4 Success Secrets of the Most Profitable CNC Machine Shops
November 26, 2012
Gardner Research recently completed an in-depth study of CNC machine shops to better understand what separates high-performance shops – those that excel at income, profit and growth – from average ones. The study found that the characteristics of these higher performing CNC machine shops included gross sales that were 14% higher than other shops, and median net income margin of 12.9% versus 5.9%. Moreover, the average growth rate for high performing CNC machine shops was 51.6% while the other shops averaged only 25.1% growth.
So what do the higher performing shops do differently than their competitors? Among the findings are these critical issues:
High performance CNC machine shops consistently invest in new equipment. The key word in that phrase is “consistent.” Other shops may invest heavily when they have a good year, but then they spend much less in other years. High performance shops invest regularly so that they maintain a much more current manufacturing environment.
These top performing shops are early adopters of advanced technologies. For example, 53% have Horizontal Machining Centers (HMC) versus 42% of other shops. And more of the high performing shops perform full, 5-axis contouring work. Similarly, 60% perform high speed machining while only 46% of other shops do so.
The most successful CNC machine shops invest in their staff. Although they typically have fewer employees per capita than other shops and do not pay higher hourly wages, they are more likely to have annual performance review and wage increase processes, leadership development programs, reimbursement for continuing education, and formal training. Even with these programs and extensive benefits packages, these companies have lower employee costs, which means they do a much better job of maximizing employee efficiencies.
The top CNC shops understand how to use marketingmore effectively including advertising, trade shows, brochures, videos, Web sites and customer tours. As a result, the median ratio of bookings versus proposals is 75% for high performing CNC machine shops versus 60% for other shops.
Gosiger can help you determine the equipment and technologies you need to insure that your CNC machine shop achieves and maintains peak performance. To learn more about the Top Shops survey data, go here.