Really solid advice John! I was going to do a video to share my thoughts but your video covers it all. My one thing to add is to consider cashing out paper investments now (regardless of gain or loss) in order to buy equipment for deep discounts if we have a downturn. I did this in '03, '09 and '15 and doubled my equipment list each time at deep discounts.
What I found really helpful is mental exercise thinking "What's guarantee failure for the business"? and try to avoid those. Before I incorporated I wrote down 18 points that would led to the failure of the company. People often overestimate success stories as they see "only winners" recipes instead of all common reasons that other businesses failed and just try to avoid those. This is known as survivorship bias. I don't think timing market is a great idea, maybe next two years will be extreme economical growth, maybe not..but definitely be prepared all the time, not just now.
I own a 2 man machine shop (me and 1 other individual) and man, times are tough right now. The economy, rapid inflation, and the stock market have rocked us. I keep running out of work, getting a little bit, and running out again. Over and over and over for the last 2 months or so. I'm not sure what to do. Almost 4 years in business and this is the worst I have seen it. Luckily, I could probably not have any revenue for the rest of the year and survive, because my overhead is low and I have only small loans for 2 of 3 of the machines that I own. Still, it is wearing on me mentally. Definitely seems like the small prototype/ light production is not booming at the moment. It has been really good for the last 2 years. Hopefully, things pick back up. It's a huge struggle currently.
Can’t imagine with every part in the world on back order that work is slow. Reach out at large manufacturers and ask hey I can do this can I do anything for you?
I have 4 cnc machines, its me and 1 other helper and we are covered up right now! I make some of my own products and also do work for other companies. I think you may need to get out and hustle and find some work I am sure its out there. Price things right don't be to high. Making your own products may be an option also. Look into a hobby you like and think of some new products.
To everyone saying things. (This is my other account) it is slow. Just because things are on backorder over the world doesn’t mean businesses aren’t putting small orders on hold. It also has been extremely competitive for pricing/ lead times for machined parts because many shops are slower. I do agree I should pound the pavement but it is difficult to do because I do have things to do during the day (deal with employee as well as my many tasks of being a business owner and being the only setup/ programmer) it’s a catch 22. Also cold calling companies is one of the hardest things to do. I have been doing it for years with limited success. Just because I have a 3 machines doesn’t mean a business will want to order something. I have expanded over the years but the best companies from my perspective are ones where someone has gotten me in the door.
John, it's been so much fun watching you grow. I have personally learned so much from watching you over the many years I have been following you. Stay humble, keep debt to a minimum, and never be afraid of change....change is inevitable those who survive are those who embrace change. It takes so much work to get a business launched, the idea of changing it is what leads to most failing. As you say....fail fast and fail cheap....but never give up.
People always need stuff fixed it seems. In 25 years I have never not had work. The more stuff I fix the more broken stuff finds me. Right now is super crazy because so many parts are not available people are forced to fix things they would have just replaced before.
Good point. I'll add that YOU are also excellent at what you do and, I suspect, have developed a good reputation within your area for the work you do. The good news is that's a fairly "repeatable" process for just about anyone out there! Get some equipment, do good work, be on time, and communicate - the future will likely be kind to you.
customer diversification is key for small business taking off. The more customers you have and the more diverse they are, the better one will weather off the critical situations. That’s my advice.
Diversification is just a function of what kind of risk you can afford. A single guy in a cheap paid for house with a cheap paid for machine in that house with a 9 to 5 that easily pays for everything in his life only needs the best customer. One guy who will pay great money for you to be his "go to guy", when he needs something fast and is willing to pay twice market rate. But if your responsible for 50 thousand dollars in outgoing expenses every year via kids, stay at home wife, mortgaged house, bank owned equipment, building lease to put the machines in and the business is your only income(which means you need to make in the 60s thousands) then you better diversify or risk some nasty stuff happening. You never want to diversify unless you need to, ideally you will just take the best work you can find and ignore the rest of the people, but sometimes you just have to do it if you can't afford a dry spell.
