I'm going to ask a real pointed question

[PBMW]

I been hangin round here for a while. Readin this and readin that.
Now, I own two Haas machines. I know the good stuff and there is a lot, and the bad stuff. And there's a bit of that as well.
But what I'm curious about is the business thinking that goes into a machine purchase decision.
Are the majority of buyers making this decision on price alone?
I get the impression that is the case a lot of the time.
This may have something to do with years of experience also.
I was talking to a fellow the other day that was interested in getting a machine in his garage and starting to make money. Said he had some customers lined up. Wanted to go at it.
I asked him what kind of material he was going to cut. Didn't know. What ever the customer wanted him to cut.
Asked him if they would be fourth axis parts. Didn't know what one them was...
So, I asked him what kind of machine he thought he needed. "Oh, I think I'll get one them tool room mills" he tells me. Tool changer? I ask. No, that's be too much money.
Well, what about holders? Well, he thinks about 5 ought to be plenty.
Now, about this time, I'm getting curious as to how he's going to pull this off. So I ask him about how much he has to spend and what the ROI would be. He tells me he don't want to spend more then $25k. I ask him about the ROI and get a blank stare....
I explain about return on investment. Ask him how many hours a day he'd have to run that little tool room mill to pay it off in 18 months.
I told him to think about the feeds adn speeds on that machine and how fast he could make that part for his customer when the shop just doen the street has a whiz bang really fast one and can undercut his price....
He started to look a little glum
Now Haas makes a great machine that enables a lot of guys to open a shop and do ok and grow into a larger shop and buy more machines, hire a couple more guys...You know the picture.
Now I know what it's like to start a shop. I started one with a little Mini Mill. Been there done that. But what I'm curious about, is the thought process involved in making that machine decision...
I was told by a good friend a couple years ago, he bought a prototype shop from his boss who was retireing. The guy told him to go buy a five axis Mori. Larry told him he didn't have the money to buy a five axis Mori and didn't know how to run one if he did.
His boss asked him where he wanted to be in two years. Larry told him. In terms of income, customer base and types of parts. His bos told him, "Then don't waste three years...go buy the Mori"
You see, we all know that buying the first machine is the hardest. But I'd like your thoughts on why some shop owners refuse to see the advantage in faster machines. We can obviously all get a lease. We are obviously all smart enough to figure out that working for ourselves is better than working for someone else...
What is it about expanding our business's that we have such a hard time seeing what it is that we need to do.
I've heard the argument about, why do I need a Ferrari to make parts when a Pinto will do. Well, if you want to do the same parts you're doing now till you retire, you don't need that Ferrari.
But if you want to grow. If you want to be the shop that your customers allways, ALLWAYS call when it needs to happen and happen right, You might want to think about it.

So, What are your thoughts. I'm curious
This was all prompted by my ordering a twin spindle live tooled lathe to replace my SL10. That got me to thinking about moving ahead on a Horizontal...

So, What are your thoughts.

[Donkey Hotey]

I think this is probably the wrong forum for the question. I don't have a problem with it...just that you're going to get a much smaller audience than you would up in one of the 'general' forums.

We seem to have a number of people in here:

1. Employed by others but looking for an edge or help getting ahead in the industry (don't actually own any equipment but work closely with it).
2. General machine shop owners who happen to own Haas equipment. They may vary in size and capacity.
3. Manufacturers of their own products.
4. Hobbyists of one sort or another, trying to turn their passion into a business (manufacturing their own products).
5. Really eccentric hobbyists who happen to have enough cash to afford a CNC. They might or might not ever make money with them.

Personally, I'm number 4, hoping to not become number 5.

A Mori ain't in the budget. I couldn't swing the payments on one unless it hit the ground generating cash.

While my two Haas machines were pricey by 'hobby standards', I know 'regular people' who have spent more on a fifth-wheel trailer and a decked out pickup truck to tow it. So it's not the 'normal' hobby, but it's not going to depreciate any faster than a boat or motorhome and at least it has the possibility of someday, generating income.

