Are you Confused about all the equipment choices and don’t know who to believe or Want to make sure you’re spending your money on the right equipment for your business? Here is the Tips Every Successful Concrete Production Business Owner Needs to Know.
Have a Solid well Researched Business Plan
Without a good solid plan I have seen companies waste time, energy, and money and be delayed in getting started in business. If you are serious about making real money, raising money or attracting investors you need a serious business plan.
Once you start to put topics in writing the plan begins to take a new dimension. Advance planning will increase your chances for success and pre-planning your alternatives will minimize any time delays.
Challenge yourself and do your homework. I can guide you through a solid plan that includes Cost of Goods Sold Analysis, Profit and Loss Statements, Sales estimates and Transportation Costs. This will provide you with foundational strength for your operation and give you the tools needed to market, create budgets, make banking arrangements, forecast expenses and cash flows, etc.
After gathering all the info and plugging in all the numbers sincerely ask yourself, “Do I really want to do this?”, then go with your gut!
Study the Cost of Sales and Where your Sales will come from in the Future
Just imagine you have just completed your start up or expansion and then you ask your sales manager how are the sales coming along? He says we don’t have any sales! Don’t under estimate the cost of creating sales with marketing materials and dollar investment in people to get the sales coming into the business.
Where is your market now?
Where will it be when you are ready to start selling? And where will it be 5 years down the road? Build these factors into your business plan, be as honest with yourself as possible and anticipate the ups and downs. In areas where seasonal business is common, your plan is even more important to get right. It will provide you with realistic numbers, so you can make an informed decision.
Determine Costing of Concrete Products
If you’re in business to make money, don’t make the mistake of losing money per unit and trying to make it up it volume. Knowing the manufacturing cost of your product is a must to be successful. Look around and ask a lot of questions regarding correct raw material cost and availability.
Check out various suppliers of sand, rock, cement, fly ash, color pigment and add mix chemicals (to enhance the performance of the concrete mix). Keep in mind all the related soft and hard costs that make up manufacturing, sales, shipping and servicing in your business. If you don’t fully understand your actual cost, you could end up, as companies in the past, having a rude wake up call.
Proper Financing to start the business
If you don’t plan to secure sufficient funds by knowing how much money it takes to get started in business, you’ll be sailing a boat without compass or map. You’ll also have a much higher financial risk in your overall business success.
Equipment selection is only one financial piece to the puzzle in building and growing your business. Allow in your financing budget to include installation and expansion costs of buildings, land, equipment and inventory of finished goods. It is important to factor in cash flow requirements.
For example:
Estimating the financial figure of paying your suppliers before you have collected receivables from your customers. One of the most stressful times in the journey of startup or expansion is when the equipment is on order but not yet installed, money is going out the door and you have a back log in sales. If you know the amount of money it takes to begin the journey of your business the more successful you will be without major cash flows problems.
Research the Labor Market for Tax Credits
Have you heard the saying “there is no such thing as a free lunch?” Dealing with the government can be the closest free lunch you can get with a little research. Start ups and expansions require as much money savings as possible to be competitive to today’s market.
If you explore the programs available today you might save a great deal of money. Explore the possibilities with programs available in government grants loans, county, city and state enterprise zones credits which will allow possible credits for companies creating or maintaining new jobs. In many cases in our industry electrical rebates are offered for expanding companies.
Experienced Labor to Operate Plant
Our equipment isn’t operating correctly and when it does the quality of my products still looks terrible. You ask yourself, what is going on? Fast, call the equipment manufacturer; it must be the machine’s fault!
Don’t believe any equipment manufacturer that states their equipment is unique and easy to operate and you will have no problems getting the equipment operating with unskilled labor. Making concrete products with machinery is preventative maintenance intensive and takes experienced labor to operate and service equipment systems. Like any new piece of software or hardware it does have a learning curve.
Qualified and well trained operators and maintenance personnel can be the cheapest (insurance policy) investment you can make in shortening the learning curve, especially if you are a start up operation.
Today's production machinery, at the highest level, is highly sophisticated and manufacturers often provide limited training on how to operate their equipment, let alone, how to make the concrete products. Although it may take a few trained, qualified people to run the plant operation, ask yourself if you are allowing for back-up personnel?
Forecasting the Start up Timing of your Project
I once heard a great baseball saying “if you don’t keep score, nobody wins, nobody loses and nobody cares”. You need to know and set the goals for startup timing or it is like not keeping score in baseball and it will cost you money and time. It is not uncommon for companies today to plan 2-3 years in advance of their target start up dates on projects.
Many of the issues outlined in this book take years to confirm before actual equipment and buildings can even be ordered. Keep in mind the amount of time the equipment supplier will need to manufacture ship, install and trouble-shoot your equipment.
Over Spending on the Investment
Remember what it is like taking your 5 old year child into the toy store to pick out a Birthday present? Did you come out with more than one gift? Emotion can lead you to paying to high of monthly payments on your new investment and delay your payback on making a profit.