John, I had a line of credit at a bank once but didn't use it. Sort of the mind set you describe. Then one day I wanted to use it. There was some change in loan officers we were unaware of (My wife and I) the new one closed it due to inactivity, without telling us! This caused me to change banks. In looking back on that (I don't know how the line you described works) I think even though you don't need it. It may be good just to use it and pay it off immediately. This builds a financial relationship and should improve your line of credit (maybe?). On expensing or capitalizing you material. Would that not change the Tax situation (maybe increase it?) on that material?
This makes sense here. In credit cards it’s the same story. Put a small subscription on it and automatically pay it; else they may close it and then your credit age of accounts is impacted
Have been following you for several years. Thank you for all your great content and advice! I love your sense of balance between living "lean" and taking risks. Both are essential. Using 50 years of hindsight, I think leaning a little more toward "risk" would have served me better.
What a fitting video. I live in Metro Vancouver where a house costs 2 million dollars. People here are in this haze of "everything is ok, my house IS worth × and it's only going up". In reality, we're on the brink of something bad and real estate numbers are already falling. As much as I'd love to go buy a new machine for the shop, my gut says hold on, it's about to get ugly.
Real-estate economists predicted the 2021,22,23 to be sharp rise then dip in 22 then small rise in 23. It seems like this trend is playing out. The future is not set but that's what I have gathered from my research. Now that interest rates have gone up, money has more value and investors can move their assets and funds around to take advantage of that so their will be a bit of turbulence while the economy adjusts.
I keep hearing people in Vancouver bitching about the housing market but I rarely hear about people just having enough and moving. I think those 2 million prices are here to stay. Because there is this huge cushion of people like you who are willing to buy when the price gets a bit cheaper pushing the price back up. The only way stuff is gonna get better is massive supply or massive drop in demand. Which means lots more building(which isn't gonna be allowed) or lots of people actually leaving. (which nobody seems to want to do)
I bought a machine last year and I've been grinding to prove my abilities to potential customers by coming up with my own products. Definitely seeing growth and opportunities now, but it's no easy path. I feel like going into some of a recession can actually be good for me since the larger overextended shops may shrink or disappear opening more doors for me. I'm debt free and plan to stay that way.
There is a rule of business that I have never heard anyone else talk about. That is never bank with just one bank. Ideally, have your main operating account with one bank and your loans with another. The monthly fee for keeping a low activity checking account with a second bank is like insurance against the bank you borrow from.
If ANYONE criticizes you for having 6 months of working capital, they are flat out ignorant OR are morally bankrupt business owners who play with their peoples livelihoods. In fact, its flat out smart to do. Im on the minimum of 6 months boat with you. Actually, I ideally want a year of cash and 1+ in less liquid assets. When i was young, I never understood the term "pay yourself first", but now, its everything and people would be much better off learning it young. It would prevent the situation that we had in 2020 and dealing with now by having the government pump FAR too much cash in the economy to keep people spending. Anyway, you're a stud John. Major stud. People would be idiotic to not listen to your insight.
You are epic! I have my own small machine that I made up and running in my garage and I'm cutting aluminum like a champ thanks to your videos. The best on the internet bar none. You are incredible sir. NY gives me anxiety but if I was ever in your state would love to see this shop.
6 years ago I bought a tormach without having ever seen a cnc machine before. Now I'm 4 years into running my small job shop full time (shout out to us small shops in our garages!) and I owe John at NYCNC a huge thanks! He has help out us little guys more than anyone else I Know
@@HuskyMachining I'm saving up cash to try and buy a Tormach so I can start doing something. However, this market looks like it's headed towards the bottom so idk if this 'buying any product' phase is going to last much longer. Hopefully I'm just naive and things will be fine, recession or not, if I buy a machine and start making money.
@@MikeB1972 If the market goes down it will most likely go up again. I don't know your situation but if you can get your machine without a loan, it will be easier in case the market crashes and you cant make money with the machine (or not as much money)
@@HuskyMachining Exactly my thoughts. I've been following a couple successful business owners and not taking on unsurmountable amounts of debt seems like a good idea. While it's very tempting to loan out a Mini Mill or 1100MX I feel it's better to outright own the equipment, at least starting out rn. I can always upgrade and expand later if/ when profits happen. I just gotta keep my eye on the goal and keep saving.
