Making Money the Old
Fashioned Way
By
Joe Martin
Taking
a business from an old lathe and a
Bridgeport mill in a garage to a
multi-million dollar manufacturing
facility.
(See
Sherline's home page at www.sherline.com
for the product line and a photo Factory Tour.)
©2001, Joe Martin, All rights
reserved.
No portion of this book can be
reproduced in any form for commercial
purposes without the express written
permission of the author.
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book.
Foreword
I first met Joe Martin when he
was just starting Sherline Products in
the early 1970’s in the same small
industrial complex
where I was starting my own graphics
business. He needed line illustrations
for the instructions for his new tool
line, and I was in the right place at
the right time. Our association has
lasted to this day, and I was
fortunate to be able to watch as he
took what started as a small business to import
tools from Australia and distribute
them in the United States and turned it into a
major business that now completely
manufactures the Sherline product line
and distributes it worldwide. He went
from one rented 1000 square foot
industrial space to a custom-designed 66,000 square
foot showplace building housing well
over a million dollars worth of
production equipment. Joe is a
product of the industrial parks that
dot our nation. He has learned what it
takes to survive in a small business
environment and then turn that small
business into a profitable venture
doing business worldwide.
The growth of his business was
not the result of luck or financial
trickery…it was the result of hard
work, tempered with more than a few
hard knocks along the way. He did not
climb over the backs of others to get
where he is today, but rather brought
along others like me to share in the
success. Several dozen employees and
many dealers around the world make a
good living because of his efforts.
Many thousands
of people enjoy using the high quality tools he
produces. Joe
has spent the past two years writing
about his experiences. Like his first book
and the many instructions he wrote,
you'll find that this easy-to-read
text conveys some very profound
thoughts on how to make money “The
Old Fashioned Way.”
--Craig Libuse
Making Money the Old
Fashioned Way
By
Joe Martin
"A
man who works with his hands is a
laborer.
A
man who works with his hands and mind
is a craftsman.
A
man who works with his hands, mind and
heart is an artist."
--From a poster on my Uncle’s wall by Louis Nizar
"A
man who works with his mind, heart and
billfold is an Entrepreneur."
--Joe Martin, March 5, 2000
Dedication
I dedicate this book to all the
expert craftsmen in this world who
work hard without being told, who
live with their agreements without
being forced to and who always produce
quality work because of pride. They
are the foundation of all nations.
Acknowledgements
I would like to thank all my
friends who took the time to read my
writings and made so many intelligent
suggestions. Mark Rogo, of Morton
Machinery, http://www.mortonmachinery.com
in Los Angeles, California went so far
“beyond the call of duty” of a
friend that he deserves more than just
recognition. I used so many of his
well thought out suggestions that I am
deeply indebted. Special thanks for my
former partner’s wife, Barbara
Hammons and Russell Millar of Millar
Instrument, http://www.millarinstruments.com
of Houston, Texas for their expertise in
correcting my grammar and spelling.
A
Special Tribute to Programmers
It should also be noted that
this project would have been an
impossible task for me just a few
years ago when the marvelous programs
created for computers that help me
convey my thoughts didn’t exist. In
a sense, these programmers are the new
craftsmen of the 21st
century. The Microsoft Word® program that
I used was as much as a work of art as
the marvelous cathedrals of the 17th
century. We just haven’t
acknowledged it yet.
Table of Contents
The
reader should note that I have
purposely left out the usual table of
contents. This isn't a book about how
to specifically answer every business
problem.
It is a book describing a way to go
about doing business by giving
examples. This book
has been written to help newcomers to
business become aware of problems they
face and to
help create a business
atmosphere where everyone wins. The “bottom
line” isn’t the only reason to be
in business. The employees, vendors,
investors and customers all deserve
equal rights.
CHAPTER
LINKS
(Click on any
chapter name to jump directly to that
chapter.)
Introduction
I wish I
HAD KNOWN this when I started
Your big
decision
Deciding on
a product or service
Employees
Marketing
PURCHASING
Manufacturing
Accounting
Managing
In general
Making a
business out of a hobby
The
difficult part of writing this book
wasn’t putting words together; it
was the thirty-five years of learning
what to write about. I didn’t do
research on the subject, I lived it.
