Should I replace my machinery?
Pioneer’s Danny Williams answers your questions. This month: “We are a small fabricator making up to 250 windows and doors a week, which we are selling mostly to local installers/builders, and around a third of those installed by our retail company. Most of our kit needs renewing as it comes to the end of its life. We are facing that crucial question: do we invest or do we buy in?” AJ Cornwall.
In the rest of your letter you gave other information, although not enough to give you specific answers. But you also said to me ‘I guess you’d love our business but please try to be objective’. Well yes of course I would love an account for 250 frames a week but Cornwall is not on our patch so I can be objective.
In my experience you should be profitable with that number and you have done OK out of it for many years. You have indicated that your overheads are relatively low and that you own the premises. You are also using kit that is way past its sell-by date and with limited or no automation; and that staffing is not an issue for you with a ready supply of loyal local people.
At 250 frames you are not far from making pretty serious money, with every additional frame produced making you money – or it should be. If you could boost production seriously then you should make serous money, though of course you need to boost your marketing and sales effort too.
Investing perhaps £400k for a decent used machining centre and a few other peripherals will allow you to at least double your output while improving quality and reducing staffing and, crucially, reduce your reliance upon humans. In fact, even at 250 frames you will improve profitability so that is perhaps a no-brainer.
However, other factors kick in: your age and ambition being significant. You will need to step up sales of course to feed the new kit and ultimately you have to ask what your plans are for the longer term. But assuming that you have 10 years left in you, investing in new plant has many compelling arguments in its favour.
Choose the alternative: buying frames in, if you want a relatively easy life and have no ambition or idea of the end game for you and the business. But the fact that you bothered to ask indicates to me that there is plenty of life left in you and putting the new kit in will stir your blood and awaken the ambition that drove you to start and build your business in the first place.
Go for it AJ.