@@MikeB1972 exactly! I have 4 machines now and each one was bought used and 2 machines at auction to avoid the dept. I'm a huge fan of tormachs if your new to Machining like I was a few years ago. Its a lot cheaper to crash a tormach over a haas mini mill
Really great points John. My dad's fabrication shop went broke in the 80's recession when incoming orders were cancelled overnight, and even in-process jobs in the shop were cancelled. People stopped paying their bills to conserve their own cash and broke contracts. My dad was just to slow to aggressively drop expenses and overhead, and didn't expect that long-term relationships with solid companies would mean nothing.. Planning for the worst case before it happens is so important.
People forget how quickly things turn on a dime when they do…Everything seems to happen slowly until you reach that breaking point and then the wheels come off. The most leveraged up will be in the biggest trouble 1st. People assume the line of credit will be there, but when banks get scared they pull their horns in and lending and liquidity dries up. Then everyone needs to sell and no one has the money to buy….
Have a plan, a backup plan, an alternate backup plan, and a final fallback plan. I participated in two tech startups. I learned about things about stuff.
This is the huge advantage that I think John Saunders has and videos like these are gold. He fully admits having to learn the machining side but his business/finance background is such a huge benefit for starting/growing a business.
I have to say, it makes me happy to see these guys doing well. I hope it continues that way. Sounds to me like there’s preparation for the inevitable downturn. Maybe the supply chain mess will ultimately benefit our manufacturing sector through some “reshoring” . I hope so.
It’s nice to always have fill in work for your employees if work is spotty. Like that fixture you always wanted to make or run another airline. Also getting material quick so they see work around them. It keeps your people at ease when things are slow.
John - great insights and great topic! And not just relevant to current (or looming) economic conditions... Anyone starting or running a business should be thinking about this stuff! I'm curious how your job has changed as your business has changed and grown - what parts you love and what parts you don't. I know many folks (myself included) who start a business doing X because they love it, but find themselves doing everything but X! In my second business I spent literally 3/4's of my time raising money to fund it instead of doing the things I was most passionate about. Yuck!
This is fantastic, I never realized you have a bunch of videos about business stuff and things on your website, I just got my LLC 2 weeks ago and it's going to be a big Year
No where near a full blown business or mfg levels just working out of my garage on my free time learning potentially hope to reach the level of full time machining. On the bight side I do own my tormach out right which I’m proud and believe it allows me not to worry about debt. Currently tinkering with the Cnc world I’ve learn’t so much from your videos thank you for great content.
I was around when 2007-2008 recession hit, my business was only 8 years old and it was ugly, it was very difficult and I don't want live this again. I say 2007 recession because in manufacturing we get a heads up on the economy. I started seeing a decline in available work 6-9 months ahead of the 2008 recession made the News headlines. We have started to see the same signs a couple of months ago and I am preparing for the worst. I have taken the following steps; I have cancel machine purchases, reduced the R&D budget, reduce staff, farmed out the cyclic work and doubled down on sales. Most business will have some kind of depth and many other obligations, they is only so much you can do to reduce your monthly costs, the only way out is to increase revenue. Talk to your business partners they may share your views, take the opportunity to discuss and secure deals.
Thank you for making this video! I am one of those guys going from nothing to something. Well, almost. I have access to my father-in-law's old Bridgeport and a 4' lathe. I added to that a CNC plasma and just built my first fixture table. As I move forward, one of my main priorities is getting a better grasp on the administrative side of operating in a manufacturing environment. Videos like this help. Thanks again!
Not a massive professional, I run a small engineering/manufacturing department, but it seems to me that a lot of what is important is to trust your instincts, and be ready to commit. If you sense the winds blowing, be ready to say, alright, buy less stock this month, start putting out job shop ads, or whatever the parallels may be for each situation. Often times the business leaders are they because of their instinct, and if you are able to get the jump on it before it is obvious to everyone, you will be in better shape.
