With a few like-minded friends at work - we have been tossing around the idea of starting our own shop.

Getting a few new cnc machines looks like it's within reach (without TOO much trouble), but of course, once we start calculating in overhead (rental/electric etc) and odds'n'ends (tooling/toolholders/vises/inspection etc), it sure seems to be an UNGODLY amount of money.

So I've been thinking about somehow leasing the space from my current boss.

Currently we have a permanent bottleneck in the mill department, which seems obvious is because we don't have enough mills. My boss would like to get a new mill, but (you knew the answer already, right?) "just doesn't have the money right now". We JUST bought a new lathe, anyway.

I was thinking of possibly being subcontracted by him for doing jobs in MY machine in HIS shop, charging him a "dirt-cheap" rate. Soon he would see how much more money the machine would make him (fewer bottlenecks), and then hire more hours from me, and so on.

I could pay off the machine with a scant 4 - 6 hours a week (!), any more hours worked would just be an earlier payoff. Meanwhile I would get to use the shop's building / electric / vises / tools and so on.

Once I pay the machine off, it will be much easier to start a shop, and buy all of that supporting stuff.

My boss had already done something similar to this in the past, I think that he'd be open to it now. It's a relatively small shop, so it may be a bit more legally accessible than some larger shops would be.

Is this feasible or just insane? Just a pipe dream?

Any advise? Has anyone else tried this? What pitfalls may be ahead (for me, or for my boss?)?

....Is this feasible or just insane? Just a pipe dream?....

Hoo boy.

I have a bit of a reputation for being negative; I look at things and try to figure out why they might not work.

Let us say 'your' machine is being run by another employee and this person crashes it. Who is responsible for repairing the machine.

Let us say that for some reason 'your' machine malfunctions, a Parameter is wrong, an encoder is reading wrong, whatever, and the machine turns out a whole bunch of junk parts. Who covers the cost of re-doing the order?


EDIT: 'sued'? It doesn't look correct b ut I can't think of anything different.
Even worse; let us say your machine malfunctions and somehow contrives to chop somebody's hand off. Who gets sued?

I am a 'Boss'.

I would not touch this kind of proposal with a ten foot pole.

Actually I would not touch it at all.

I did warn you I have a reputaion for being negative so if other people think this is a great idea just ignore me.

Geof - this is exactly the type of reply that I need. Good and bad - hopefully some of both... ;^)

I don't think that I would let anyone run my machine but me, so there won't be anyone else crashing it (wait - I mean there won't be ANYONE crashing it!). Of course, my machine, my responsibility for any repair.

And if I'm the employee already, in my boss's shop, running jobs for him, wouldn't any accidents be covered (eh - generally that's when you're clocked in, right? hmmm)? I'm sure that any other work for other customers would NOT be covered...maybe I would have to wait until that "second phase" of having our own shop until running jobs for any other customers.

Maybe a nice little legal disclaimer, releasing my boss's company from any liability for any work done "after hours" - I've had to sign these before at another job, when doing personal work.

Maybe just the idea of my purchasing the machine, and leasing it to my boss? No huge outlay or no big commitment for him. Of course, then ANY SCHMUCK will be able to go over and crash it (there are several schmucks at work already).

And, my boss has done something very similar already. I am not privy to the specifics of the deal, but I could certainly ask, when it's time.

I like to try and think outside of the box - and work around what might be "standard" obstacles. Half the time, when I'm cracking jokes about things, somebody says: "That's a good idea - they should have that!"...Hopefully my spitballing here can help form the concept better: make it less a joke than a good idea.

Well, make sure you get everything written down in some sort of contract. Verbal agreements just won't do...the boss could easily lock you out or be closed by some government agency (taxes, etc.) and you won't have access to anything...unless you have a contract and a decent attorney.

Good Luck.

I don't want to sound negative, but this sounds like a bad idea.

So many things could go wrong, in a deal like this.