What the machines meant to me is this: I could generate designs and build prototypes on my schedule, while keeping my 'day job'. When the time comes to turn the switch on the business, I can move the equipment to a real shop and get down to production.

Many consumer markets can't tolerate another layer of profit (RC boats, RC cars, specialty car parts, etc). So if there were a machine shop between the raw materials and my customers, there would be no money left in them for me. The consumer will only pay so much--unlike markets--like aerospace--that beg to be gouged.

A salesman at Westec had this discussion with me. It might have been Mori...or Mazak...doesn't matter: he told me that a Haas machine wouldn't last and didn't really have the speed. I told him that I lay awake at night, dreaming of wearing out a Haas. I hope that someday I can't stand their perceived lack of quality--because it means that my business has outgrown that very machine that got it going. If I am forced to come to them for a machine, then the Haas did its job.

If the more expensive machines were the only thing on the market, I couldn't even afford to get on the train.

I think the guys who buy a couple of machines and think they're going to hang out a shingle and get to work are wayyy more gutsy than I'll ever be. That's a tough world.

They can work in their garage and undercut a real shop for only so long. Eventually, they'll need more room and more power than a residence can provide. They'll add a building and a few more machines, and then employees to load them and push the green button. That overhead will put a pinch on them. Then they'll be pissed when they get undercut by 'some guy in his garage.' I'm not saying it can't be done (others here have obviously done it) but it's like a restaurant: you're at the whim of your market.

I agree with you in that situation: a competitive edge is very important. If you can't beat them on speed, then you'd better beat them on price or quality. If they can't do that with a Haas, maybe they should be looking at something better/faster/more rigid. To not have any idea what they're going to do with the machine is just foolhardy.

[Geof]

Aw come PBMW, it is Sunday evening and you want deep thinking?

I have encountered a few of those DHAC types you describe, and the garage-shop undercutters Mr Hotey describes.

Based on people I have met and what I have read here I think a lot of people have the dream of running their own shop but do not recognize just what is involved when you are setting up for the long haul. Most seem to consider price only, and, never mind thinking about where they might be in three years, they don't even think seriously about the next six months.

Experience is an important component but I also think that personality (?) comes into it. I put the (?) because I am not sure that is the correct word. I think you have to be able to separate what 'you' (think) want from what the 'business' needs. In the early days of starting a business, you are the business, but this situation is going to develop in two possible ways: You are going to limp along never getting further ahead until you are burnt out and quit to find a job. Or, you are going to grow, and the business becomes something more or less independent of you, you were essential to its genesis and initial growth but somewhere along the way it outgrew you. The funny thing about growing a successful business is that the more successful it is the less necessary you are.

This is why I say personality comes into it. Right from the get-go you have to be able to differentiate between what you can afford and/or want, and what the business needs; but I think most people cannot split their thinking that way. You also need to recognise that sometimes you are going to become a slave to the business, and put in far more effort than you dream you are capable of, to get it over humps. There is a bit of advice you sometimes read in business magazines about remembering to 'pay number one first' where the number one is you. Wrong, in the early stages of a business, the business is number one. Later on, when the business is successful you don't need the advice about paying yourself as number one; that is a given.

And I think I may have drifted sideways to the topic. That is what happens with age a couple of glasses of wine.

Twin spindle live-tooled? Maybe in a year or so I will send you a sample of one or two of my parts and pay you to develop a good time/cost estimate for doing them. I considered going this route a few years back and came to the conclusion that the best approach was separate lathe and mill. Best meaning initial cost, production time, flexibility of machine use, etc. Of course our environment is different, we make our own designed product so we know what is coming up and have control over timing. But is still wonder if I was out-to-lunch on my decision years ago...we are sort of committed now.

[Caprirs]

I don't own a Haas but have something comparable by Dynamechtronics. I worked for Dyna for a few years and visited the dealers and customers around the country. Also worked the trade shows like Westec, Eastec, and IMTS and spent time talking with folks who worked for other builders.

Some things I learned during that time:

1. A lot of older shop owners like to take small steps, especially into the unfamiliar (like way fast CNC). They are not comfortable making what they perceive to be a big jump. That approach has served them successfully so far, thus they see no reason to alter that way of running their busniess. Forcing them to change too fast gets them out of their element and then they don't know how to manage it.