Companies and individuals can over spend and theorize emotionally why they think they want something when they can’t understand the difference of need and want. The equipment is only a part of the overall investment between land, building, transportation, administration and sales. Be careful not to spend too much on all aspects of the business for a start up operation. Land, building, equipment, trucks…etc…everything.
It is easy to get in a trap of believing you require and need more items than you really do to start up or expansion. One wise customer told me he would always ask himself prior to purchasing anything: “will it save my company time, money, increase quality or reduce labor?” Simple questions can sometimes make the decisions easier. What is really a required need versus just another item to purchase?
Raw Material Source Selection
Why can’t I just go out and research the cheapest aggregate supply and buy it?
Making concrete products is similar to the concept of making cookies. The cookies are only as good as the ingredients that are put into the mix.
The same applies to concrete. You can have the highest level production facility in the world with advanced equipment, but if the materials that are run through the system are not up to standard the entire investment is not going to make you quality products. Materials need to be available with the correct property characteristics, and consistency, and then consider the price.
Creating a Mix Design
Don’t go to the extreme and wait till you are losing customers to realize your mix design is not meeting quality standards. Many times mix design is taken for granted but should never be over looked to ensure you are making the highest quality products at the best possible production cost.
Just having quality materials is one part of the journey. It is vital to learn the proper ingredients proportioning of the aggregates, sands, cements, add mixtures and colors to create a consistent and value added quality product.
The last ten years in the concrete industry has shown blended colors in concrete products can increase sales and your profit margins. Obtain good advice in creating and maintaining a good cohesive mix design which exceeds you markets requirement for PSI strength, water absorption, freeze thaw and wear ability. I always recommend making your quality standard slightly above the industry standard to eliminate cost risk variances of going below the standard.
I have seen these tips used through the years with successful companies. Making a consistent quality product is your company’s best advertisement!
Accurate Estimates for Forecast Demand
Six months after completing plant startup and journey of your expansion you ask your sales person (that put the estimates together) Why are we at only 10% of our forecasted sales? You hear no response?
Do not over or grossly under estimate the market demand you are in when adding new facilities and do not assume the good times will last forever. Look at the existing products in the market and either decide to stay on the same path other successful companies have taken and continue on their success, or it may be a path of downward momentum because the product has outlived its lifecycle.
Balance Investment versus Sales Demand
There are two ways to go out of business: no sales or too many sales at one time. Many times equipment systems will make a wide variety of concrete products and it is important for you to research the sales of the most profitable items.
Buying equipment and matching your financial investment to what your market area can absorb is the direction to success. Having a sales and marketing plan that makes sense and determines which items will make you the most profit, is vital to your research.
Marketing Materials Investment Cost
Imagine you just lost a huge sale because your biggest potential client asked for color samples and specifications of your product. He also wants to have them this afternoon so he can award the contract.
The problem is your sales manager didn’t get time to work on the project and two days later you’ve lost the sale. You, as the owner, can’t understand why you just lost the biggest possible sale on the schedule.
Often times it is not just the actual materials or web site cost but the management’s investment time to create the marketing look and direction of the marketing materials. What is the manager not doing while researching marketing materials and how much is this costing you?
The customer needs to know what products and services your company can provide. Ten to fifteen year ago a typical concrete plant could invest in a facility and never have to think about providing marketing and advertising materials for their business. With increased competition in today’s market those days no longer exist.
Don’t under estimate the importance of your allowable man power requirements involved in creating marketing materials.
Finished Goods Inventory Space
I have seen it happen where companies will spend a huge sum of money on a production operation only to begin loosing sales in two years because they don’t have enough storage for the finished goods.
They can’t deliver goods to the client because they don’t have the inventory. Be aware of the costs of Land and the impact to your overall project value along with inadequate consideration to inventory finished goods to support your manufacturing production at optimum output. Allow for additional land, finished goods, storage, trucks and repair and service area requirements.
Land Selection for Production Facility
Don’t wait one year after you are set up in operation to find out your plant just got flooded with water and you are out of business. Research contaminated soil conditions, flood plains and earthquake fault lines.
Many other factors also go into the site selection such as access to the highways, zoning, distance from your raw materials and shipping distance from your targeted market place….etc. Generally it is more favorable to be closer to your raw materials source than it is being closer to your target market. In today’s world rail road access for deliveries of material are allowing companies to position themselves in areas normally not achievable ten years ago.
Plan the Building for the Future
You see the most exciting new machinery product line that will make your company tons of money. Oh no, I don’t have the proper size building to accommodate the expansion.
Selecting an existing or new building that is too small in over all dimensions including height of ceiling can limit your production output and growth of your business. If you are in this for the long haul, your land allocation and building should be planned for expansion, particularly if you are producing a product line that is extensive and experiencing consistent growth. Always try to have an alternative plan so you can continue to grow your business without the costly mistake of a building that’s too small.