--Joe Martin
I
was a model aircraft builder for many
years and usually flew my own designs.
As a group we didn’t use the exact
standards of aeronautical engineers to
design our aircraft, but we sort of
knew what worked and what didn’t.
Every now and then a design would be
superb and the designer would get to
write an article for an associated
magazine about it. Now the designer
would have to come up with three pages
of
BS
as
to why their model aircraft flew so
well. They just couldn’t tell the
truth and write about the law of
averages and luck, so in most cases,
you would end up with three pages of BS. I’ve found that most of the
information published about starting a
business has also been developed in
the same manner. All BS. Hopefully, I
have learned from their mistakes.
This book is specifically
written for the workers of the world
who want to or have already started
out on their own. It contains the logic
it takes to go from a one-person shop to a company that requires several
departments;
with each department having an
individual manager. Once this plateau
is reached a different set of rules
come into play that will be closer to
standard business practices. No longer
is the company in a true survival
mode. The next set of rules for these
companies will be so dependent on the
personnel and profit available that
these new rules must be developed
internally by that individual
organization; therefore, I would never
be so bold to suggest I could advise
companies that have reached this
level. However, I do believe the logic
I offer may be the very useful to the
department managers of these companies
when dealing with their employees. If
you think about it, a department in a
large corporation is very similar to a
small, specialized company.
New and growing companies with more
problems than solutions have a
tendency to attempt to solve simple
problems with complex answers. Perhaps
my writings may help these managers
get back to reality and review what it
really takes to build a business -
“The
Old Fashioned Way.”
The Reason I Wrote this Book
When I first decided to go into
business, I thought it would be wise
to do a little reading on the subject;
however, after just a few pages I
would give up. Why? The authors were
attempting to teach me how to run a
large corporation, when all I wanted
was to have my own 1000-sq. ft.
(93-sq. meter) shop. Hell, I didn’t
have any money to worry about, and I
believed keeping track of it would be
the least of my problems. My
problem would be making it.
This turned out to be so very true;
therefore, I decided to pass on some
of the things that were so difficult
for me to learn to accomplish this.
After reading this book it may
surprise you to know I also know quite
a bit about tax laws and accounting. I
learned this as a result of being in
business. It isn’t necessary to
know accounting and tax laws to start
a business. Again, your problem is to
make and keep enough money to have it
be worth keeping track of. This isn’t a
book about how to con anyone out of
money for a bad idea.
It’s a book for that group of
disgruntled workers who are willing to
work hard, who believe their way is
better and want to start a business of
their own to prove it.
Writing in a Brief Style
In this book I used the same style of
writing I use when sending my
viewpoints to my local newspaper in
the “letters” section where we are
limited to 200 words. I wanted the
reader to understand my point with the
fewest words. This is far more
challenging than one would imagine, and
I spent a great deal of time writing
and rewriting it. I would also like to
state that I personally wrote and
typed in every word in this book.
If you have the time and
enjoy short stories, you might also
enjoy reading “Making a Business
out of a Hobby”. It is the last
chapter of my first book, Tabletop
Machining. It tells more
specifically some of the details of
the path I took in starting Sherline
Products. Although there is some
duplication between the two, they were
written separately, and there are some
additional lessons there
that might be of value to you in
starting a business of your own.
What it Takes
A person starting into business
needs information that can’t be
found in graphs or endless columns of
numbers. They need to develop the
skill to make educated guesses about
their chosen field, their customers
and employees. They need to know that
these are the skills you need to
become successful. The skills needed
according to business schools are the
skills that are easiest to hire. Look
in the Yellow Pages for people with
these skills and you have your choice
of thousands if you are located in a
big city. Advertise in the help wanted
for a bookkeeper or manager and
you’ll get a lot more applications
than you will from a truly skilled
toolmaker. Ask a Harvard business
graduate which product your company
should manufacture and they’ll have
so many consultants working on the
problem you’ll be in the poorhouse
before you start. In other words, they
can’t.
