Moore Addison
  • “About half of our new custom work comes from Thomasnet.com leads. We could not have competed for — and won — all the new business we have without our strategic Thomasnet.com program.” — Alli Cravens, Sales and Marketing, Granger Plastics
  • “Qualified leads are coming to us now, and since prospects can easily search our capabilities and qualifications, those who contact us are more inclined to do business with us.” — Bill Boyer, CEO, Boyer Machine & Tool Co., Inc.
  • “We are extremely pleased with the activity generated by our Thomasnet.com program. New RFQs come in so often we have trouble keeping up. Even more astonishing is the quality of the leads and the number of new customers we have converted.” — Norman Rodriques, President, Springfield Spring Corporation 
  • “As a small machine shop, it’s critical that every marketing dollar I spend attracts the right kind of customers — those that I actually want to do business with. My Thomasnet.com program paid for itself within the first 3 months.” — Richard Barnard, President, Eaglestone Technology, Inc.

Thousands of manufacturers have partnered with Thomas to help them eliminate risk and rectify their common mistakes to help them grow — read more of their stories here.

Need more proof on why you should advertise on Thomasnet.com? There are online advertising solutions available for every budget, for every job shop need. And buyers are looking for your services and products right now. Request a custom In-Market Buyer Report today to show you the names and locations of companies that are looking specifically for suppliers who do exactly what you do, where you do it.

For additional resources for manufacturing companies looking to grow their business, see the below links:

In Market Buyer Report

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