You've gotta be one of the smartest men I've seen when it comes to these issues.. I appriecete these videos you put out on business.. most are scared to breech these topics
Hi John, I liked this video.I was just wondering how are you liking the new Horizontal?. it looks really sweet! Keep up the content You are now my main Lunch Time entertainment. Huh Huh
One thing as a new business owner, put in your P&L a line for bad debt write off monthly. Plan for those that will not pay. Second, be careful about who you extend credit to. I have learned over the years that friends who own businesses that may purchase from you sometimes have bad accounting practices. They will use that friendship to delay or not pay you. Keep your friendship out of your financial decisions.
Holy crap, John, I haven’t seen your channel for a long time, man you have a good shop now. I think the last time I saw your channel you had just purchased your first haas.
I think the interest rate rises have been a bit too reactive because inflation and cost of living has gone up already. It was overdue and there will be an adjustment phase now that "money has more value". One indicator I use to see how the manufacturing market is going is look at the price adjustments on old xometry quotes. They've gone up about 10% in the last 6 months or so, and over the last 4 years almost doubled. These rates seem to be indicative of what I get from manufacturers directly. Things that have gone up in a similar trend are microchips and some consumer electronics, and in Australia material cost have gone up due to a building demand spike driven by government grants. In Australia unemployment is fairly low and finding good people available to fill positions is not easy at the moment. So in summary expenses are changing but machines are not increasing in price as much as machining work value is increasing therefore it seems like there should be an opportunity to keep doing well if you can keep the effect of increased machine repayments from being a significant part of the bottom line. I expect things to settle into place in July with the new financial year allot of companies may hold off hiring and starting new projects until the start of the new financial year, and January new calendar year. With more and more populations being modernized and growing economies around the world there will be steady growth over the next few years I believe. -Ken
Here's my advice. As business owners, our lives are FULL of promises. Like everyone else we make promises to our spouses, our kids and to ourselves. Some of them are conflicting. But we also make promises to customers, suppliers, employees, advisors, bankers, investors and taxmen. These promises can also be conflicting. There is a big lesson you have learned at home that helps you through the bad times and is good at work too. -The promises you make to your kids you devolve to your spouse, you both know what you have to achieve not just what activities need to be done. At work, you will be tempted to create recipes for your employees so they know what to do. You are not Henry Ford, get over yourselves. You must learn to devolve the promises to your staff not delegate the processes. You are better to have your employee leave early having satisfied a promise than work late and still break it. In times of difficulty, it's better to have people who can creatively keep their promises than people who ridgidly follow process. Devolve promises, stop delegating processes.
This pandemic has taught not to rely on the government for assistance. A lot of us started taking our journey towards financial freedom more serious! I advice everyone to start your financial journey right now because 6 months Of negotiating doesn't make any sense no matter what side you're on!
Well if you feel broke or you wanna get richer, look at the chart for Apple, Amazon, Tesla, Etsy, McDonalds. Then look at the chart for gold and silver. Then ask yourself what you would rather invest your hard earned money in. Also look at the charts for these stocks during the 2008 financial Crises and global pandemic of 2020. Did gold live to its promise as safe-haven ? Gold and silver crashed together with stocks. So if you want to start building wealth with your hard earned money, which asset is better? The chart speaks for the truth louder than the hot air coming out from the mouths of gold and silver bags I rather invest in bitcoins, make more than enough of my capital rather than to continue to recycle in gold and silver that always promises to be a long term investment year in year out.
I did get introduced to this expert from a comment section on twitter and began trading with them and their services did yeild positive result in a space of 1 week
In some businesses, even ones that involve machining, you can follow all of John's advice and it won't work out? Why? Because sometimes you have to run very ean just to compete. In those situations there is a lot more pressure on cash, etc. For our business I would love to buy a new Haas (like SMW has, for example), but that's just not possible. So we purchase a used machine with much less capability. And this is an ongoing snowball where you struggle just to stay healthy and live for tomorrow. That hat affects many small businesses. I've never gotten the impression John has ever been in that situation, at least not for an extended time.