The Skills You Need
The skills you need are what to
do next without anyone telling you.
Sometimes this is easy because the
demands of your customers eliminate
the problem; however, if you really
want to run your company you can’t
have customers deciding your future.
You have to be at the helm. You have
to be able to watch a customer flinch
when you tell them the price that’s
too high or watch their eyes light up
when discovering they need it and can
easily afford it. You have to develop
a gut feeling to know good employees
and good ideas. These are the things
that can’t be entered in the books
but they are the things determining
your destiny if you chose to go it
alone. The accounting books only keep
score.
Read a Little, Think a Little
What I write about are problems
that affect all businesses, not just
machine shops. I write in my own style
and you’ll find it easy reading. I
try to write without using complex or
excess words, somewhat like a good
design that doesn’t use complex
solutions. I want to impress you with
my logic in solving problems, not the
obscure words found in large
dictionaries. Read this book one
paragraph at a time. Think about what
I wrote and how it might be applied to
your particular circumstance. There
are many subtle things to think about.
I don’t believe the overall book
would be very good if I attempted to
write how my logic could be applied to
every particular circumstance; it also
would have been an impossible task.
This could be interesting reading
while traveling or lunch. Read a
little, think a little, or, better yet,
think a lot.
A Collection of Random Thoughts
This book is a collection of
random thoughts that came into my mind
as I thought, “I wish I had known
that when I started.” I took these
thoughts and sorted them into logical
groups, but I didn’t sort them in an
exact order or order of importance.
Hopefully you’ll find the book more
interesting with this random approach.
Some of my observations may seem
stupid or obvious, but each one cost
me more money and time than I care to
remember. This
book could have easily saved me a
million dollars when I needed it most
if I had paid attention to these
details. These are
things that you will usually learn the
hard way. As an example, I state,
“Don’t hire employees who start
talking about their careers.” Well I
didn’t hire just one to come up with
this conclusion; I hired many and they
have all moved on after I paid for
them to go to school or spent
thousands of dollars having the most
expensive people in my shop train
them. They didn’t leave because
wages were better at their next job.
They left to continue endlessly
searching for jobs that don’t exist.
Information for the 21st Century
Consider the fact that I’m
writing these statements and book in
the context of the year 2000. Things
are changing so fast today that in the
year 2010 I may have different points
of view, but I doubt it. What I write
about is so basic that human nature
would have to change more than
technology to influence my viewpoints.
My Qualifications
I have a unique perspective on
business because I’ve been actively
involved in every phase of business. I
had to learn these different phases
because I didn’t have the finances or the
temperament to pay
employees and consultants for things I
could do or teach myself to do. It has
been an experience that I wouldn’t
have wanted to miss and knowing about
all these different phases is what has
made it so interesting. I’ve taken
the time to understand the
interactions of these different
phases. They are:
1)
Creating
a new design or invention
2)
Designing
the components so they can be
manufactured economically
3)
Creating
a complete set of production drawings
with the aid of a CAD program
4)
Deciding
on the amount of inventory to build or
purchase
5)
Engineering
what equipment will be used to
manufacture the product
6)
Writing
instructions for these products
7) Coming
up with an advertising and marketing strategy
8)
Deciding on where and how large the
business establishment should be
9)
Deciding
on what equipment to purchase
10)
Deciding
how many employees to hire and how
much to pay them
11)
Understanding the tax and accounting
rules that affect your business
The
Definition
Entrepreneur—A person who
manages a business and assumes the risk
for the sake of profit. (Dictionary)
Entrepreneur—A person who is
self motivated and approaches profit
making as an art form, and can craft
these two traits into a talent for
making money in the business world. (A
better definition offered by Mark Rogo
of Morton Machinery)
A
New Word
Did
you know the first time someone called
me an entrepreneur I had been in
business for ten years and I didn’t
know what it meant? I was always too
busy trying to survive to learn fancy
terms like that. Looking back, I find
the dictionary doesn’t accurately
define it. “Assumes the risk for the
sake of profit.” Now that’s a joke.