Buildings are available today with end walls that are easily collapsible and expandable. Often, during the designing stage of a facility, it is possible to incorporate options in batching and mixing. You can supply a phase two production line for the future, with little upfront cost in batching.
In today’s world, the majority of the equipment is installed for production inside a single building. With all the new types of value added products coming on board in the market today, the need for additional processing lines may be required for growth.
Commercial Zoning and Permitting
You are ready to get started with the expansion. You’ve finished the building plan, secured your future sales, secured your financing, chosen the equipment and are ready to write the checks to get it all started! Then you check into zoning and building permits only to find it may take 6-12 months to get approval. Delays in zoning and permitting are real life. If you don’t plan ahead on these issues the market may pass you up before you can get in business.
The 25 tips take time to complete, but will save much more time in the long run. All of your permitting requirements, such as air quality approvals, conditional use permits, and city and county zoning approvals can take time. Try to get these issues completed well ahead of your construction dates and build these possible delays into your plan.
Don’t get your Business Land Locked
Don’t cut your land needs short. There are too many stories of companies that have become land locked preventing their business to grow. Running out of land and not being able to keep up with demand can put you out of business. Too often producers run out of land space because they did not fully understand what the land needs would be when the business grows from Level 1 though Levels 2-3-4-5.
Having the ability to start small and possible options to purchase or lease property adjacent to the existing facility will help you continue growth in your business.
Correct Packaging of your Finished Goods
It has always been amazing to me how much money is wasted by not having the properly sized and designed shipping package.
If you neglect pre planning for packaging you could end up with a packaging line of equipment that does not meet your requirements. To correct this later could mean costly additions in equipment and redesign of your packaging line.
To design a packaging system that flows smoothly, I recommend determining how your customer receives your goods, and work your way backwards. This will help determine you’re casting machine output.
The majority of concrete products are shipped by flat bed trucks in many different skid sizes. Also, there are several wrapping alternatives such as stretch or shrink wrapping, steel or plastic banding. Determining your ideal shipment package type and size is important because it is a major economic issue in your cost.
Knowing the various sizes, shapes, weights and configurations of your packaged finished goods will allow you to create a standard. Once you have established a standard, your designs in palletizing automation become clearer to you and the equipment manufacturer. Your package design can be your companies’ best advertisement.
Research your Electrical Requirements
Want an easy way to delay your project by two to three months and spend a lot of unexpected money? If there is one unexpected delay I see more than any other in expanding and starting a new facility it is electricity completion by the Utility Power Company and internal wiring under estimates and delays. Because most equipment is operated on 3 phase electricity, delays can occur in obtaining the needed amount of electrical service.
Utility Companies are often never in a hurry to upgrade existing or new facilities. Pre planning your electrical requirements and installation locations can save you a lot of time and money.
Manufacturing is a Capital Intensive Industry
What extra support and auxiliary items, in addition to my concrete machinery, do I need to get the plant up and running? You might be surprised how big the list is just to maintain the concrete machinery on a daily level?
Research your capital requirements, including a realistic amount for auxiliary plant equipment, delivery equipment, handling and packaging equipment, spare parts and start-up capital. Consider if your start-up will be during a traditionally slow or busy time of the year. This will have an effect on working capital requirements.
Research your Vendors and Suppliers
Have you heard about the concrete producer that bought millions of dollars of equipment only to find out, 6 months later, the equipment manufacturer was extremely late on delivery and had been in Bankruptcy for 12 months?
The cheapest price is not always the best price. Make sure the plant you are going to build fits the output levels of production you are requiring. If expanding, try and use the same equipment so spare parts, molds, etc. are interchangeable with existing equipment systems.
A very wise producer once said, “Recognize what each machine produces best and worse and don’t commit the weaker products to the system”. Often times it sounds great to have a flexible machinery system but be careful not to over commit the number of product lines to manufacture in a single production facility.
Choosing the Manufacturing Equipment
You can benefit from purchasing equipment similar to what you may already own. If purchasing new equipment consider putting penalty clauses in your offer for delivery dates. Equipment manufacturers are seldom correct with delivery dates.
Recognize that most equipment manufacturers don’t understand the daily aspects of how to operate and make concrete products with their own equipment.
Be Careful Listening to the Sales People
Jokingly, I often ask my customers the question.”How can you tell when a salesman is lying? The answer is …”when their lips are moving!” Be careful and know the sale persons’ character, reputation and knowledge of the equipment and the industry, before taking his words for absolute fact.
Ask to talk to users of the equipment and attend plant tours of similar equipment set ups making the variety of products you need to produce. Don’t be led down the path by a sales representative to overselling untested equipment or technology.
Research Used Equipment Carefully
The best advice I can give, when you’re looking at used equipment, is Buyer Beware! Be careful buying used equipment because it often misses focuses your labor talents and takes too much time to make it work in your application.
Even if a used machine worked well for the previous owner, by the time it is taken apart and reassembled performance issues can arise.
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