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For a pessimistic type like me, who has had contracts broken, even a contract is not much help unless you have the financial resources to get a good lawyer. And even then it is probably going to cost more than the machine is worth.

The most secure situation is to have your machine in premises you control; it does cost more but you need to look at the extra cost as being a kind of insurance premium against things going sour.

one simple arguement and you could have a heck of a time getting back into the building to remove your machine , it would be months before most lawyers would even find time to begin talking about a resolution

even if you are sincerly a respectable man with good intentions , why would your boss want to have future competition right under his nose , you and your machine can walk out of the shop along with the work your boss has sub contracted to you . its a cut throat business and if your boss has been doing this long enough he has either been cutting throats or has been getting his cut , he would be a fool to go for it , and i believe you would be making a big mistake by doing it as well , as the law dictates posession is 99% of the law , if you get locked out it will cost you a small fortune to get it out of his posession
also the fact he can t afford to buy another machine and the machines have been overloaded with work would throw up a huge red flag for me , the banks like to see good numbers so why can t he get another machine , is he running beyond his financial capacity and in for a crash if it slows down

you mentioned about how fast you can pay off a running machine so rent some small warehouse space and count it as the cost of doing business

What dertsap said,
You have too much to loose and he has everything to gain.
Get a small space & machine.
Work nights on his jobs (you can charge him more) I don't believe in giving stuff away.
It will set your prices too low, your not his friend he is your boss.
Your talking BUSINESS here not a hobby.
And it's easier to just start out and NOT take the work from him.
As already stated, if he is that busy and can't afford another machine something is wrong and you could be setting yourself up to get screwed.
I don't want to come off as negative but I have set up business with a few people and companies before and they always look at me stupid when I say the following:
While we are still friends here and talking let's sit down and put in writing how we get a divorce. aka. exit strategy.
Good luck with what you decide.

"why would your boss want to have future competition right under his nose , you and your machine can walk out of the shop along with the work your boss has sub contracted to you"

My boss is planning on retiring in 5 or 6 years (one more reason for him to hold back on purchasing new equipment, I guess). He's talked about selling the business to the employees, but when I look around the shop...it's (SERIOUSLY!) like time-traveling to 1985.

When it gets to that sell point, I know that I don't want to purchase 30+ year old machines, and loads of worn-out support equipment that constantly need repair and replacement. Plus, I don't plan on just being an employee for 5 or 6 more years until this might happen. Life's too short to coast! I'm old enough to have plenty of good credit, and young enough to take few chances.

I realize that when you buy a business, you're also buying the customers, so that's worth something, of course. Although I figure that several of those customers would get pretty upset with the instant price hikes that would probably ensue: like it or not, it can't stay 1985 forever.

"its a cut throat business and if your boss has been doing this long enough he has either been cutting throats or has been getting his cut"

...well, let's say he hasn't been cutting any throats. The shop has been...surviving...but certainly not thriving.

I know where you are coming from here. I was offered at one point to "rent" time on a machine from my boss for my own personal work; but never took the offer as I wanted nothing to do with my bosses equipment after hours. I am now a contract worker for a past boss and my current boss. But all work is done on my equipment in my own shop. It is much harder to work around but the end result is far more rewarding. If you do end up with some or all of your bosses business at that point bring your machine in to the family.
my 2 cents in the jar.
good luck, any endeavor like this is always hard.

Perhaps another workaround- you buy the machine, use it in the boss' shop and he gives you a small share in the company or first refusal to buy a percentage when he does retire?

He gets a free machine you get a share in the company.

Not sure if this would be attractive to him- I only know machining, not business- no doubt others could comment better.

RUN AWAY, Recordist, you are just setting yourself up to get screwed.

I've also heard the "I want to get out in two years and sell to you guys schtick" Its usually just a lie to make you hump even harder to build up his business. If that was honestly his intention, you would already own some of the business.

What happens when you are doing your own work for a non-related customer and the boss is mad because you are using his electricity to not do his work?

What happens when a customer realizes they can go straight to you, and eliminate the middle man?

