Machine Shop Business Plan Template
If you want to start a machine shop business or expand your current machine shop business, you need a business plan.
The following Machine Shop business plan template gives you the key elements to include in a winning Machine Shop business plan.
Machine Shop Business Plan Example
I. Executive Summary
Business Overview
[Company Name] is a new machine shop located in [Location] that provides custom fabrication and machining services to local businesses and residents. Our mission is to help the members of our community make their designs a reality. We offer affordable pricing, design services, and the best customer service in the industry. No matter how challenging the project is, we have the experience and capability to produce everything our customers need.
Services Offered
[Company Name] will provide a variety of machine shop services to manufacture our customers’ unique designs and parts. We can work with a variety of materials including plastic, aluminum, and stainless steel. Some of the services we offer include:
- Boring
- Milling
- Lathe machining
- Abrasive machining
- Grinding
- Design and prototype services
The costs for each project will be determined by the materials needed and the amount of labor required.
Customer Focus
[Company Name] will primarily serve the residents and businesses of [Location] and surrounding areas. The demographics of this area are as follows:
- 224,813 residents
- 15,000 businesses
- Average income of $62,000
- 27% married
- Median age of 36 years
Management Team
[Company Name] is run by [Founder’s Name], who has over [X] years of experience as a professional machinist. Throughout his career, he has worked as a machinist for local businesses, spending much of that time as a manager and trainer for other employees and apprentices. For the past year, he has worked on additional repair and fabrication projects on the side and is ready to turn his side hustle into a full-on business.
Though he has never run his own machine shop business, he has worked in the industry long enough to gain an in-depth knowledge of the business, including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
Success Factors
[Company Name] is uniquely qualified to succeed due to the following reasons:
- The company will be providing a valuable service for individuals and businesses in need of machine shop services for a variety of projects.
- [Founder’s Name] has a track record of success in the machine shop industry and is a proven expert.
- [Company Name] will provide high-quality services for a moderate price.
- The local area is currently underserved and has few local machine shop companies offering quality customer service.
Financial Highlights
[Company Name] is currently seeking $520,000 to launch. Specifically, these funds will be used as follows:
- Store design/build: $200,000
- Equipment and machinery: $200,000
- Working capital: $120,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Top line projections over the next five years are as follows:
| Financial Summary | FY 1 | FY 2 | FY 3 | FY 4 | FY 5 |
|---|---|---|---|---|---|
| Revenue | $560,401 | $782,152 | $1,069,331 | $1,379,434 | $1,699,644 |
| Total Expenses | $328,233 | $391,429 | $552,149 | $696,577 | $776,687 |
| EBITDA | $232,168 | $390,722 | $517,182 | $682,858 | $922,956 |
| Depreciation | $7,000 | $7,000 | $7,000 | $7,000 | $7,000 |
| EBIT | $225,168 | $383,722 | $510,182 | $675,858 | $915,956 |
| Interest | $6,016 | $5,264 | $4,512 | $3,760 | $3,008 |
| Pre Tax Income | $219,152 | $378,458 | $505,670 | $672,098 | $912,948 |
| Income Tax Expense | $76,703 | $132,460 | $176,985 | $235,234 | $319,532 |
| Net Income | $142,449 | $245,998 | $328,686 | $436,864 | $593,416 |
| Net Profit Margin | 25% | 31% | 31% | 32% | 35% |
II. Company Overview
Who is [Company Name]?
[Company Name] is a new machine shop located in [Location] that provides custom fabrication and machining services to local businesses and residents. Our mission is to help the members of our community make their designs a reality. We offer affordable pricing, design services, and the best customer service in the industry. No matter how challenging the project is, we have the experience and capability to produce everything our customers need.
[Founder’s Name] has been a machinist in the industry for [X] years. Throughout his career, he worked for various businesses providing machine shop services to his employers’ customers and clients. However, he saw that there were very few local machine shops that were designed for average residents. That’s when he decided to open a machine shop business that catered to helping both businesses and individuals with all their machining needs.
[Company Name]’s History
[Founder’s Name] recently began researching what it would take to start his own machine shop and thoroughly analyzed the costs, market, demographics, and competition. [Founder’s Name] has compiled enough information to develop his business plan in order to approach investors.
[Founder’s Name] incorporated [Company Name] on [date of incorporation] as an S-Corporation. The business is currently being run out of [Founder’s Name]’s home, but once the lease on [Company Name]’s office location is finalized, all operations will be run from there.