It’s like I had a choice. Who in the
hell would invest in Joe Martin?
The
True Entrepreneur
To
me, the true entrepreneur starts with a
vision of a new and better method,
product or method of marketing and then
goes on to accomplish that vision. They
don’t ask for help or screw anyone to
get ahead. The bottom line means little
as long as they survive. Their trophies
are their buildings and establishments.
They enjoy their work, for it is their
life. They’ll impress you with what
they have done, not with how they look
or what they say. This is a different group of
people than you would normally associate
as being businesspeople.
If
you want to get along with this group,
skip
the
BS.
Confidence Building
My
own family thought I was going off the
deep end when they found out I was
quitting a good job at Kraft Systems and
starting out on my own again. I can
remember my mother saying, “You think
you’re too big to work for someone.”
My brother explained how I didn’t know
enough about business to succeed. Carl,
my best friend who later became my
partner, spent a couple of hours trying
to talk me out of it. Dad bought me a
micrometer. With encouragement like
that, how could I fail?
Ace in the Hole
Actually, I had an ace in the
hole. I was a hell of a lot smarter than
they thought I was, and I was willing to
put forth the effort it would take to
survive. I never was very good at sports
so this was going to be my “big
game”, and I didn’t intend to lose.
Profits never entered the picture.
Survival was the only success I was
looking for. One day at a time. One week
at a time. Finally,
30 years later, I’m at the goal post,
and I don’t know how to stop.
Surfing
I’ve always felt like a surfer
who is riding a big-ass wave over a
coral reef and doesn’t have time to
stop and plan the next move. I had to
make my own rules on the spot and move
on. There wasn’t time to discuss my
next move in an academic setting. These
rules have served me well over the years
for I have more satisfied customers and
employees than I deserve. The decisions
I had to make were always compromises
but I believe they were fair. Of course,
of the many decisions I made I wish I
had a chance to make a few again, but
who’s perfect? I’m not ashamed how I
got to the “goal post.” In fact,
I’m damn proud of it.
CNC Machines
Before starting on my book I
want you to fully understand that the
CNC machines (computer controlled
robots) of today are the future. They
will be used to manufacture products in
every country and for every industry. I
don’t over emphasize these machines.
Even third world countries, where wages
are ridiculously low, use CNC machines
because it’s simply a better way to
get a job done. CNC machines aren’t
only used in machine shops. They will be
used to print your books and weave the
fabrics of the clothes on your back.
These marvelous machines are a part of
our life and they are unavoidable. You
have to know about CNC whatever your
endeavor in business.
Your Word
The
most valuable thing you own when you
start a new business is your word. You have the
choice to make it even more valuable or
worthless. You should treat it as if it
were made of gold and never allow it to
be devalued. Once it has lost its value
there is little you can do to restore
it.
What is the Worst that can Happen?
You don't necessarily need a lot
of money to get started. You may find it interesting that
I believe it is easier to start a business with little
money as long as you have a skill that
can be sold. You have little to lose and
much to gain. The worst thing that can
happen is that you will end up where you
are right now; working for someone else. Start
with more money than brains, and
consultants, advertising agencies,
attorneys and accountants will soon
relieve you of the excess money supply. Lee Trevino,
a professional golfer, told a story that
best represents getting a business
started. When questioned about the
pressures of playing a game of golf
where a hundred thousand dollars could
be riding on one putt, he told the
reporter that it was fun to be playing
for such high stakes. Then he added,
“I’ll tell you what pressure is. It’s playing for $20 when you only
have $10 in your pocket.”
You have More to Invest than You Think
Your most valuable asset is time
and if you don’t spend it wisely
you’ll go broke. In today’s U.S.
labor market you have to figure at least
$20/hr for employees and $75/hr and up
for consultants; therefore, it’ll take
more money than most people have to pay
other people to do your thinking. I’m
sure that you believe all your problems
could be easily solved if you just had a
few thousand dollars more, but the truth
is it would only put off the inevitable
if you don’t have the intelligence and
self discipline to be your own boss. You
have to be a person that is driven to
succeed by not accepting failure, and
remember failure should also be defined
as not completing projects.
