CNC Machine Shop Business Plan [Sample Template]

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Are you about starting a CNC machine company? If YES, here is a detailed sample CNC machine shop business plan template & FREE feasibility report.

If you are looking for a profitable engineering business whose products can be used by players in the production industry, then one of your options is to open a CNC machine shop company. Starting a CNC machines shop company is relatively capital intensive because of the expensive lathe machines, milling machines, grinders, drill presses and other machines and equipment needed to run the business.

It also requires serious planning and hard work but the fact remains that it is indeed a profitable business to go into. Below is a sample CNC machine shop business plan template that will help you successfully launch your own business.

A Sample CNC Machine Shop Business Plan Template

1. Industry Overview

A machine shop is a room, building, or company where machining, a form of subtractive manufacturing, is done. In a machine shop, machinists use machine tools and cutting tools to make parts, usually of metal or plastic (but sometimes of other materials such as glass or wood).

A machine shop can be a small business (such as a job shop) or a portion of a factory, whether a toolroom or a production area for manufacturing. The parts produced can be the end product of the factory, to be sold to customers in the machine industry, the car industry, the aircraft industry, or others. In other cases, companies in those fields have their own machine shops.

CNC machine shop business is a subset of the Machine Shop Services industry and businesses in this industry cuts raw materials into specific shapes and sizes using a variety of tools such as lathes, milling machines, grinders and drill presses.

Almost all forms of metal product fabrication involve machining, and industry operators may also machine plastic and composite materials. In the U.S., the industry generates over $44 billion annually from more than 19,685 registered and licensed machine shops (CNC machine shops inclusive).

The industry is responsible for the employment of over 248,609 people. Experts project the machine shop industry to grow at a – 0.1 percent annual rate between 2014 and 2019. It is important to state that no machine shop can boast of having a lion market share of the market in the industry in the united states of America.

A recent report published by IBISWorld shows that the Machine Shop Services industry has remained largely unchanged after posting two years of revenue declines and three years of revenue increases over the five years to 2019. Revenue has decreased marginally at an annualized rate of 0.1 percent to an estimated $43.8 billion in 2019.

Although nearly all of this industry’s downstream markets have expanded over the past five years and are currently operating with improved market conditions, falling metals prices between 2013 and 2016 contributed to lower revenue in that period.

Rising metals prices after 2017 is propelling industry growth, with revenue expected to rise 0.1 percent in 2019. Technological advancement in machining is largely driven by the defense and aerospace markets. It is important to point out that a machine shop can be a capital intensive business, because the purchase of equipment can require large investments.

A machine shop can also be labor-intensive, especially if it is specialized in repairing machinery on a job production basis, but production machining (both batch production and mass production) is much more automated than it was before the development of CNC, programmable logic control (PLC), microcomputers, and robotics.

It no longer requires masses of workers, although the jobs that remain tend to require high talent and skill. Training and experience in a machine shop can both be scarce and valuable. Some of the factors that encourage aspiring entrepreneurs and investors to start a CNC machine shop is the fact that the market for its products is growing rapidly in the United States and it is not seasonal.

That makes it easier for entrepreneurs who are interested in the business to come into the industry at any time they desire; the entry barriers might be high but that any serious-minded entrepreneur can comfortably raise the startup capital even if it means collecting loans from the bank.

The machine shop services industry is a highly profitable industry and it is open for any aspiring entrepreneur to come in and establish his or her business as long as you are able to obtain the required license and permits; you can choose to start on a small scale producing and supplying at a cottage level or you can choose to start on a large scale with distribution network spread across key cities all around the United States of America.

2. Executive Summary

Jack Anderson® CNC Machine Shop, Inc. is a licensed computer numerical control (CNC) machine production company that will be involved in cutting raw materials into specific shapes and sizes using a variety of tools such as lathes, milling machines, grinders and drill presses.

