A major capital investment may seem like a no-brainer, but it will change your organization in ways you need to consider before signing the purchase order.
I learned this the hard way. When I decided to purchase my first automatic, way back in the day, I had enough manual work to keep us busy for three months working 16 hours a day. I was drowning. I had two full-time employees and 1250 square feet of space. I just knew the press would be our savior. I could easily make the $732/month payment. I had $10,000 in the bank, a book of work, and availability of another 1250 square feet next door for expansion. It seemed like an absolutely obvious choice, so I pulled the trigger.
Here’s what happened. Our cash balance of $10,000 immediately dropped to $4000 with the deposit of $6000 on the equipment loan. I didn’t have much credit then, so the bank required a 20 percent deposit. That left about $30,000 on the note with the payment of $732 per month.
The equipment came in and was installed. About $700 of electrical work was required, but no compressor, chiller, or gas plumbing. This was an all-electric Precision Oval, for you old-school vets – a heavy iron workhorse.
We got to work, and within three weeks, we had burned through all of the backlog. It was amazing and exciting at the same time, but this is when the reality began to hit home, and I did not even see it coming.
The operation of a 48-inch electric dryer was about $250 a month more than what I had been spending, and my rent had doubled to $1200 a month. (Yes, this was a long time ago.) So just those two changes added $850 to my monthly overhead. I didn’t add any new people right away, so we were good there.
But three weeks after the machine was installed, we were out of work. The scheduling board was empty. I had relied on family, friends, and referrals, but those channels were now tapped out. The good news was that I had no serious competitors then, but I was still out of work. That meant I now had a sales problem.
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