Here’s
a quick test to see if you've got what it
takes. Pick out a skill that you believe
would be helpful if you decided to start
a business that you don’t have now and
don’t want to learn. A computer
program like MS Word or Excel might be a
good choice because it’s inexpensive,
available and useful. Now give yourself
a two-week crash course on the subject
without any help. Don’t call your
friends who could help you or take a
course at school. You have to do this on
your own using only the help screen
built into the program and pure logic.
This is far more help than you’ll ever
get in the business world when it comes
time to make an important decision.
Using all the spare time available, work
day and night for two weeks. No weekend
breaks or time out for family functions,
sports or TV. Just work! If you can’t
control the computer program to do
something useful and relatively complex
at the end of two weeks, it might be wise
to keep your day job.
In
business, you’ll find you’ll work
the hardest when you’re not getting
paid; and if your business is
successful, you’ll make the most when
you're doing the least.
Positive Thinking
A total waste of time can be
standing in front of a mirror saying,
“I can, I will.” This isn’t the
secret of success. Positive thinking is
taking the time to understand what you're
trying to accomplish and learning what
is necessary to accomplish this. Your
everyday actions should reflect your
positive thinking. You have to focus on
your goal and not be “sidetracked”
by nonbelievers. When
you start a business, success is
dependent on what other people think of
you and your products, not what you
think of yourself.
The
two things you have to sell are a good
product or skill and integrity.
Integrity is something you have to show
people you have by your actions; it is
not something you can tell them you
have.
Leave Room for Failure
When I start on a new project I
always estimate my chances of success.
You have to be realistic and know there is
always a chance of failing. I found that by
mentally arriving at the percentage of
success I have before I start, a failure
is simply a loss. It isn’t devastating
because I knew the odds at the beginning and it
didn’t work out. This method keeps you
from mentally putting all your “eggs
in one basket.” Positive thinking
isn’t the answer. You have already
thought positive to start the project
and being realistic about the project is
what it will take to get it to succeed.
You also have to be realistic enough to
know when to give it up and plan your
next move.
Who
Starts a Business?
Have
you ever noticed how few engineers,
scientists, and business college degreed
graduates start businesses? They may
acquire businesses, but they very seldom
start them. The reason is they can’t
work alone or not
willing to take the personal, financial
and ego-related risks to accomplish their ideas. It may also take millions
of dollars of investment to experiment
with their ideas. What you find are
craftsmen and hobbyists starting
manufacturing business because they know
how to make and design the parts and the
tooling they need in a cost-effective
way. Investors are finding that hi-tech
companies can’t be run without a CEO
who has a complete knowledge of the
technology in which the company is
involved. Things are happening
too fast today to make decisions by
committee.
The
New Investors
The
venture capitalists have discovered this
fact and are willing to put their money
into ventures where they believe the
leaders can stay abreast of current
technology and lead at the same time.
This is a marvelous trend. The engineers
and scientists of the world were getting
screwed because the products this group
wants to build or sell needed a capital
investment that few individuals had.
They also can’t work weekends on used
equipment, as I have, to build a
business.
Taking a Chance
I remember an employee who quit.
He told me what was wrong with me
was that I was unwilling to “take a
chance.” Can you imagine that? I’ve
spent the better part of my life
investing my own money in my own ideas
and this guy tells me I’m unwilling to
take a chance. Taking a chance and not
liking someone's idea are two different
things. What is a legitimate risk in the
mind of one man is a measurable failure
in the mind of the next. This is what makes
the world of business so fascinating.
I’ve been called a pessimist. I call
myself a “realist”, and I look at all
new ventures pessimistically; this also
includes using my own ideas. Optimistic people are
always getting into trouble because they
resort to hoping things will turn out. By being a
realist I’m convinced things will turn
out. You have to “nit-pick” every
aspect of a new endeavor to eliminate
the chance of failure. Think like a
critical customer and fix the problem
you may find through “their eyes”
before it is an actual problem.