We will engage in almost all forms of metal product fabrication. We have been able to lease a production facility that is a perfect fit as it relates to the production facility we want to build, and the facility is centrally located in North Platte – Nebraska. Jack Anderson® CNC Machine Shop, Inc. will produce and supply these component parts to end users at affordable prices.

There is growing interest when it comes to the production of machine component parts and new enterprises are springing up, which is why we spent time and resources to conduct our feasibility studies and market survey so as to offer much more than our competitors will be offering.

We have robust distribution network; strong online presence and our distributors are armed with the various payment options available in the United States.

Beyond the fabrication and supply of standard machine parts/components to production companies in the United States, our customer care is going to be second to none in the whole of North Platte – Nebraska and our deliveries will be timely and reliable.

We know that our customers are the reason why we are in business which is why we will go the extra mile to get them satisfied when they patronize our products. Jack Anderson® CNC Machine Shop, Inc. will ensure that all our customers are given first class treatment whenever they order machine components from us.

We have a CRM software that will enable us manage a one on one relationship with our customers no matter how large their numbers may grow to. We will ensure that we get our customers involved when making some business decisions that directly affect them.

Jack Anderson® CNC Machine Shop, Inc. will at all times demonstrate her commitment to sustainability, both individually and as a firm, by actively participating in our communities and integrating sustainable business practices wherever possible.

We will ensure that we hold ourselves accountable to the highest standards by meeting our client’s needs precisely and completely.

Jack Anderson® CNC Machine Shop, Inc. is owned by Jack Anderson. Anderson has a B.Tech. in Mechanical Production Engineering and with over 25 years of hands on experience in the mechanical engineering production industry, working for some of the leading brand in the United States.

3. Our Products and Services

Jack Anderson® CNC Machine Shop, Inc. will ensure that we go all the way to be involved in the production and distribution of quality machine components. We are in the industry to make profits and we will ensure that we do all that is permitted by the law in the United States to achieve our business aims and objectives.

In essence, we will engage in;

Manual and computer numerical control (CNC) milling services
Turning services to produce cylindrical components
Drilling and boring services
Sawing services
Broaching services to enlarge existing holes
Fastening services using automatic screw machines
Grinding and planning services

4. Our Mission and Vision Statement

Our vision is to be listed amongst the top 5 Computer Numerical Control (CNC) machine shops in the whole of the United States of America.
Our mission is to establish a computer numerical control (CNC) machine shop that will distribute quality machine parts at affordable prices to retailers, and industries in North Platte and other cities in and around Nebraska where we intend marketing our products and services.

Our Business Structure

Our intention of starting a Computer Numerical Control (CNC) machine shop is to build a standard Computer Numerical Control (CNC) machine shop whose products will be distributed all across the United States of America and the globe.

We will ensure that we put the right structures in place that will support the kind of growth that we have in mind while setting up the business. We want to put modalities in place that will guide us in hiring people that are qualified, honest, customer centric and are ready to work to help us build a prosperous business that will benefit all the stake holders.

As a matter of fact, profit-sharing arrangement will be made available to all our senior management staff and it will be based on their performance for a period of ten years or more. In view of that, we have decided to hire qualified and competent hands to occupy the following positions that will be made available at Jack Anderson® CNC Machine Shop, Inc.;

Chief Executive Officer (Owner)
Production Manager
Human Resources and Admin Manager
Machine Operators
Sales and Marketing Manager
Accountants/Cashiers
Customer Services Executive
Drivers/Distributors

5. Job Roles and Responsibilities

Chief Executive Officer – CEO:

Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results
Creates, communicates, and implements the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
Responsible for fixing prices and signing business deals
Responsible for providing direction for the business
Responsible for signing checks and documents on behalf of the company
Evaluates the success of the organization
Reports to the board

Admin and HR Manager

Responsible for overseeing the smooth running of HR and administrative tasks for the organization
Maintains office supplies by checking stocks; placing and expediting orders; evaluating new products.
Ensures operation of equipment by completing preventive maintenance requirements; calling for repairs.
Defines job positions for recruitment and managing interviewing process
Carries out induction of new team members
Accountable for training, evaluation and assessment of employees
Responsible for arranging travel, meetings and appointments
Oversees the smooth running of the daily office activities.