2. A lot of shops don't make parts where the 5 axis Mori, Makino, or Niigata is of any benefit. The reality is 95% of machine work is done on simple 3 axis machines just as accurately and just as fast from setup to cleanup as can be done on the SuperUber machine because the parts aren't complex enough to need the fancy approach and the quantity is too low to justify trick fixturing.

3. Buying the machine does not buy the knowledge to take advantage of all the capabilities. Jumping from manual machines to CNC requires a change in approach. Jumping from Haas/Fadal machines to 5 axis Mori, Makino, Niigata requires another leap. Skipping the middle leap is mighty ambitious.

4. The accessories can really push the entry price out of a budget. A shop acquiring its first typical CNC VMC needs a big investment in tool holders, tool bits, CAD software, coolant. Again, the knowledge does not come with the pieces. Most shop owners recognize there is a learning curve where they are spending more money than they make.

5. Last but not least is the personnel to run the fancy machines. Guys who are proficient on Super machines don't come cheap. Same with the CAD/CAM fellow who does the programming while Wunderkind is running the machine.

My worthless rambles.

[PBMW]

This is why I say personality comes into it. Right from the get-go you have to be able to differentiate between what you can afford and/or want, and what the business needs; but I think most people cannot split their thinking that way.

Bingo!!!!!!!!!



This is good stuff. I put this thread here because I have noticed this thinking most among Haas owners. I don't know if that's good or bad, but it's what I've seen


I think markets may well be different in different areas. Or peoples perceptions of markets are different. Caprirs said that 95% of all machine works is 2d stuff done on a three axis machine with low quality requirements. I have not found that to be the case. I can certain'y find that work. But I don't bid it. 85% of the shops I know in my area have a fourth on the majority of their machines. They are all doing complex work. Granted we are in the Aerospace capital, But most of these guys got burned by Boeign back in 1990 and don't do that work. We have a number of large high volume mfgs here that require a lot of wigets. They don't pay much. Low margin stuff...
What I've found is that more and more of my work nad RFQ's are for more and more complex parts. That requires me to think about more capable machines if I want to grow.

[Geof]

..... I have noticed this thinking most among Haas owners. I don't know if that's good or bad, but it's what I've seen....

Regarding your first comment I have a theory, I am great for theories , but please adopt a flexible mindset because I am generalizing rather broadly.

Haas pushes machines at the already-experienced-on-manual-machines CNC newcomer. This is explicit in their Toolroom Machines, Quick Code and Intuitive Programming. It is a good business ploy, was a good ploy when they started it almost ten years ago. Back in the late 1990s I was investigating CNC and read several articles in industry magazines; I remember one which had the statistic that only about 10% to 15% of machine shops had CNC. I think that a likely contributing reason for this lack of market penetration was because most CNC machines were ridiculously over-priced. The established manufacturers got away with it because it was possible for some shops to get the machines and once they had them they made lots of money; the initial costs could be tolerated by the high earning capacity.

Haas was a new kid on the block and took a different marketing approach; somewhat lower capabilities, lower price, and go for volume by aiming at potential customers who did not yet have CNC; not by competing head-on for existing CNC users against the established manufacturers. I think it worked, certainly Haas' sales have grown enormously, and I think there has been a moderation in prices on the part of some of the other manufacturers.

But I think there was also another factor in the equation which was the US housing market. Now it is certainly going down the tubes, and hurting a lot of people, but when it was soaring a lot of established home owners had a goldmine under their feet that could be turned into a home equity loan to buy a Haas and start their own business out in the garage. I would dearly like to know, just for interest sake, what proportion of Haas purchasers used this type of loan, or put the increased value of their home up as security for a lease.

