Acquiring the first customers?

[DCNCP]

I have wanted to get into the machined product space for a little while. I enjoy watching things getting produced and knowing what I have made is getting put to good use by others.

looking at the tooling I have at my disposal and what my abilities are, I decided that I should first start out with a relatively easy product that I can produce without lots of capital. The answer I came up with is universal tooling that the bench top machine guys could benefit from (I like to machine as a hobby so this hits close to home). It's a simple and pretty straightforward product. A fixture plate with its own custom clamps and step blocks that can allow someone to clamp down their parts they intend to do some machining on. Nothing new here, just my own variation on it.

I went out to my shop and I produced a prototype to try out and also take some pictures of. I tried to machine a couple of pieces of raw metal with my clamps holding onto it and it worked just fine. So, I was confident in my prototype and then I started to think about how in the world I would go about connecting with businesses to ask them if they would be interested in including my product in their own product line to sell to their customers.

Now, this is where I am out of my element. I don't really know anybody in the retail business that deals with this sort of thing. So, with zero customer leads, I though I could simply start with shooting some online machine tooling businesses a message through their contact email and let them know that I am interested in providing them with this product of mine.

I believe I messaged about ten or twelve businesses. I did get a reply from the owner of one of the businesses I had messaged. He liked what he saw in the pictures and expressed interest in talking about details of price and so on. He felt that his customers would like this product and he could move 3 to 5 units per month. I thought "OK, well that's a good start". I appreciate his interest and I am happy to call him my first customer .

So, this is where I am currently at. I know I will definitely need more than one customer to make it worth while. I feel like I just got lucky with the email method and perhaps that's an inefficient way to reach out to people. Its basically the email version of cold calling and I imagine acquiring a customer that way is statistically low. Or, perhaps that's just the way it is no matter what medium is used. I don't know.

I have always wondered how companies get distribution set up with larger establishments. I sometimes visit the online stores of MSC supply or McMaster Carr and I see products I am familiar with and some that I have bought for my own use. I wonder how the smaller companies are able to connect and get some channels setup to get product moved. I guess I feel like I am not understanding how this all works exactly. My whole life I have done business as the consumer, so thinking about business in terms of the manufacturer is foreign to me.

[Fulcrum]

Sounds like you're getting into building machine fixtures. I don't think there is much of a retail market but I know there is a market for custom part testing fixtures.

[DCNCP]

That's correct . I used to work as a lab assistant doing photonic semiconductor experiments. I would go in the lab and figure out how the experiment should be set up so repeatable tests could be performed for high quality data. Much of it involved me operating as a custom fixture designer/maker to get things rolling. That was not really my initial job description, but I had my own personal equipment at my disposal, so my boss let me have at it. Only reason I am not still there is because it was an Air Force contract. When it ended, that was that. My contributions earned me the privilege of getting my name published in a couple of scientific Journals.

[PayingSimply]

First off congrats on finding an initial success. Understand this is all about relationships and make sure your communication is frequent and consistent with this client. Next you want to think about what your strategy is. Will you continue to build out the products in house or possibly partner and license out your designs to someone with wide distribution? Do your products have a distinct and competitive advantage over others?

We're rooting for you.

[DCNCP]

Here is what I have in my favor. My equipment is paid off and I have plenty of tooling on hand. My primary machine tool, the CNC mill, is a production capable machine. My disadvantage is that I only have one mill and thus only one running spindle at my disposal. So, I would say that on my own I can provide light production. Anymore than that, and I would probably need to extend past 8-10 work hours per day or consider adding another mill to the shop.

Currently, my numbers suggest that I am able to produce about 12 of these units in 8 hours. And if I extended that over 5 work days, then I have produced 60 units. With this in mind, I believe my capacity is more than sufficient to at least keep the machining portion of the production in house. My current plan is to keep a low stock quantity of 5 units on hand for the customer. That way I am not financing a lot and according to the proposed purchase projections of the customer I should be able to ship immediately.

In the mean time, I believe that I should keep brainstorming more potential product ideas that I can produce. I do believe my fixture is useful, but at the same time I also believe that the demand will be low. My primary objective was to produce something that I knew would be simple for me to make and be low stress so I can get some practice in order fulfillment and basic book keeping.