Production Plant Manager

Responsible for overseeing the smooth running of the Computer Numerical Control (CNC) machine shop
Part of the team that determines the quantity and quality of machine component parts that are to be produced
Maps out strategies that will lead to efficiency amongst workers in the plant
Responsible for training, evaluation and assessment of plant workers
Ensures that the steady flow of both raw materials to the plant and easy flow of finished products through wholesale distributors to the market
Ensures that the plant meets the expected safety and health standard at all times.
Responsible for using space and mechanical handling equipment efficiently and making sure quality, budgetary targets and environmental objectives are met
In charge of coordinating automated and computerized systems where necessary
In charge of overseeing the maintenance of vehicles, machinery and equipment.
Ensures that proper records of machine components are kept and warehouse does not run out of products
Ensures that the production facility is in tip top shape and machine component parts products are properly arranged and easy to locate
Controls supply inventory

Machine Operators

Handle manual and computer numerical control (CNC) milling services
Handle turning services to produce cylindrical components
In charge of drilling and boring services
Handle sawing services
Handle broaching services to enlarge existing holes
Handle fastening services using automatic screw machines
Handle grinding and planning services

Sales and Marketing Manager

Manages external research and coordinate all the internal sources of information to retain the organizations’ best customers and attract new ones
Models demographic information and analyze the volumes of transactional data generated by customer purchases
Identifies, prioritizes, and reaches out to new partners, and business opportunities et al
Identifies development opportunities; follows up on development leads and contacts
Responsible for supervising implementation, advocate for the customer’s needs, and communicate with clients
Documents all customer contact and information
Represents the company in strategic meetings
Helps to increase sales and growth for the company

Accountant/Cashier:

Responsible for preparing financial reports, budgets, and financial statements for the organization
Provides managements with financial analyses, development budgets, and accounting reports
Responsible for financial forecasting and risks analysis.
Performs cash management, general ledger accounting, and financial reporting
Responsible for developing and managing financial systems and policies
Responsible for administering payrolls
Ensures compliance with taxation legislation
Handles all financial transactions for the organization
Serves as internal auditor for the organization

Client Service Executive

Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
Through interaction with customers on the phone, uses every opportunity to build client’s interest in the company’s products and services
Manages administrative duties assigned by the human resources and admin manager in an effective and timely manner
Consistently stays abreast of any new information on the organizations’ products, promotional campaigns etc. to ensure accurate and helpful information is supplied to customers when they make enquiries

Distribution Truck Drivers

Assists in loading and unloading machine component parts and raw materials
Keeps a record of vehicle inspections and make sure the truck is equipped with safety equipment
Assists the transport and logistics manager in planning their route according to a distribution schedule.
Local-delivery drivers may be required to sell products or services to stores and businesses on their route, obtain signatures from recipients and collect cash.
Inspects vehicles for mechanical items and safety issues and perform preventative maintenance
Complies with truck driving rules and regulations (size, weight, route designations, parking, break periods etc.) as well as with company policies and procedures
Collects and verifies delivery instructions
Reports defects, accidents or violations

6. SWOT Analysis

Our goal of starting out in North Platte and service industries only within North Platte – Nebraska is to test run the business for a period of 3 to 5 years to know if we will invest more money, expand the business and then start supplying our machine component parts all around the state of Nebraska, other cities across the United States and the world.

We are quite aware that there are several Computer Numerical Control (CNC) machine shops and contractors all over North Platte and even in the same location where we intend locating ours, which is why we are following the due process of establishing a business.

We know that if a proper SWOT analysis is conducted for our business, we will be able to position our business to maximize our strength, leverage on the opportunities that will be available to us, mitigate our risks and be equipped to confront our threats.