So say you do put a machine in his building, you give him a cut rate, he certainly is not going to like writing an employee a 5 digit check. A lot of nasty stuff will happen then, especially since you plan on using his tooling.

What happens when you realize you can make more money and be happier out on your own? Are you going to swipe his customers? Where are your customers going to come from if you don't, it'll be a real touchy situation if you steal his customers and stay in his building.

When my boss found out that I was out buying machines with the guy that used to run the shop(the guy who had my job before me, good friend from way back in college and my business partner), my boss was not happy.

He told me I was going to steal all of his customers, funny thing is in the shop he hated it when I took on outside work and actually made him money, the only reason the reason the outside work came in was because I made a deal with a few buyers, if they didn't have to talk to the owner, I would get the work.

I gave him a one year notice, and a promise that I would not even talk to any existing customers for a year after I left. I made it 4 months before it became unbearable. I did keep to my promise of not talking to a customer for a year, (they called my partner). I just made it over the year mark and called a buyer to ***** about some welded assemlies that are late, (machine, passivate, bond-lube, assemble, get$$$, assemble into final assembly, get more $$$$). He was mad as hell at me because I hadn't/didn't/wouldn't talk(ed) to him in over a year.

Two of our best customers also cancelled POs and actually went and got material and castings from my old job, one even went so far as to buy the fixturing for a particular job I had made from my old boss to avoid a setup fee. The scary thing is that all prices have increased, some substantially, some by a small bit.

The old boss still won't talk to me, but he will talk to my partner. I wasn't gone 2 weeks and the old boss was asking my partner to have me go over to the shop and help out. There are still calls to come help fix a machine, apparently they need a tech in there often, lots of crashes($75 an hour for a 6 hour round trip plus $95 an hour working time). I did all the machine repairs, I only had a tech in there once and that was to maintain a warranty on a spindle. He also keeps

'nuf of my story, if you think you can do it, do it. You don't need to be tied to somebody, or have your moneymaker in somebody else's building(that big thumb crushing down on your head). Stuff a machine in a garage. If you are in an industrial area, go looking for some space to rent from non-related businesses.

Run away, your boss has no interest in you actually succeeding, he just wants a free mill and extra capacity for no money.

When my boss found out that I was out buying machines with the guy that used to run the shop(the guy who had my job before me, good friend from way back in college and my business partner), my boss was not happy.

.

ive seen guys tossed out the door for just that type of thing ,and with just cause they were trying to steal work from the company ,which they were successfull doing

ive seen guys tossed out the door for just that type of thing ,and with just cause they were trying to steal work from the company ,which they were successfull doing

If the boss wasn't a useless sack, me and my partner would still be working for him and we would all be millionaires. However the boss's biggest priority was to screw over as many people as possible, which in the end, and now is he screwed himself.

My partner was screwed out of about $40,000 in bonuses. I lost about $18,000 on pay cuts and about $50,000 on bonuses.

I wasn't trying to steal anything, I originally bought a manual lathe and kept it in my back shed to do some simple stuff that we didn't have the equipment to do(or it tied up the high dollar stuff). We did have the equipment, it was sold when we moved, then it was replaced and the owner never paid for that so the guy who owned the equipment came and took it away.

I ran a lot of stuff at home, backside chamfers, quick face, stupid stuff, then I realized why the hell did I lay out my money to make this a@@hole money.

How is this. The a@@hole owner cut my pay back to $13.50 an hour. I was running the entire shop, hiring, firing, responsible for two shifts and on average 7-8 employees, up to 14 at one point. Quoting, ordering material(outside customers), setup, programming, billing, paperwork everything you do to run a shop. His response was when I did finally quit and chewed him real hard "you should have worked more hours to make up the money".

Well, I have no problem leaving him, I didn't go after his customers, my partner didn't go after them, they came to us. They knew who was getting the work out, on time and with good quality, it wasn't the owner. I kept to my promise not to talk to a customer for a year, is it my fault that they followed?