The Difference Between Sales and
Engineering
When
a sales person sells a product; their
satisfaction is that they closed a deal.
When an engineer or designer sells their
product; their satisfaction is that they
designed something that another person
would purchase. This fact is more of a
difference than you might believe at
first glance. My lack of sales skills
have screwed up too many “deals” by
me not knowing when to shut up; but, on
the other hand, a sales person could
never know the satisfaction I have when
I see my products being used by
satisfied customers. This is something I
have never been able to put a cash value
on, because in the cold world of business
it is the bottom line that counts. Or
does it? There is a need for both types
in this world, but there is more to
making business than “closing
deals.” Fortunately, there are still a
few salesmen out there who work with
potential customers to solve problems
and create deals where everyone wins. It is the satisfied
customers using products or a service
they like that can keep a business going
for the long haul, not a few quick deals
where you win and the customer
loses.
How to Lose Your Ass
If you really want to lose your
ass in your own business, get involved in
something you know little about. If you
don’t have the desire to learn and
think about every aspect of the needs of
the customers that would use the service
or products you plan to manufacture or
sell, quit while you’re ahead. To be successful you
have to be extremely good at knowing
your potential customers and their
needs. This is the
most important thing. This is the
information you can’t get from
outsiders or employees. You have to know
your customers well enough to know how
much they will pay for the service or
products you plan to manufacture and
sell. You could pay thousands of dollars
for market research that was done by
people more interested in their golf
game than your success. Excuse me for
being redundant but this point is so
important.
When to Walk
Did you ever notice that people
tend to judge others by themselves? What
I’m trying to say is that if someone
doesn’t trust you, you shouldn’t
trust him or her. I’m
not interested in any deal that involves
a partner who needs an attorney to do his thinking. The only
chance you have to break even on a deal
like that is to have a better attorney.
It isn’t worth the effort. Of course,
there are times where agreements have to
be properly documented, but if the deal
can’t start with a simple handshake
and a feeling of trust, forget it.
Partnerships
When two or more persons get
together and form a partnership where
they plan to work together for an
undefined period of time, it is as close
as it can get to a sexless marriage. The
way you can make it work is by keeping
it sexless and not start screwing one
another. Both sides must bring something
to the table, and both sides must
believe the other side is bringing
something to the table for the
partnership to work. Lawyers will advise
you to clearly define ownership at the
beginning. The problem with this is at
the beginning there is very little to
divide that has value. It
is more important to arrive at a method
of determining ownership at a future
date. Consider the
hours worked vs. investment. One partner
puts $5000 into a venture and a second
partner puts their skill and work into
the partnership. It could be quite
possible for the working partner to put
a couple of thousand extra hours into
the venture in just one year by working
nights and weekends, as I did. If their
time was charged to the partnership at
only $10 an hour this could bring their
investment to $20,000 in just one year,
while the second partner went about
their life at their regular job. This is
why I believe partners should accurately
keep track of the time invested by each
partner at a reasonable rate, as well as
money they may invest. Would it be fair
for the investor of only $5000 to own
half if the company (that in just a year
now had a value of $40,000 because of
the other partner's hard work) while
making income from a regular job and
spending weekends with their family? These
problems usually don’t come to light
until a spouse of one of the partners
wants a divorce.
From my
experience working around the small
start-up businesses located in
industrial parks, I consider the
above to be the
most important paragraph in this book. It might be wise to read it again.
Partnerships Can Have Advantages
The good part of a partnership
is when two people with different skills team up and appreciate the
skills of the other partner or partners.
Together they solve problems that would
be impossible to solve alone. They have
a common interest and enjoy working
together. Partners with the
same skills have to learn that they
can’t always have their way and that
they cannot be competitive with one
another and remain partners.
Partners with the same skills should
rejoice in the fact that they can
discuss their most technical problems
with someone who may help them find the
answer to technical problems.
Partnerships can be great. Mine was.
Investors
A decision that will have to be
made by most business owners is “how
much you are willing to give up to own
and control the company you started.”