In this scenario Haas the manufacturer benefited from the run-up in home values and a lot of people, who otherwise would never have started their own business, did start their own business. Now I am going to ruffle feathers: I think a lot of people who think they can run their own business, but who are wrong, bought Haas machines and they are part of the reason there are so many little basement/garage shops out there driving prices down and beating each other into the ground. This beating into the ground is occurring; there have been entire threads more or less on the topic even if it is not explicitly stated that way. It takes a very different set of abilities and attitude to be self-employed in your own business than those needed to be a successful employee. It also takes another set, different again to the other two, to transform a start-up from a self-employed one-man operation to a long term successful business with employees. Very few people have the combination required, particularly the ability to transform from the self-employed one-man mode to a proper business with employees structure. And is essential that this transformation takes place otherwise the one-man operation will gradually burn out.

A natural corollary to all this, if my theory has any merit, is that there are a lot of one-man operations out there who are slowly going down the tubes even if they do not recognise it yet. In the case of those who did use home equity, if they have paid off the loan they may be okay; if they haven't a refinancing comes up they may be in real difficulty. A good, if somewhat depressing, indicator for the validity of my theory will be an increase in the next few years in the number of used Haas machines on the market (at distress prices).

I don't think there is any question about good or bad, if I am not totally out to lunch, it is bad. A lot of times in life circumstances prevent you making a decision or embarking on a path that is ill advised; I think this constraint was removed during the past ten years or so for a lot of people. There is a big difference between looking back with hindsight and saying; "gee, I am glad I did not do such and such back then. It would have been a disaster"; to saying; "Oh ****, why did I do such and such back then, how am I going to get out of this without losing my house, etc."

Sorry to be so pessimistic, I am not one to sugarcoat things, and I am probably overstating things.

[Donkey Hotey]

Sorry to be so pessimistic, I am not one to sugarcoat things, and I am probably overstating things.

I don't think you're being pessimistic at all. I think you're being realistic--as much as that might hurt some.

I'm one of the guys who was given the freedom to buy this equipment due to a surge in home values. But the business actually started coming before the equipment. I made things for my own motorcycles that people wanted to buy. Being hand fabricated, there was no way I could sell them for what they cost me. But the market was there and it was persistent.

My father and most of my uncles were self-employed at one time or another (different industries). I've seen the ups and downs of both employment and self-employment. I lived through my teen years watching my dad struggle with a business. I know what it's like. But that's also what makes me uniquely suited to survive: I grew up surrounded by it.

I shared a thought along these lines with my Haas salesman a couple of years ago. He liked it so much that he's been quoting it ever since. I pointed out that (at the time) they were producing about 800 machines a month. If 10% of the businesses buying those machines were failing, there would be 80 machines hitting the 'used' market every month. There would be some lag but it would happen. At the time, I couldn't find a decent used machine to save my life. Since then, there have been a few but not many.

Yes, I see some low hour machines out there but it's not nearly in the numbers that Haas' production would suggest. Even if 1% were failing: they cracked 10K machines last year. That's a lot of potentially failed businesses. That's a lot of used machines.

What I think Haas may have done is to open up new markets. They don't just go to Westec and IMTS. They go to the powersports expos now. American Chopper has probably done wonders for their sales.

Do a search on eBay in Hobbies and use the keyword CNC. Take a look at all of the custom machined parts that small shops are making (props, rudders, engine mounts, other hardware).

It may not be a multi-million dollar business. But some guy in Iowa with a big steel building and a bunch of time on his hands while he waits for the crops to grow, can now get into a market making extra money and supplying a niche market.

It's not a huge demand. Real manufacturers aren't going there because the volume doesn't exist. But the niche market will certainly supplement if not sustain a one-man operation.

My business plan is simple: I want products that I can't buy. When I've made my own, others have wanted them too. In the past five years, I've watched three different products hit the market that I had sketched out long before they were introduced. All of them have been successful. One was voted 'innovation of the year' by one of the motorcycle magazines. But I wasn't the guy making them or selling them. At least it's good to know that the concepts weren't flawed.

It may be like Xerox panicking about the computer putting them out of business. "People won't need copies anymore!" After it was done, computers contribute to unprecedented levels of paper documents. We're drowning in it. The USPS was worried that email and electronic bill paying would hurt their business. Instead, eBay and other electronic commerce have increased their volume.

