How to be successful in small business

Welding shop owners share tips, experiences

WWW.THEFABRICATOR.COM MAY 2004

May 4, 2004

By:

Greg Lamm

In November 2002 Greg Lamm was laid off from his full-time welding job.

One month later he started his own microwelding business.

This year he plans to purchase a laser.

So how did he do it?

It started with one phone call, then two, and then more phone calls from mold or tool and die shops in the Rockford, Ill., area after he was laid off. They all asked him if he had a welding machine, and he told each one of them no. When they asked if he planned to get a welding machine, he said the same thing.

"People were asking me, 'What are you going to do?' And I said, 'I'm going to get a rocking chair and watch the grass grow.' 'But it's November,' they said."

So he didn't stick with his grass-watching plan for too long. As of Dec. 1, 2002, he was in business, owning and operating Precision Micro Welding.

Lamm has learned a lot from the process about how to start and maintain a successful welding company.

First Steps

To get the ball rolling, Lamm called several banks he hadn't worked with before to inquire about getting a loan to buy the equipment needed to start his business. When no one would give him a loan, he talked to a small, local bank he had worked with before and got better results.

The first thing the bank asked for was a business plan to take to the board. Lamm, who didn't know what a business plan entailed, learned from the bank about the information he needed to get—quotes for the equipment he needed, prospective customers, what he expected to make, and how he expected to make it—and came back with all the answers in a basic business plan.

To find out how much he should expect to make, he called his prospective customers to find out how much they expected to spend on welding for the year.

"To set the company up, I borrowed enough money to buy equipment, but not enough to live on," Lamm said. "Now that I look back, I probably should have borrowed enough to live on for two months, but I did OK."

Once he got the loan, Lamm set his rates by calling other shops to see what their rates were. He bought the welding and office equipment he needed to start the business, buying only what he needed, nothing extra.

"I started out with what I needed to do the job right—no fluff—and let the money coming in pay for new equipment. Don't rush in and try to do or buy everything all at once," Lamm said.

He then hired an accountant, an attorney, and an insurance agency. He also established what he calls an advisory committee, which comprises his wife, pastor, attorney, and accountant, to help him make sound business decisions.

"You need to be business-minded," he said.

And then he opened the doors.

"What we were told we could expect to make the first month we made in the first week and a half," Lamm said.

Success has followed Lamm since then, but not without the peaks and valleys typical in the business world.

He said one of the secrets to his success is building a solid foundation.

"Get the foundational stuff taken care of first," he said. "Keep steady bank records and steady accounting practices. Organization is everything, from your accounting to your floor plan to your welding wires or your tungstens."

Lamm said he's averaged one new customer a week since the company opened and an 8 to 12 percent increase in business a month since October 2003.

Much of this is due to the way he manages his business, Lamm said.

"Do the job right the first time, ship it on time, and charge a fair price," is his credo. Because he's in a service industry, he feels it's important to show his customers that he appreciates their business simply by thanking them and by following up with them to make sure he's meeting their needs.

He also feels it's important to take ownership of the business by keeping it organized and keeping his facility clean and uncluttered. He saves money by doing everything he can himself, including making his own business cards.

Casting in California

Although he's on the West Coast, far from Illinois, and specializes in a more artistic type of welding than Lamm, Jonathan Newell also has learned quite a bit about running a business in his last 14 years of owning JN Design, Grover Beach, Calif.

One of the secrets to his success is farming work out to welders based on the job his company is contracted to complete.

His company focuses on the high-end custom bronze market, with the bulk of its products being combination cast and fabricated custom lighting, railings, gates, fountains, furniture, memorial plaques, and sculptures.

"We cater to designers and builders from Pebble Beach to New York," said Newell, who was in the jewelry business before completing an 1,800-lb. bronze fountain for which he poured the foundry. This is what got him interested in larger bronze jobs.

To get leads and commissions, Newell travels all the way to the East Coast to tradeshows. He also relies on referrals from those he completes projects for, such as the designers who represent the customers his company ultimately serves.

His company employs sand cast and lost wax casting techniques, depending on the job, and uses silicon bronze that can be gas metal arc-welded and gas tungsten arc-welded.

Like Lamm, Newell sees putting the customer first as critical to his success.

"Whatever it takes to meet deadline and keep up with your commitments," Newell said. "If you mind your p's and q's and clean up after yourself, especially on building sites, people respect and respond to that."

Another key to Newell's success has been diversity in the jobs that his company does.

"Once they [the customers] realize the diversity that we do, we sometimes start out with a sink pedestal and then end up dressing the whole place," Newell said. He said it's the customer-specific aspect of the work that makes his job interesting.