Since incorporation, the company has achieved the following milestones:
- Found a retail space and signed a Letter of Intent to lease it.
- Developed the company’s name, logo, and website located at [website].
- Planned the suite of services to be offered.
- Determined equipment, supplies, and materials needed.
- Begun recruiting key employees
[Company Name]’s Products/Services
[Company Name] will provide a variety of machine shop services to manufacture our customers’ unique designs and parts. We can work with a variety of materials including plastic, aluminum, and stainless steel. Some of the services we offer include:
- Boring
- Milling
- Lathe machining
- Abrasive machining
- Grinding
- Design and prototype services
The costs for each project will be determined by the materials needed and the amount of labor required.
III. Industry Analysis
As long as society depends on metal, there will always be a demand for machining, manufacturing, and welding services. These services are essential for several industries, including automotive, construction, and aerospace. Without expert machinists, many of these industries would suffer, which would severely impact the global economy.
The Global Machining Services Market is expected to grow by $18.07 billion at a CAGR of 4.67% over the next five years. There is no indication that the industry is slowing down, making this a great time to open a new machine shop.
IV. Customer Analysis
Demographic Profile of Target Market
[Company Name] will serve local businesses and the community residents of [Location] and its surrounding areas. The demographics of this area are as follows:
- 224,813 residents
- 15,000 businesses
- Average income of $62,000
- 27% married
- Median age of 36 years
Customer Segmentation
[Company Name] will primarily target the following customer segments:
- Local businesses: Multiple local industries depend on machining and manufacturing services to help them build machines and other products. We expect most of our business to come from local establishments across a dozen or more industries.
- Individuals: Everyone could benefit from working with a professional machinist from time to time. Whether it be a repair job or a custom fabrication, we will always offer our services to individuals who have needs for our services.
V. Competitive Analysis
Direct & Indirect Competitors
The following companies do business within a 20-mile radius of [Company Name], thus providing either direct or indirect competition for customers:
Carl’s Machine Shop
Carl’s Machine Shop is a machine shop in [Location]. In business for over 40 years, Carl’s Machine Shop focuses on providing custom fabrication and repair services to local individuals. They help with all sorts of projects, from automotive to furniture.
Carl’s Machine Shop’s services are generally for customers at the upper end of the market who are looking to customize their expensive cars, furniture, and other objects. As a result, the company’s prices are quite high and are not realistic for the average middle-class resident or business owner. We will price our services more moderately, attracting the customers who are priced out by Carl’s Machine Shop’s services.
Machining Skills Inc.
Machining Skills Inc. is a small machine shop that primarily serves the local construction industry. Established in 1997, the company offers a wide range of machining services, including prototyping. They do not serve individuals nor specialize in repair services.
Though we expect Machining Skills Inc. to continue to thrive, we plan to price our services more moderately, making us an active competitor with the company. Our management team also has better relationships with the industry and experience that will make [Company Name] a more appealing option.
Raise The Bar
Raise The Bar is a local machine shop that provides a variety of machining services for local businesses. They primarily work on construction projects but help out businesses in other industries as well. Raise The Bar is known for its well-priced services and high-quality fabrications.
While Raise The Bar will continue to thrive in the local community, it does not offer any services to individuals. Furthermore, our management team has strong relationships with local businesses that will make our services more appealing than this competitor.
Competitive Advantage
[Company Name] enjoys several advantages over its competitors. Those advantages include:
- Customer-Focus: [Company Name] contractors provide the highest quality customer service focused on transparency, communication, and responsiveness throughout the process, from the initial inquiry to the follow-up once the project is completed.
- Management: [Founder’s Name] has been extremely successful working in the machining industry and will be able to use his previous experience to help clients with whatever they need. His unique qualifications will serve customers in a much more sophisticated manner than many of [Company Name]’s competitors.
- Relationships: Having lived in the community for 25 years, [Founder’s Name] knows many of the local leaders, real estate developers, and business owners. These relationships will help the company build a significant customer base.
- Affordability: Even though local businesses will make up most of our sales, [Company Name] still strives to be an affordable option for local individuals as well. We strive to be the best neighborhood machine shop that can help individuals with all their machining needs for an affordable price.
VI. Marketing Plan
The [Company Name] Brand
[Company Name] seeks to position itself as a high-quality, durable machine shop business. Clients can expect to receive the best machining services from skilled contractors and professionals in [Location] using the highest quality materials.