So it may be that the Haas buyer isn't the traditional machine shop. Their buyer may be an emerging market that we're only starting to see.

[PBMW]

Interesting thoughts.
I've wondered about a couple of these things because I can think of three shops that are owned by "Non machinists" They all have Haas machines. All of them have over twenty machines. All of them are not in the complex parts business. All of them are struggling right now. I've asked all three of the owners why they don't expand into more complex stuff. The answer is a lack of expertise

[Geof]

Good points Greg but remember Polaroid, Kodak and Telex.

PBMW's point about non-machinists owning machining companies and lack of expertise limiting growth is mirrored by machinists owning machining companies and lacking the business knowledge neede to manage growth.

I have posted in other threads how the start up business owner has to transform from an entrepreneur into a manager to grow. That is difficult, I know, I did it. Even worse is having to go out and market effectively, spending weeks of the year flying all over the world and being sociable when you would dearly love to crown some idiot. The rewards are worth it but it is difficult; and close to essential.

[Caprirs]

Well, since this opinionfest is still going, I'll chip in some more.

As mentioned by The Mighty Geof, early CNC machines were very pricey. Although he labeled them as overpriced, I kinda disagree. I think a more accurate desciption is they were overkill for a lot of applications. As an analogy, imagine you want to buy a pickup truck and your choices were only the full size rigs from Chevy, Ford, and Dodge. Your application is just to move a couch and bring home some lumber from Home Depot. Thus, the market for mini-trucks is born. Not everyone needs to carry 4,000lbs in the bed while towing a 16,000lb fifth wheel tralier. Same with CNC machines. Why spend more than you have to?

Boyd Coddington's shop and Jesse James shop will not make better billet wheels on a Mori than they will on the Haas. So why spend the extra money? The Haas gives them the ability to make a part critical to their business on their own timeline. I reference these two because they are easily recognized.

Fadal (Francis, Adrian, David, and Larry) is actually the company that sorta discovered the market for the cheapo machines. They recognized there were a lot of companies that would like to have their own CNC but could not justify the massive investment required for a full boogie Mori Seiki setup. They were right and sold a lot of machines to companies that needed on demand CNC access.

Gene Haas recognized the same market along with countless other "commodity" machine builders. The Haas contribution was to make the control easier to operate and use compared to the conventional Fanucs of the time.

A lot of machine owners are not in the machine shop business. Even if the machine sits idle 75% of the time, it can still be very profitable to own in a lot of applications.

[Geof]

..As mentioned by The Mighty Geof, early CNC machines were very pricey. Although he labeled them as overpriced, I kinda disagree. I think a more accurate desciption is they were overkill for a lot of applications. .....

Being such a "Mighty" guy I can admit when I missed the mark; you are correct. And if I had been half a smart as I think I am I would have taken PBMW's ...I've heard the argument about, why do I need a Ferrari to make parts when a Pinto will do. Well, if you want to do the same parts you're doing now till you retire, you don't need that Ferrari..., and pointed out before Haas all that was available were Ferraris. But I think Haas is somewhat above Pinto. (Gotta say that the Haas guys might be watching )

[Caprirs]

Haas is assuredly above Pinto. I think they are a sorta Camry/Saturn level machine. Nothing fancy, but it works, is reasonably priced and easy to service. It fits the needs of a lot of folks.

Haas has been so successful there has been a backlash (hah!) against them. Guys with Moris have a tendency to look down their nose at anything less and sometimes fail to recognize that not everyone needs a Mori. In addition, a lot of the Haas owners are not really machinists, yet they can successfully use the machines which further irks the Mori guys. Kinda like the Ferrari guy who gets miffed when the Mustang guy is running nearly as fast but with much less invested.

PBMW, I think most of the machine work is simple 2.5D stuff because that is the bulk of the machine tool market. There are way more simple 3 axis VMCs sold than mega-trick 5 axis rigs. In fact, the biggest machine tool builder (Haas), sells mostly 3 axis VMCs. Part of that may be due to shop owners apprehension about the 5 axis machines, but I think most shop owners do choose wisely when purchasing equipment and know what kind of machines work best for the parts they make.