Jack Anderson® CNC Machine Shop, Inc. employed the services of an expert HR and Business Analyst with bias in retailing and distribution to help us conduct a thorough SWOT analysis and to help us create a Business model that will help us achieve our business goals and objectives.

This is the summary of the SWOT analysis that was conducted for Jack Anderson® CNC Machine Shop, Inc.;

Strength:

Our location, the business model we will be operating on, well – equipped CNC machine shop, reliable machine component parts, varieties of payment options, quality and our excellent customer service culture will definitely count as a strong strength for Jack Anderson® CNC Machine Shop, Inc.

So, also our management team members are people who have what it takes to grow a business from startup to profitability within a record time.

Weakness:

A major weakness that may count against us is the fact that we are a new Computer Numerical Control (CNC) machine shop and we don’t have the financial capacity to compete with leaders in the industry especially as it relates to leveraging on economy of scales.

Opportunities:

The industrial production index is a composite measure of output from the economy’s manufacturing, mining and utilities sectors. Higher industrial production increases demand for manufactured metal, machined products and machining services. The industrial production index is expected to increase in 2019, representing a potential opportunity for the industry.

Threat:

The prime rate to our business is the interest rate charged by banks to their most creditworthy and largest corporate customers. A higher prime rate will make it more expensive for companies to fund expansionary activities. Downstream markets will experience challenges as the prime rate is expected to rise in 2019, presenting a potential threat to the industry.

7. MARKET ANALYSIS

Market Trends

If you are a close observer of Computer Numerical Control (CNC) industry, you will agree that CNC machining is still going strong within the world of manufacturing, showing precipitous growth even amidst the slew of competing technologies and new entrants.

Even so, CNC machining is a wide ocean with many varying interests and trends within it. With so many sub-technologies, it can be hard to keep track of what the latest shifts are so here’s our handy guide for the recent developments in 2019.

A trend that emerges shows that as a result of increased adoption in india, China, Japan and other nations in the region, Asia Pacific is leading the charge. Another factor is that major manufacturers such as Okuma Corporation, Yamazaki Mazak Corporation, and DMG Mori Co., Ltd. are all based in these countries.

As a result, Asia Pacific is probably going to remain a lucrative market, and is poised to remain a leader over the next six years. A large factor that contributes to this growth is government initiatives and investment keeping the market competitive. Asia Pacific stands at USD 22.33 billion in 2018 and is expected to grow further.

So also, Europe is expected to grow as it is considered a major market for advanced technologies. Current roadblocks to beating Asia Pacific in this regard are high barriers of entry and lower investment in the market. On the other hand, the US market is currently saturated with machines.

One of the growth areas within the US has been that of the energy sector, attributing to high demands for alternative new energy sources due to fears of obsolescence of the conventional energy systems. That said, the US is definitely the highest ranking in terms of global Multi-tasking machine tools market.

Growing use of multi-tasking machines in the aerospace industry and high labor cost are the main contributors to this trend.

8. Our Target Market

The machine shop services industry has a wide range of customers; a good number of manufacturing companies, automotive companies, aerospace companies and the likes make use of machine component parts and the services offered in a machine shop.

In view of that, we have positioned our Computer Numerical Control (CNC) machine shop to service businesses in North Platte – Nebraska. We have conducted our market research and we have ideas of what our target market would be expecting from us. We are in business to retail (distribute) machine component parts to the following businesses;

Machine production companies
Automobile production industry
The aircraft industry
Production companies
Others related production companies that make use of component fabricated parts.

Our Competitive Advantage

Jack Anderson® CNC Machine Shop, Inc. is launching a standard Computer Numerical Control (CNC) machine shop that will indeed become the preferred choice for companies that make use of fabricated machine component parts.

Our competitive advantage revolves around our ability to attract local support and patronage, easy compliance with government regulations, ability to quickly adopt new technology, ability to raise financing and our ability to follow international best practices.

Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and objectives.

We will also give good working conditions and commissions to freelance sales agents that we will recruit from time to time.