Notice I stated, “give up.” Many
times the amount of money you could make
would be higher if you sold a portion of
your business. If an offer like this
comes along you should take the time to
review your past and decide if you
started your business only to make
money. I started my business to do it my
way and I find “moneymakers” very
boring people. I wouldn’t want to be
associated with an investor where I had
to explain my actions in terms of profit
only. A good investor is
someone who brings more than just
money. They
can bring contacts, experience and the
constructive criticism that could build
your company to the point that your
“smaller” piece of the pie worth
more money overall.
Get in a Business You Enjoy
I
believe that selling to a recreational
or hobby market in which you are
involved in is your best bet.
You know your customers because you’re
one of them. You like your customers
because they are just like you. This is
the type of market you can deal with
because it is possible for an individual
to develop a new product, manufacture
it, advertise it, and sell it to this
specialized market. I have and I’ve
enjoyed every moment of it. You have to
work too many hours to be working at a
business that you don’t enjoy.
“Nerds” Can Be Heros Too
The “nerds” that took over
the computer market succeeded when old,
well established companies with
“snobby” managers failed. Why? These
nerds weren’t nerds to their
customers; they were heroes. They were
doing the impossible, sitting behind
their computers developing products that
customers loved. Customers thought of
them as quarterbacks of their favorite
team. Every time you see what Bill Gates
accomplished think about this. To be successful it
isn’t necessary to look good to
everyone, just to your customers.
An
Interesting Analogy
One of the joys I have is
purchasing and owning the buildings and
equipment it takes to produce my product
line. I feel the same way when I look at
my manufacturing facility as a farmer
may feel when he looks over a field of
crops growing on a good day. Profit
allows me to purchase new and faster
equipment, and I love it. Farmers may
purchase more land and love it. You
can never get the same satisfaction by
adding zeros to your investment account.
A Wonderful Adventure
For
me, business is a wonderful adventure.
I’m never so sure where I’m going
that it gets boring. One day I may have
to go with the flow to survive and a
week later I’ll feel like a fish
swimming upstream. You have to know when to take
the helm and when to go along for the
ride. These are
difficult choices because you’ll be
dealing with employees’ personalities
and financial survival at the same time.
or Service
The Product
Nothing that I’m writing will
be of much good to you unless you can
come up with a good product or service
that will keep you in business. It has
to be wanted by consumers who are
willing to buy at the price you are
asking. This is where it all starts. I
will try to make you aware of many of
the problems that I had to solve and
some of the logic and things to consider
about new products, but -
You
have to decide what a customer will find
satisfactory when the complex equation
of cost vs. quality is calculated.
Customers all want perfect
products, but wanting perfect products
and paying for perfect products are two
different subjects. A customer will
usually start with the “low end”
product if they have a choice between
two items that are somewhat similar but
have a major difference in price.
Consider
the previous paragraph the second most
important fact in this book.
Where to Start
First, you have to know more
about your chosen field than your
average customers do. If you think about
this for a moment, your work or your
hobby will be your choices. Pick either
and again you have a choice of two:
eliminate an irritant or add a pleasure
to a task. The irritant could be cost,
size, appearance and complexity. The
pleasure that could be added is lower
cost, simplicity, appearance and pride
of ownership. Next, ask yourself if you
have built a gadget or have performed a
service that makes a particular task
easier? If you haven’t a better choice
for a business might be related to sales
or service. In this case, team up with
someone who can come up with products or
services but who doesn’t have the
skill or desire to package, advertise
and sell their ideas. In every case, the
road to success is a long one and you
need a skill that can be marketed or
lots of money to keep the doors open
until your products or services can
provide an income.
Ideas
I consider myself an original
thinker. I don’t copy other products
or methods; in fact, once I make my mind
up to start a project I will go out of
my way to avoid looking at what other
people or companies are doing. When I
start on a project I have an uncompleted
design in the back of my mind and
looking too closely at something someone
else has done narrows my thinking. I
believe I would lose more than I could
gain. There is nothing wrong with
checking out the competition after you
have developed your original idea, but
don’t do it until after you have gone
through the process of developing your
own idea past the concept stage. When I
hear teachers expounding their theory
that their duty is to teach students
where to find information rather than
making students learn the information I
would like to ask them how many good
ideas have ever came by putting several
books next to one another on a shelf. Good ideas are the
result of knowing a great deal about
many things and putting together many
seemingly insignificant facts from
millions of combinations to come up with
a new idea. Of course,
the solution found with a good idea
would have been the “obvious
solution” to a group who couldn’t
figure out how to tie their shoelaces on
their own.
