Start a Profitable CNC Machining Business

A successful CNC business is not created in a vacuum. Behind each entity are years of education, training, and experience, preparing their owners to handle the decision-making and manage the stressors of running a day-to-day business. You will have many opportunities to learn as an entrepreneur, but the basics of CNC machining should already be part of your business arsenal.

As a CNC machine business owner, you will be responsible for quoting (bidding) new jobs. How well you master this assignment will play a significant role in the profitability of your venture, and the size of your backlog.

If you have not already done so, begin by registering on the MFG platform to create your account. This allows you to:

• Build profile pages optimized for SEO, highlighting your facility and unique manufacturing capabilities.
• Answer RFQ’s for real job opportunities, allowing you to grow your business.
• Minimize manufacturing down time and maximize marketing.
• Increase exposure, expand your customer audience, and generate more leads.

You can choose multiple paths when starting a CNC machine shop. You can be a jobbing shop, providing services such as repair work. You can take on larger quantities of parts; for example, providing castings, which require secondary machining operations. You could also create products–yours or someone else’s–supplying labor, materials, and machining in a high-production environment.

Most likely, you will be the face of your company, providing much of the customer service to your manufacturing clients. They will expect you to provide your expertise, offering suggestions on how to improve quality, save money, and decrease the lead times on their products.

In starting a CNC business, you may embark on one of your career’s most exciting and lucrative ventures. Read on to learn more about setting up your CNC machining shop successfully.

1. Hire an Accounting Firm

Most people contemplating starting a CNC business are aware they need an attorney; however, the first professional they should consider bringing on board is an accountant to assist them in all the steps that follow here.

There are also other reasons to find a CPA before starting a business. They will save you time in managing all the start-up requirements, and can also help you in recording expenses and maintaining your accounts along the way. You will appreciate that at tax time!

2. Create a Business Plan

Developing a business plan is essential to launching a new CNC shop, and your newly-hired accountant can help you do so correctly. The business plan serves as a road map (or a GPS), ensuring you start down the right path and don’t veer off-course in those first few critical months. Initially, the business plan helps you and your start-up team determine how to structure, run, and grow the business.

If you need funding for your venture, having a business plan in place gives the lending institution confidence, showing them you are organized and knowledgeable–and not just approaching them for financing based on a wing and a prayer.

3. Decide on a Legal Entity

Once again, your accountant will be an invaluable team member in making decisions like choosing a legal entity. The business structure you choose could determine the amount of taxes you pay, your liability, and how much paperwork you must file.

You must choose a business structure before registering your business, deciding among a sole proprietorship, limited liability company (LLC), partnership, S corp, or C corp.

4. Register for Taxes

You will need to register for various local, state, and federal taxes before you may officially open for business. To register for taxes, apply for an employer identification number (EIN). This is easy to do on your own.

Your business must be in the United States, and you must have a valid taxpayer identification number, which is typically a social security number. Go to the IRS website, filling out and submitting the application online. You can then download, save, and print your EIN confirmation notice.

5. Open Dedicated Business Bank and Credit Card Accounts

You should not mix your personal and business finances in the same accounts. If for no other reason, you’ll create a nightmare for your accountant. However, there are even more significant justifications for keeping them separate.

When you combine your personal and business accounts, all those assets not directly related to the business–home, car, and personal property–could be at risk if your business is sued. Keeping the two accounts segregated protects your personal banking and credit card accounts.

You will also want to start building excellent credit for your CNC business since you’ll likely be borrowing to add new machine tools, or even finance an expansion in the future.

6. Obtain the Necessary Permits and Licenses

The permits and licenses you’ll need will vary, depending on your state or municipality. Since you’re starting a CNC manufacturing business, obtaining an EIN completes your federal requirement, but your state and local government might also require an identification number.

You’ll likely need a general business license from your county or city, and some states also require a ‘doing business as’ (DBA) license, requiring you to register your business name with them.

Check with your accountant or attorney to confirm you have acquired all the necessary permits and licenses.

7. Purchase Business Insurance

You need business insurance to operate safely and within the law. Start by finding a reputable insurance broker through the other members of your professional team. The broker will tailor an insurance program to match your risks, business model, and growth plans.

A business owner’s policy typically includes liability, commercial property, and business interruption coverage. Most states also require businesses to carry workers’ compensation insurance to cover employee injuries, rehabilitation, lost wages, and legal costs related to a workplace injury.

8. Design a Logo and Start Marketing Your Shop

Your logo represents your brand, tells the world what your company stands for, and sets you apart from competitors. The internet is filled with logo makers who will help you design a unique logo.

You can use several methods to market your CNC shop, including connecting through MFG, participating in networking events, joining industry organizations, sending out direct mailings, and cold-calling local manufacturers.

CNC machining businesses can also help themselves stand out by following ISO 9000 standards and becoming ISO 9001-certified as quickly as possible.

9. Create a Business Website

Once you have defined your brand and created a logo, you’re ready to build a business website. If creating a website intimidates you, you can hire a professional to do it for you. These days, many business owners without website-building experience are tackling that job themselves and saving money in the process.

Web technology advancements now make it possible to build an essential website using one of several website builder tools such as Wix, GoDaddy, WordPress, and Squarespace. The process is relatively simple, and it only takes a few hours to get your site up and running.

Developing a website adds credibility and legitimacy to your business without requiring a significant investment in time and money.

10. Set up a Business Phone System

As with keeping your banking and credit card accounts separate, installing a business phone system keeps your personal and business lives separate and private. Taking this step also adds an air of professionalism to your new venture, makes it easier for potential clients to find you, and helps your accountant track your finances.

Compare various phone systems online and choose the one that makes the most sense for your CNC business.

Get Off on the Right Foot

Take nothing for granted. Potential customers will want to see your shop before writing that initial purchase order. Ensure that your shop is clean and well-organized to impress and instill confidence in others, and make it more efficient for your workers.

Dress for success when you visit companies that could turn into customers. Some new shop owners mistakenly believe that their appearance is irrelevant because they own a ‘blue-collar’ business. When you meet a company’s owner or purchasing manager, they could judge you on how seriously you take your new business. Taking the time to change into casual business attire tells them you are pretty serious!

Attract customers immediately by leveraging relationships you developed in the past, as well as discovering manufacturers who need your CNC services now. Knowing how to relate and speak to them using the language of the CNC machining industry will help you convince potential customers that you are the solution to their needs for high-quality parts and fast turnaround in deadlines.