9. SALES AND MARKETING STRATEGY

Sources of Income

Jack Anderson® CNC Machine Shop, Inc. is in business to attract clients to purchase our fabricated machine parts. We are in the machine shop services industry to maximize profits and we are going to ensure that we achieve our business goals and objectives.

In essence, our source of income will be;

Manual and computer numerical control (CNC) milling services
Turning services to produce cylindrical components
Drilling and boring services
Sawing services
Broaching services to enlarge existing holes
Fastening services using automatic screw machines
Grinding and planning services

10. Sales Forecast

One thing is certain when it comes to Computer Numerical Control (CNC) machine shop, if your business is centrally positioned coupled with effective and reliable machine fabricators and good distribution network, you will always attract customers.

Jack Anderson® CNC Machine Shop, Inc. is well positioned to take on the available market in North Platte – Nebraska and we are quite optimistic that we will meet our set target of generating enough income/profits from the first six months of operation and grow the business and our clientele base.

We have been able to examine the machine shop services industry, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast.

Below are the sales projections for Jack Anderson® CNC Machine Shop, Inc., it is based on the location of our business, and other factors as it relates to Computer Numerical Control (CNC) machine shop products startups in the United States;

First Fiscal Year (FY1): $335,000
Second Fiscal Year (FY2): $650,000
Third Fiscal Year (FY3): $1.1 million

N.B: This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor offering same products, distribution services and customer care services as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.

Marketing Strategy and Sales Strategy

Before choosing a location to launch Jack Anderson® CNC Machine Shop, Inc., we conducted a thorough market survey and feasibility studies in order for us to penetrate the available market and become the preferred choice in and around North Platte – Nebraska.

We hired experts who have good understanding of the Computer Numerical Control (CNC) machine shop line of business to help us develop marketing strategies that will help us achieve our business goal of winning a larger percentage of the available market in North Platte – Nebraska.

In summary, Jack Anderson® CNC Machine Shop, Inc. will adopt the following sales and marketing approach to win customers over;

Introduce our business by sending introductory letters alongside our brochure to factories, and all the industries that make use of fabricated machine parts and key stake holders in and around North Platte – Nebraska
Ensure that we have fabricated machine component parts/products at all times.
Make use of attractive hand bills to create awareness business
Position our signage/flexi banners at strategic places around North Platte – Nebraska

11. Publicity and Advertising Strategy

Even though our Computer Numerical Control (CNC) machine shop is well structured and located, we will still go ahead to intensify publicity for the business.

Jack Anderson® CNC Machine Shop, Inc. has a long-term plan of opening distribution channels all around the state of Nebraska and other cities in the United States of America which is why we will deliberately build our brand to be well accepted in North Platte before venturing out.

Here are the platforms we intend leveraging on to promote and advertise Jack Anderson® CNC Machine Shop, Inc.;

Place adverts on community – based newspapers, radio and TV stations
Encourage the use of word of mouth publicity from our loyal customers
Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Google+ and other platforms to promote our business.
Ensure that our we position our banners and billboards in strategic positions all around North Platte – Nebraska
Distribute our fliers and handbills in target areas in and around our neighborhood
Advertise our Computer Numerical Control (CNC) machine shop in our official website and employ strategies that will help us pull traffic to the site
Brand all our official cars and distribution trucks and ensure that all our staff wear our branded shirt or cap at regular intervals.

12. Our Pricing Strategy

Our pricing system is going to be based on what is obtainable in the Computer Numerical Control (CNC) machine shop line of business. Be that as it may, we have put plans in place to offer discounts once in a while and also to reward our loyal customers especially when they refer clients to us.

Payment Options

The payment policy adopted by Jack Anderson® CNC Machine Shop, Inc. is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.

Here are the payment options that Jack Anderson® CNC Machine Shop, Inc. will make available to her clients;

Payment via bank transfer
Payment via credit cards
Payment via POS machines
Payment via online bank transfer
Payment via check
Payment via bank draft

In view of the above, we have chosen banking platforms that will enable our clients make payment for our fabricated machine component products purchase without any stress on their part.

