Machine shops

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January 11, 2024

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Boston, MA, USA

Does anyone have experience rolling up machine shops? Curious to hear about feasibility / challenges and risks.

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Reply by a professional
in Janesville, WI, USA
Hope this helps a bit... I just helped a client close a machine shop last week.

Strengths:
- Moderate barrier to entry

- Opportunities for improved automations


Weaknesses:
- Heavy WC needs

- Significant cyclicality

-High CapEx

-Overseas competition

- Requires skilled labor force

A few questions to ask:

- How new is your equipment

- What is the customer concentration

- How often are machines upgraded/maintained?
- How have you hired skilled machinists?
- Have you taken advantage of technology/automation improvements?
- How has your customer base changed over the past 5 years? (Thinking about trend towards overseas)
- What are your AR terms?
- How is inventory managed? Is any obsolete?
- Are gross margins at least 35%?
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Reply by a searcher
from Massachusetts Institute of Technology in Boston, MA, USA
Thanks Chris! Very helpful.
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