Actually, my old boss had a big giant contract. And I promised him I would get him through it before I left. I had it scheduled and planned to be done IN HOUSE by end of Sept to on the bad side Nov 2007(they are still working on it and sending most of it out, maybe he shouldn't have cut my pay). I didn't keep that promise then again, I was getting chewed for all kinds of stupid stuff, like working on that big job because we weren't getting paid for it right away, or the time about 2 days before I quit, I got chewed because I couldn't make 72 feet of parts out of 6 foot of material. Or the job that was 3 parts 12.38" long and he ordered 2 pieces of material one inch long, then told me to rub them to make them grow, he probably wanted me to f#$k them so they reproduce and give me enough material to make the 3rd part.

So, I don't feel bad about taking his work, I was the one that brought it in. I kept sort of to my promise(as much as I could without ending up in psych hospital, or dangling on the end of a rope).

WOW, that was a rambling ranting rave, bad memories.

hope i didn t come across as implying anything , but i remember the boss freaked when he found out they were buying machines .

glad to see youve moved on to better , its tough to keep the chin up and be loyal and honourable to some miserable sob , ive dealt with my share of idiots , it just eats at the soul especially when ive had some goof yelling in my face and i stood there thinking how much more can i take before he's picking himself up off the ground , some people are just outright ignorant

Be careful who you deal with. I have seen a lot of strange things happen on these deals: One guy had several machines in a guys shop. The other guy didn't keep up on his quarterlies. One morning he comes in and there are Federal Agents all around the place. They not only seized his equipment for the taxes, he even lost his personal toolbox out of that deal. Another case: A guy had a space rental deal with his machines in there. Guy sells the business, "loses" all the paperwork showing who owns the machines in the shop. New owners not only did not recognize any agreements, they wouldn't even hire the poor soul that lost the machines because of his "poor attitude."

I tried something like this.

I rented open time in 2 day blocks. I had to provide all my own tooling & fixtures and did all my own setup & programming. I would go in Saturday night and start the setup, then be back early Sunday morning to start my runs. I also would have Monday "officially" off and continue the run until 6pm when I started teardown to give the machine back.

Problem was regular customers that show up un announced with walk in jobs... Or customer calls. See since I actually am there the Boss assumed it was rude for me to not want to take calls or handle such walk-ins.

This got so bad that one day he ask I do a hot walk in job from one of our best customers. The job took nearly 7 hrs and he billed 8hrs (included time to go fetch tooling we didn't have on hand). After it was done and he had written up the invoice, he ask me to deliver it to the customer. Then he ask if I would have the mill torn down before morning. I said No. I worked today so I guess my day off and machine rental work will be done tomorrow. This caused all sorts of domino effect for his schedule and he was far from happy.

Lets just say there wasn't much open time available in the future.

this is a good discussion. I was looking to do something similar with my friends. My friends own a custom race car shop, and I have been designing things for them. Now they, and I are getting more business, and I was thinking about buying a machine, and storing it at their shop. In the beginning all profits go right into the machient pay it off, once that is paid, then we split the profits. the only bad thing is that this is friends, and friends and money never mix.

something like that could easily work but the first thing to do is look at these guys and ask yourself what kind of friends they are , are they the " hey lets get hammered " friends or are they the guys you know will bail you out of a pinch when you need help .

friends and money do mix well together as long as they are true friends

What ever path you pick, you need to set up the arrangment as a "real" business with real contracts, including how it will "end". Pretty much all businesses will end one day, and planning for that is just as important as everything else.

When I say "real business", I am talking about officially incorporating it, issuing ownership stock, and everyone putting money in up front along with their ownership. (C corp, not an S or partnership) Everyone has a task / position in it, and a method of taking payment in "stock" or "money" is defined.

The method of valuing the stock should be set up at the beginning. A good "first approximation" is to add up:
- The depreciated value of assets (equipment, tooling)
- Cash and equivalent
- Outstanding payments due (good ones, not the junk)
- Debt you owe
- 1 X your annual sales
- 5 x your annual profit (some people use 10 x, but I would not in a machine shop type environment)

The value of customer relationships, etc (good will) is part of the 5 x profit.

