Countertops Magazine Archive

Equipment Minded? Mind These Rules

Questions you should answer before upgrading your equipment

What do the shows Cool Tools, Orange County Choppers and Home Improvement all have in common? They display an inherent fascination with, attraction to and affection for equipment that is common among men. The gravitational pull towards sophisticated equipment is common among fabrication shop owners too.

Unfortunately, this inclination is fueled by an industry-wide overemphasis on technology as the be-all, end-all answer to personnel and production challenges. Add to that the endless manufactures and financers offering big promises and small payments and a fabricator could easily buy equipment that ends up overwhelming already strained business systems while at the same time draining critical cash flow.

This is not an argument against investing in highly automated and expensive machinery. Sometimes investment into the equipment side of a shop can pay off handsomely. This article is more of a checkpoint along a road with many off ramps that may lead to lower profits and higher frustration. If you are currently considering an investment in such machinery, stopping long enough to answer the following questions will serve you well.

Question #1 – Is your business currently struggling to improve output, manage over-time and increase profits? If so, adding equipment that requires significant training and that may have a big learning curve will only magnify these problems. The truth is that tiny little mistakes like missing decimal points, mirrored CAD files or the wrong edge selected from a pull down menu become gigantic expenses on highly automated machinery. Working to get these issues under control before the equipment arrives will increase the likelihood that you will get maximum benefit from your investment.

Question #2 – Will your equipment investment decrease your labor cost on your current sales? If so, what positions will no longer be necessary once the equipment is installed? It’s easy to pull the trigger on a sexy piece of automated metal. It’s not easy telling a man he no longer has a job. But what is the point of adding the payment if the labor savings doesn’t cover the new payment and then some?

Question #3 – Will the equipment increase your output without increasing labor? This is a tricky one, because increasing shop output does not occur in a vacuum. The additional counters that said equipment will produce also must be sold, measured and installed. Will the displaced labor from the new equipment be capable of performing all the other necessary tasks or will additional staff (and expense) be required in those departments? Hmmm…

Question #3a – What is your break-even point? How many more dollars, jobs or countertops are required to first justify the risk and expense of acquiring the equipment? More importantly, how many more are required to generate an actual return on investment…meaning profits in excess of the cost acquiring the new equipment and taking on the new business.

For the sake of conversation, let’s assume the answer to question #3 is yes, it begs a follow-up question.

Question #4 – Do you have sufficient sales growth to justify and utilize the proposed increase in output? If not, what is it going to cost to acquire that additional business? Are you willing to lower your prices or spend money on advertising and promotions? Unfortunately, business will not materialize out of thin air simply because you have the machinery to handle it.

Question #5 – Is your current staff capable of operating the new equipment? This question leads to many more. Is your current staff interested in learning how to operate the new equipment? How much training is necessary for the successful transition from manual to automation? Have you asked the opinion of likely candidates to determine who is and isn’t interested in the position?

Question #6 – Is your current staff over-qualified to operate the equipment? Meaning: are you prepared to pay a $25/hour fabricator to run a machine that only requires a $15/hour operator? This is a tough one but it bears consideration. One of the advantages of automated technology is that it lowers the dependence on highly skilled (and expensive) labor. Combining the two may have advantages, but it is going to cost more and may lower the return on investment.

Question #7 - What is the actual cost of the equipment? It is easy to calculate the number of additional jobs necessary to cover the cost of the payment, but what about the freight, set up and training? These typically are not factored into the sticker price and must be financed or paid for separately. Depending on the size of the equipment and where it is coming from, freight could add $3 to 5k to the cost. For set up there is the cost of paying the movers to unload it, paying plumbers to attach air and water lines and electrical on top of that, plus the cost to fly, house and feed your employees while they travel to a remote location to learn how to operate it! It could be $30 to 50k in additional costs before the machine is even turned on the first time. When tooling, consumables and breakage during the learning curve are factored in, the break even and return on investment will require adjustment yet again.

If we were just arm-chair operators dreaming about the latest tools on TV, we could buy the cool tools and ignore tough questions like the ones presented here. But we are not. We operate on a true reality show everyday where we make decisions that affect our customers, employees and families. Our mistakes aren’t wiped clean at the end of the episode and bankers have longer memories than the average television viewer.

But be encouraged! These tough questions are the questions that define successful business management and leadership. Figuring out the answers before we make a major purchase can help you keep your business from being cancelled like the latest sitcom. And that is the difference between you and the men who only play tool men on TV!

About the Author

Aaron Crowley has worked in the countertop industry for 19 years, the last 15 as owner of Crowley’s Granite Concepts, a seven-time Angie’s List super-service award winner. He also developed the Fabricators Friend line of stone-shop gear, founded and authored the book Less Chaos, More Cash. He speaks and writes regularly about business management in the countertop industry, and can be reached at [email protected].