And in working with the customers, Newell has found it beneficial to put together client-specific presentation portfolios. He said he has 1,200 to 1,500 photos to choose from to make each portfolio specific for each customer he meets with.

"I focus on showing them the work that relates most to what they're working on," Newell said. He also finds it important to ask the designers about the client before he meets with them to get a better feel for the situation ahead of time.

How Consolidation = More Business

Although Richard Bludworth may not have a presentation portfolio in mind when he thinks about gaining more customers, he does regard sales strategy as key to his success in a niche market that's undergoing much consolidation.

A 6-year-old company with 25 to 40 employees depending on the job, Bludworth Marine LLC has been up against some of the same struggles as the shops with 10 or fewer welders.

"In the past six years, the industry has seen a tremendous amount of consolidation of customers and competitors with bankruptcies among each," said Bludworth, owner and president. "On one side of the competition are the large shipyards with physical assets we cannot compete with on medium to large marine repair jobs, and on the other side are rig welders with a garage who can compete with zero overhead for the small repair and fabrication jobs. The number of customers has shrunk, while their size and buying sophistication have increased. This leaves a very narrow and specialized niche of available customers and jobs to whom we can sell our specialized knowledge."

Bludworth Marine specializes in commercial marine vessel repair on inland and offshore tugs, barges, and ships, as well as metal fabrication primarily for the commercial marine industry—an industry that has had its share of mergers. Because fewer customers are available, the company has increased its sales effort and diversified the types of sales strategies it employs.

These sales approaches have benefited the company, which has gained customers and more work from its original customers.

Bludworth said another reason the company has remained competitive is its round-the-clock service. It's also rare for the company to outsource any work. Sometimes it will contract out if the company is overloaded, but this doesn't happen very often. Other times the company will outsource to companies that cut metal into shapes it needs so the cutting doesn't have to be done on-site.

Although the company has remained competitive, Bludworth admits that growth and pricing have been low.

"Unit pricing of our services has remained depressed to levels of 15 to 20 years ago, and net margins of 0 to 3 percent are common. While wages paid have not increased as much as the general populations, other costs, such as environmental and insurance, have skyrocketed," Bludworth said. "I'm not sure what profit margins would allow us to grow like we have in the past."

At the same time, however, the company has invested in more machines, even if they do the same type of work the company's older machines do. Bludworth recognizes that even though his company is in a niche market, it has been able to extend its reach.

"Our niche is not a growing market, so we have to take our business from other people," he said.

Different Businesses Require Diverse Techniques

Whether it means grabbing business at the right time, presenting the right portfolio to prospective customers, or just getting the word out, all of these business owners agree that it's important to be proactive if your business is going to survive.

Many techniques and resources are available to help small businesses survive, and it's important to seek them out to make the best business decisions possible.

"You cannot know too much, and you cannot have too many sources," Lamm said.

Most business owners agree that research, along with the experience gained from starting a business, will give you the best idea about the decisions you need to make and the directions you need to take.

Bludworth Marine LLC, www.vesselrepair.com

JN Design, www.jndesign.net

Precision Micro Welding Inc., 815-636-9100

What challenges or successes have you encountered in running a small welding shop? Write to Associate Editor Stephanie Vaughan at stephaniev@thefabricator.comabout your experiences in the small-business world.

Read more about small welding shops and their quests for success in "Nobody's business but your own" in the May/June issue of Practical Welding Today.

Words of Advice for Small Welding Shops

"New business owners [should] join organizations that directly apply to what they do. By doing so, they gain exposure and make new contacts, as well as have a wealth of information and resources available to them to help them learn and grow. I've joined our local chamber of commerce and the United States Microscopic Welding Association." — Greg Lamm, Precision Micro Welding

"Look to those who are successful around you as role models." — Jonathan Newell, JN Design

"Increase your sales effort and diversify the types of sales strategies you employ." — Richard Bludworth, Bludworth Marine LLC

"Make sure you can pay your loan payment." — Greg Lamm, Precision Micro Welding

"Stay on top of new equipment and technology trends." — Jonathan Newell, JN Design

"Don't rush out and buy all the newest, state-of-the-art equipment. Buy what you need to get to open, and borrow, rent, or lease the rest until you can buy your own." — Greg Lamm, Precision Micro Welding

"Find ways to be efficient." — Jonathan Newell, JN Design

"Never order more product than you can use in one month." — Greg Lamm, Precision Micro Welding



Stephanie Vaughan

Contributing Writer

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