Value Drivers for a Machine Shop

Value Drivers for a Machine Shop

Have you been wondering what the value of a machine shop company is? Read below to find out what drives the value of a machine shop company!

Value Drivers for a Machine Shop Company

Are you in search of ways to improve a machine shop company or how to increase its value? There are various ways to increase the value of a machine shop company! Peak Business Valuation, business appraiser Ohio, loves to help companies grow and increase their value! One of Peak’s main goals is to help companies thrive! Obtaining a business valuation from Peak Business Valuation is a great starting point. A business valuation can provide ideas on how to improve the value of your machine shop company.  Below are value drivers you can utilize to add value to a machine shop company.

Customer Concentration

First, does your machine shop company contain high customer concentration? Customer concentration refers to the way in which a business’s revenue is spread across its customer base. For example, if your company has four customers who each account for 25% of the annual revenue, the loss of a single client would result in an immediate 25% drop in revenue. This is considered a high customer concentration business and carries a lot of risks.

Compare that to a business with 100 customers who each account for 3%-5% of annual revenue. A loss of a customer or two doesn’t have near as much impact on the bottom line. This would be a low customer concentration business and is less risky. A company with low customer concentration has more value than that of a company with high customer concentration. As you seek to improve the value of a machine shop company, analyze how concentrated a company is regarding its customers.

Peak Business Valuation, business appraiser Ohio, can help you understand the importance of maintaining a low customer concentration. Receiving a business valuation from Peak Business Valuation can help you see the impact customer concentration has on a machine shop company. Schedule your free consultation today!

Employee Quality

One of the most important assets to a machine shop company is its employees. Skilled machinists, programmers, and tool room managers are essential to the success of a machine shop. As your employees gain experience and improve, so will your company! Oftentimes within the machine shop services industry, there is high employee turnover. Companies with lower employee turnover typically have a higher value. Your business is likely to have a higher value if you have long-standing employees.

Processes & Procedures

Next, one of the main value drivers for a machine shop company is its processes, procedures, and organization. Machine shops that have well-organized processes are more valuable than those that have less structure. For any recurring work in your shop, you likely have a set process explaining how the part is manufactured. These processes and procedures are a major part of a machine shop’s value. The more efficient your company’s procedures are, the higher the company’s value will be.

Peak Business Valuation, business appraiser Ohio, performs many business valuations for machine shop companies. Our business valuation can help improve a machine shop’s processes and procedures. The business valuation will help determine areas of improvement, which will help increase the value of a machine shop!  

Certifications Can Help Increase Value

Obtaining certifications can be a way to increase the value of a machine shop company. Certifications are becoming a very important aspect of machine shops. These certifications set a baseline for the quality controls in your company. The International Organization for Standardization (ISO) provides a certification that gives specifications for products and services to ensure quality, safety, and efficiency. The most common certification is ISO 9000. The ISO 9000 is defined as a set of international standards on quality assurance and quality management. This certification was developed to help companies to maintain an efficient quality system. Additionally, certifications can be a useful tool to add credibility to your customers. Obtaining certifications can help add value to your company and increase credibility!

Condition of Machines & Technology

Another big value driver for machine shop companies is the condition of the machines and technology. The condition of the machines and level of technology has a significant impact on the value of your company. The main role of the machines is to produce high-accuracy parts on an efficient time schedule. That is what brings the most value, efficient machines. Your machine shop will have more value if your machines are efficient and if you utilize a high level of technology.

Peak Business Valuation, business appraiser Ohio also performs machinery and equipment appraisals. The condition and value of the machines have a big impact on the value. Reach out to Peak Business Valuation to understand the value of the machines! 

Use your Website as a Selling Tool

Last, a strong online presence isn’t only for “business to consumer” companies like Amazon or Walmart. A strong online presence is for any company that wants to drive more sales! With the recent COVID-19 pandemic, more people are turning to the internet to do business. And this especially applies to manufacturing companies.

As customers turn to your website, they want to know what services and capabilities your company offers. Make sure your website explains clearly and in detail all your company’s services. As well, your website should verify the certifications the company has earned. Educate potential customers of the company’s processes and procedures. If possible, incorporate pictures, graphics, and videos. Producing a website that creates a strong online presence will increase the value of any business! For more information read The Value of SEO.

Summary

Understanding what drives the value of a machine shop company can help you to set goals to maximize the value. There are many value drivers for machine shop companies. These are some of the most common Peak Business Valuation, business appraiser Ohio, sees.

By implementing the value drivers discussed above, you can increase the value of a machine shop. Whether you are looking to sell or grow your business, fulfilling these value drivers will help. If you have any questions about a machine shop and how to increase the value of a machine shop, feel free to reach out to us. Schedule a free consultation call with Peak Business Valuation today!

 

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