Another issue is that even though my margins look fair, my net profit is not great. My materials come in at $37 and my sale price is $82. The seller likes to resell at 150% of their acquisition. The first conversation I had with the customer was a little on the fence because I was asking $130 for my fixture. I sent another email and expressed that I wanted an open dialogue about pricing and I wanted to hear their side of it. So, I was told that at $130 they would have to sell for $200 and likely get priced out of that market. Sensing that they were wanting to make this work, I asked them to give me a couple of days to figure out how to get my manufacturing times down. And, so after a couple of days I figured out a way to produce the fixtures at a fraction of the time and still give me the same margin in terms of compensation for time. I came back to them with $82 and they agreed. So, that was my first attempt at something resembling a negotiation.

I would say that my "competitive advantage" would be the concept of having fixturing available to help keep operators from having to machine custom fixtures all the time. Over the last few years that I have machined things, I realized that setup takes a lot of time to do correctly. Some times its just as involved as making the parts and I found that to be a drag.

Two companies that comes to mind in the fixture market are "Mitee Bite" and "Te-co". Both have been around for a while and both are doing well. Teco produces many conventional work holding products that are of good quality and have sold well. Mitee Bite appears to be interested in selling to manufactures with a large portion of their product line devoted to providing customers with miniature clamps.

I actually have some clamps from Mitee Bite and I will be using them to produce my pallets for part production. I think they have good stuff. The difference between what they are doing and what I am envisioning is a product line that does not require the customer to machine out custom fixtures in order to incorporate the clamps. I want my product to be drop-in and ready to use for a majority of whats out there. And I understand that some times custom tooling must be produced in order to get a job done, but I do not want that to be the first option.

[Fulcrum]

Looks like your margins are light, but if this customer/distributor is buying consistently and paying COD than you shouldn't get hurt too much when the inevitable "oops" happens. Any way to cut the material price down to $22-25 so you can leave a little room for safety?

The more I think about this, I think a quality 3D printer may be a better tool than your mill.

That said, one of your best options for finding new customers is probably going to be a good pair of shoes and a website showing the quality of your product and listing your capabilities and capacities. Once established, it gets a "little easier" for work to find you; though this depends heavily on your reputation.

[DCNCP]

Right, and a reputation depends on the testimony of prior customers. It's somewhat like a catch-22. This is the reason why I want to work with the customer have. I know the money is not much, but what I am valuing more than a simple check in the mail is the start of a reputation. I see it like they are taking a chance on me, because they are. So, its my job to make sure they will get what is promised and in turn their customers are pleased.

One thing I have thought about doing that does not take a lot of capital is to start uploading videos of me producing things in my shop on a weekly basis via YouTube. It would be my way of self promotion and give others an idea of what I know how to do. Perhaps I could do a 50/50 type of business where I produce a product for steady income and I also produce parts for customers that have a more specific need... I just don't want to become a job shop. I know too many guys that have gray hair or no hair that have decided to run that sort of business. It's a hard way to make a living.

[Fulcrum]

Pictures and a listing of your machines and capabilities can go a long way. Having open spindle time, allowing for a quick turn, doesn't hurt either.

Any time you try out a new vendor, whether it's a startup or long established institution, you're taking a chance. I run into this with all new customers I go visit unless they're desperate. One thing working for you is that you will normally have drawings and set reference points for confirming the quality of your work. I'm not afforded that luxury as the larger industry I serve is ruled by tribal knowledge, the mentality of this is how it's been done for 150 years and this is how we'll continue doing it, and you need to be 60+ years old to be able to service our blades.

Don't be scared to ask for a shot at some work. Many places will have one or two jobs that their vendors have difficulty with. Find out what that work is, determine if it fits your shop and abilities, than deliver the job on time and done right. It really is that simple.

[DCNCP]

Thanks for the advice. Something else I have been wondering about is how to work with multiple customers when one or more could possibly be competitors. Let me explain.

So my current customer made no mention of wanting product exclusivity. They decided on what price they would be happy with reselling at. But, what if I acquire another customer and they are twice as large and wish to buy a larger quantity and end up selling at a lower price point from what my first customer has decided to sell at? In a situation like that, is there anything I can do? Wouldn't the first customer want to come back to me and ask me what in the world is going on?

[Fulcrum]

Interestingly, I had a similar discussion today. Your overthinking it. For the most part, the only time your price will change, from one customer to another, will be due to either larger purchases (either individual or rolling averages) or better payment terms to you. Until you sign an exclusive agreement with a dealer, you can sell to whoever you wish.