Add this all up and this is your "equity". Divide by the number of shares, and that is the "value per share". It is not magic, this is done every day in the stock market.

Profits - If there are any excess profits, you distribute them to the share holders as "dividends".

If someone pays for something from their own pocket, you expense it to the company. The company re - pays you for your cost in cash, or if it is pre-arranged, in stock. If it is not pre-arranged that they will re-pay you in cash and you accept stock, it is common to accept the stock as being worth 50 cents value per dollar of debt. You can also do this with pay, but it gets a bit complicated to do that, as the IRS will view this as income, and you will still owe taxes on it.

Most states allow very simple incorporation arrangements, and it provides a lot of benefits. In CA where we are incorporated, it can all be done by mail, and the forms are virtually pre-printed. No need for a lawyer at all, of course, the lawyers will tell you that you need to pay them a couple grand, but you don't. OTOH, it does take time to get a business set up. Fed tax id, state incorporation filings, county, city, permits, license, sales tax ID, checking account, PO box, etc. It all takes time.

There is another benefit - taxes. It is MUCH easier to find a good tax specialist for a corporation, then to find one that really understands personal taxes and all of the interesting things you can do with a stand along company. I have my company's financial year end in the summer, so I can keep those taxes and aspects separate from my own fiscal year. It is a lot easier to get the attention of an accountant in July / August then in the normal tax season rush.

I always suggest that people authorize 1 million shares, and then issue (sell them) to the share holders as needed.

The first 50,000 - 100,000 shares sell to the "founders" for 10 cents / share. This ensures that the founders retain control of the company as time goes on.

The next 100,000 shares usually sell for $ 1 / share, also to the founders. This lets people "buy in more ownership" as their money allows or does not allow. It also allows people to put their "pay" back into the company for more ownership if they desire.

If someone wants to "sell out" then it is easy to value their ownership (number of shares x agreed upon pricing method). The other share holders can either buy them out in a chunk, a little at a time, or the company itself can buy the shares back if it make sense. If the share holder wants his cash "fast", then he / she might agree to a lower price per share, just like in the real world of finance.

Grandma's fruit farm with ma and pa owners almost never became a multi million dollar business, and there is a reason for this - it is hard to expand ownership and the whole company is dependent on 2 people's lives. Standard Oil, Chevron, and GE are big - there are many reasons, but one of them, is that they are C corps that act like professional businesses.

BTW, I am not trying to drum up business here, but I do this sort of advising for a living. This is the same advice I give to my paying clients. :)

run Forrest !! RUN !

Why do you want to own this Mill??
Something to prove to your boss??
What to be your own boss/slave??
You will find far more satisfaction under your own roof, making your own decisions, finding your own customers, sending work out with YOUR name on it.
My shop is in a 2 car garage, 1 employee and I'm the happiest I've ever been!

Talk about deja vu

NC Cams started out by renting space in another shop. Every time I came in to use the machine, it was a freaking mess due to shop owner's guerillas using the machine. Spent half the day fixing it so I could use it only to find it tore up the next time.

DItto the deal with the Feds only I was able to get equipment out of shop just ahead of the Federales. HOwever, I spent New Years Eve paying off a bank loan in return for buying out the machine's partnership agreement to keep the shop owner out of slammer on fraud/embezzlement charges. Seems he sold some collateralized equipment to pay tax bill and the lein holder found out.

Expect to encounter each and every bad deal that you read about above. IF you're that set on the deal, find your own building, buy the machine ands set up shop. YOu can have a partner shop for business from your boss and do it cleanly. Partner does sales, you run machine.

Bosses want employees that they can CONTROL. They don't want subcontractors in their own shop. Why? It is easier to screw subs if they are not in-house to really see what's going on.

DON"T DO IT!!!!!!!!!!!!!!!!!!!!!!!!!!!