Listen to your Customers for New Ideas
Customers or potential customers
can be a gold mine for new ideas, but
you have to listen to them. Usually they
can’t tell you what to make or how to
make it; however, they may tell you
about associated problem they are
having. Putting some thought into ways
to solve their problem can be a source
of some great ideas. My customers are
unusual because many can tell me not
only what to make, but also how to make
it. Few will be so lucky to have
customers like this.
Turning Ideas into Products or Services
Think about how the
product answers a
particular problem that could be useful
to others. Decide how much a potential
customer would pay to easily solve a
problem of this type. Now consider how
many customers you would have at
different price levels of quality. Pick
out the group with the most potential.
Don’t be too optimistic! Subtract the
discounts you’ll have to use to have
dealers sell your product. Now you have
the amount you have to be able
to beat in order to manufacture, advertise and sell this
product at a profit. Working with the quantities you
believe you could sell, you can begin to
accurately predict manufacturing cost.
Now you have the basic information that
you can use to decide whether you want
to go on with the project. Most of what
I have written about in this book will
give you more insight to accomplish what
is in this paragraph.
Selling Imported Products
Sometimes products can come to
you by way of an overseas manufacturer.
They can be found in import trade
magazines. The good part is you may be
able to become an exclusive importer for
them for a surprisingly small order. The
bad part is the agreement isn’t much
good if you can’t buy all of what they
can manufacture. I’ve personally seen
Asian products sold direct to the
consumer at a lower price than an
importer with an exclusive agreement
paid. This happened within months of
giving the exclusive agreement and after
that company spent thousands on
advertising the same goods. Try suing a
company in Asia and you’ll see what I
mean. Again, if
you want to lose your ass, buy a large
quantity of merchandise used for
something you know little about. You have to
know how products are discounted and
sold in the area you plan to sell before
you sign a purchase order.
Selling Ideas
We
have a customer who is a professional
inventor. He comes up with an idea and
does all the design work to put the
product into production. He then goes
out and sells the package to the
appropriate manufacturing companies. He
doesn’t get up front money and when he
shows them the product there is a
prototype complete with packaging,
tooling designs, tooling cost and
instructions; a very complete package.
He is very knowledgeable about his trade
and doesn’t require agreements before
he allows potential customers to see his
idea. He told me he has never been taken
advantage of to date. Most companies are
ethical and don’t steal ideas;
however, the ease that products can be
copied in Asian countries today makes me
more leery. Problems arise when
suggestions are given that are not well
thought out. For example, a suggestion
could be made to an oil company to
produce a fuel that didn’t pollute and
had twice the energy at 25% of the cost.
Any fool would find this idea
worthwhile, but the idea is worthless
without the solution. Ten years later
after the Oil Company has spent billions
of dollars improving their product by
5%, they get accused of stealing an
idea.
Plastic Products, a Good Way to Success
To
start a manufacturing business on your
own you need products that are difficult
to duplicate. Injection molded plastic
parts may be the answer. The tooling is
expensive but the part price is low. If
you want to “test the water” you can
save money by building prototype tooling
out of 7075 aluminum and do a little
second operation machining to eliminate
expensive slides. A plastic injection
mold toolmaker will explain what I’m
referring to. Once the tooling has been
built and tested the product is very
easy to manufacture. This is one type of
manufacturing that can be successfully
contracted out. The toolmakers that
build plastic molds are a very talented
group of people and usually can improve
the designs they work on if given the
chance. Not all plastic parts are cheap
throwaway items. Profit can be higher
selling to a specialized market that you
understand and gives you a realistic
chance of success.
Build
a Crude Prototype ASAP