13. Startup Expenditure (Budget)

From our findings, we were able to come up with the areas we will spend our resources on and this is what it would cost us to set up Jack Anderson® CNC Machine Shop, Inc. in the United States;

The total fee for registering the business in the United States of America – $750.
Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines and other software) – $3,300.
Marketing promotion expenses in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
The cost for hiring business consultant – $2,500.
The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
The cost for payment of rent for 12 months at $1.76 per square feet tank facility cum mini depot in the total amount of $250,000.
The total cost for production facility remodeling – $100,000.
Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500).
Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $150,000
The cost for Start-up inventory – $300,000
The cost for store equipment (cash register, security, ventilation, signage) – $13,750
The cost of purchase and installation of CCTVs – $5,000
The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al) – $4,000.
The cost of launching a website – $600
Miscellaneous – $10,000

We would need an estimate of $1.2 million to successfully set up our Computer Numerical Control (CNC) machine shop in North Platte – Nebraska.

Generating Funds/Startup Capital for Jack Anderson® CNC Machine Shop, Inc.

Jack Anderson® CNC Machine Shop, Inc. is a private business that is solely owned and financed by Jack Anderson. He decided to restrict the sourcing of the startup capital to 3 major sources.

Generate part of the startup capital from personal savings
Source for soft loans from family members and friends
Apply for loan from my Bank

N.B: We have been able to generate about $500,000 (Personal savings $450,000 and soft loan from family members $50,000) and we are at the final stages of obtaining a loan facility of $700,000 from our bank. All the papers and document have been signed and submitted, the loan has been approved and any moment from now our account will be credited with the amount.

14. Sustainability and Expansion Strategy

Part of the plans we have in place to sustain Jack Anderson® CNC Machine Shop, Inc. is to ensure that we continue to deliver quality products, services, improvise on how to do things faster and cheaper.

From our findings, another factor that kills new business is financial leakages. In order to plug financial leakages, the management of Jack Anderson® CNC Machine Shop, Inc. will adopt the use of payment machine and accounting software to run the business.

We are quite aware that our customers are key component to the growth and survival of our business hence we are going to continuously engage them to give us ideas on how to serve them better. We will not waste time in adopting new technology, best practices and diversifying our services once the need arises.

Our key sustainability and expansion strategy as a business is to ensure that we only hire competent and technically sound employees, create a conducive working environment and give employee benefits to all our staff. We know that if we implement our business strategies, we will grow our CNC machine shop business beyond North Platte – Nebraska to other states in the U.S in record time.

Check List/Milestone

Business Name Availability Check: Completed
Business Registration: Completed
Opening of Corporate Bank Accounts: Completed
Securing Point of Sales (POS) Machines: Completed
Opening Mobile Money Accounts: Completed
Opening Online Payment Platforms: Completed
Application and Obtaining Tax Payer’s ID: In Progress
Application for business license and permit: Completed
Purchase of Insurance for the Business: Completed
Leasing of production facility and construction of production plant: In Progress
Conducting Feasibility Studies: Completed
Generating capital from family members: Completed
Applications for Loan from the bank: In Progress
Writing of Business Plan: Completed
Drafting of Employee’s Handbook: Completed
Drafting of Contract Documents and other relevant Legal Documents: In Progress
Design of The Company’s Logo: Completed
Printing of Promotional Materials: In Progress
Recruitment of employees: In Progress
Purchase of the needed machines, technology, furniture, reservoirs, computers, electronic appliances, office appliances and CCTV: In progress
Purchase of distribution trucks: Completed
Creating Official Website for the Company: In Progress
Creating Awareness for the business both online and around the community: In Progress
Health and Safety and Fire Safety Arrangement (License): Secured
Establishing business relationship with fabricated machine component distributors all across the United States of America: In Progress