If you understand real estate, definitely use some of your profits to buy rental property that cash flows. It has served me well (real estate that was foreclosed in the past has been from people living in the properties and they couldn't keep making mortgage payments in a tightening cycle). When my shop slows down, rental property that cash flows can carry the shop until things pick up. People will always need a place to rent so the cash will be there. It does take some time and effort to manage but if you have a good deal, you can hire a property management company when things are booming in your shop. The Ohio rental market is strong given the property values are so low. I'm in Southern California so I know how cheap Ohio is. Best of luck
The safest your business will ever be from a recession is a little paid for cnc mill in your house. You have no employees, no machine payment, no lease/mortgage, you really have basically zero overhead. I'd say your timing is great to get a little cheap cnc machine. In fact a recession might be a good thing for your business, all the other guys with overhead might go out of business and you will still be in your house making parts.
What goes up must come down. The economy is not immune to this. You must be prepared for a downturn....especially when things have been doing well for a long time.
Reading about people grabbing multi-figures monthly as income in investments even in this crazy days in the market,any pointers on how to make substantial progress in earnings?would be appreciated 😇,
My growing love for crypto caused me to explore until I came across Eliana(although I'm trying to avoid sensationalism) they are by far the best. No hype for hype's sake, but great inspiration to trade crypto
Was in a business with my farther in the 80s, things were great. We had excellent credit and like you said we only borrowed money when we really did not need to. It was just to build our credit rating. Well the Dot Com Crash came and most of our customers went out of business owing us money. There was not enough work out there and my farther wanted to retire, so we called it quits. We were able to sell our equipment and walk away without owing anyone a nickel.
I've never been anything except a wage slave, so I've never been successful enough to fail. I have just since March 2021 become a content creator splitting my time between that and a part time job very close to home cutting my expenses down. I'm in the middle of designing and fabricating an entry level CNC router out of junk that which can be replicated in a small shop. It's based around aluminum castings which bolt to turned and ground shafting using LOTS of inline skate bearings, meaning there are no precision surfaces to machine. The castings will need a few holes drilled and tapped. The whole thing will bolt together with user choice acme all-thread or ballscrews with a base that adjustable for size, but about a meter square. Entry level machine running LinuxCNC for the entry level. Not even running Fusion or any Windows software, but only open source alternatives FreeCAD/Inkscape/Blender, etc. And then the next revision will switch over to helical rack&pinion drive for a machine optimized for cutting large sheets, cutting boards, etc.. Hey, not too many people can say that they have machined steel with a machine made out of melted down drink cans, but mine will do that. It won't do it great, but by the time I'm done it will be competitive with a heavy duty Shapeoko. That's a promise. And I'm doing it right in the beginning of the Greatest Depression. My timing is impeccable.
Sadly, I have the feeling we are going look back and be surprised at how much we underestimated what is coming. I hope I am wrong, but I think this is going to be worse than 08 and of a much longer duration. People are going to have to go back to basics and adjust their priorities and standard of living. I also think there are going to be some great deals on CNC machines…sadly enough.
You can always get advice from yourself. Trust your gut. It’s usually the right decision even if it’s backwards or opposite of what others think or say.
Hi I noticed you said you started out using a small CNC router. Well, I would like to get into small boat building and would like for a small CNC router to assist me with some parts with complex angles...can you reccomend a good, small, INEXPENSIVE gantry type machine with torque to spare. Wood and wood composites would be the chief materials to cut and shape. Do amateur machines with decent software exist. I spent money on a CNC program and do not know anything about home craft. HELP!
6:00 Until in the middle of a downturn when the bank sends a letter to state that they are reducing your 600k line of credit to 6k, or what you happen to have on it. Ask me how I know.... Buckle up kiddos. It gets real bumpy from here...
@@js18ms Thinking is inherently structure. Idea's are not structured, they just come from the ether but it thanks structured thought to sort out the good vs bad ideas.
@@js18ms Thinking is reasoning out things. And reason is just mental structure, so to think without structure is to think without reason which isn't possible. That's just having random ideas. Which is inspiration, not thinking.