The [Company Name] brand will focus on the company’s unique value proposition:
- Client-focused machining services, where the company’s interests are aligned with the customer.
- Service is built on long-term relationships and personal attention.
- Professional industrial experience in a small business setting.
Promotions Strategy
[Company Name] expects its target market to be individuals and businesses within a 20-mile radius of its location. [Company Name]’s promotion strategy to reach these potential customers includes:
Targeted Cold Calls
[Company Name] will initially invest significant time and energy into contacting potential clients via telephone and email. In order to improve the effectiveness of this phase of the marketing strategy, a highly-focused call list will be used, targeting local businesses primarily in the construction and automotive industries. As this is a very time-consuming process, it will primarily be used during the startup phase to build an initial client base. However, what may make the process easier is [Founder’s Name]’s ongoing relationships with leaders in both industries.
Referrals
[Company Name] understands that the best promotion comes from satisfied customers. The company will encourage its clients to refer other individuals and businesses by providing discounts on future services for every new client produced. This strategy will increase in effectiveness after the business has already been established.
Broadcast & Streaming Media Advertising
[Company Name] will invest in professionally produced commercials to run on broadcast networks, radio stations, streaming platforms, and podcasts.
Website/SEO
[Company Name] will invest in developing a professional website that displays all of the services offered by the company. It will also invest in SEO so that the company’s website will appear at the top of search engine results.
Social Media
[Company Name] will create the company’s social media accounts and invest in ads on all social media platforms. It will use targeted marketing to appeal to the target demographic.
Publications
[Company Name] will advertise its services in key local publications, including newspapers and area magazines. Additionally, the company will print brochures and place them in specific locations frequented by target individuals.
Direct Mail
[Company Name] will blanket neighborhoods in the area with direct mail pieces. These pieces will provide general information on [Company Name], its services, and promotional discounts.
Pricing Strategy
[Company Name]’s pricing will be estimated on a project-by-project basis, drawing on [Founder’s Name]’s deep expertise in machining. The pricing will be determined by the materials needed and the amount of labor required to finish the job. Pricing will be moderate and less expensive than our competitors, but more expensive than lower-quality, efficiency-driven machine shops.
VII. Operations Plan
Functional Roles
[Company Name] will need to fulfill the following functional roles to execute its business plan and ensure the company’s success:
Service Functions
- Machining and production
- Prototyping
- Repair services
- Customer service
- Quoting and invoice creation
Administrative Functions
- Social media management
- Website management
- Bookkeeping
- Marketing
- Hiring and training staff
- Maintenance functions
- Other general administrative functions
Milestones
The following are a series of steps that lead to our vision of long-term success. [Company Name] expects to achieve the following milestones in the following [xyz] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Launch [Company Name] |
| [Date 6] | Reach break-even |
VIII. Management Team
Management Team Members
[Company Name] is run by [Founder’s Name], who has over [X] years of experience as a professional machinist. Throughout his career, he has worked as a machinist for local businesses, spending much of that time as a manager and trainer for other employees and apprentices. For the past year, he has worked on additional repair and fabrication projects on the side and is ready to turn his side hustle into a full-on business.
Though he has never run his own machine shop business, he has worked in the industry long enough to gain an in-depth knowledge of the business, including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
Hiring Plan
[Founder’s Name] will serve as the Owner and Manager of [Company Name]. In order to launch, he needs to hire the following personnel:
- Assistant Managers (1 to start)
- Administrative Staff (2 to start)
- Machinists (5 to start)
IX. Financial Plan
Revenue and Cost Drivers
[Company Name]’s revenue will primarily come from providing fabrication, repair, and other machine shop services to local businesses and residents. Pricing will be determined by the materials and labor required.
The main cost drivers for [Company Name] will be labor expenses, marketing, and lease for the retail space.
Capital Requirements and Use of Funds
[Company Name] is currently seeking $520,000 to launch. The funds will be used for capital expenditures, office build-out, hiring initial employees, marketing expenses, and working capital.
Specifically, these funds will be used as follows:
- Store design/build: $200,000
- Equipment and machinery: $200,000
- Working capital: $120,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Key Assumptions
The following table reflects the key revenue and cost assumptions made in the financial model:
| Number of Clients | Average |
|---|---|
| FY 1 | 120 |
| FY 2 | 150 |
| FY 3 | 180 |
| FY 4 | 200 |
| FY 5 | 220 |
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRETAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
