During the most recent recession we've seen many mold making shops that seemed to have it all go out of business: state-of-the-art equipment, experienced employees and everything we'd normally associate with a successful operation. We are left wondering why are they out of business. The pundits blame it on foreign trade, the economy and many other factors.  These failures however are generally not the result of a single cause but a combination of factors. In considering these factors, you can better build a case for a successful business.

Cause #1: Doing what you don't do well

Hire an accounting or finance major from a local college for a two-week project. Have him dig back a few years into the records of all the molds you've built. Here's his assignment:

         Column A - the mold ID

         Column B - the mold's classification

         Column C - Your quoted price of the mold

         Column D - Your cost to manufacture the mold

         Column E - Your quoted cost of all the engineering changes

         Column F - Your cost of implementing the changes

         Column G - The profit from the mold alone (Column C minus column D)

         Column H - The profit from the changes (Column E minus column F)

         Column I - Your total profit (Column G plus column H)

         Column J - Your percentage of profit (Column G divided by Column C+E)

Using the SORT function on the DATA toolbar, first sort by classification. Have him make a chart that illustrates how frequently you build different types of molds. Sort the data by profit on each job. Draw another graph. Sort the data by percentage of profit.  Draw a graph.

These three graphs will tell you a story. First, it will show what you do well in terms of the types of molds you build. Next, it will show you the money you've committed and the profit you've made.  If you do $1,000,000 in sales, at the end of the year some jobs can show a 50% profit margin while others actually lose money.

What you're looking for is more work where you made a good profit and NO QUOTE the types of jobs on which you made little or no profit. This will tell you what you do well. Try to do more of it. It will also tell you what you don't do well. For now, try to avoid taking these kinds of jobs.

LESSON LEARNED - Don't try to be a master of everything. Be the best at something you enjoy, do well and can profitably complete.

Cause #2:  Do not covet

You go to the trade shows and see a really nifty multi-axis, ultra high-speed, computer controlled, 36-head automatic tool changing, wear compensating, artificially intelligent machining center. WOW!  What a cool toy! The guy 10 miles away from you (the Dastardly Evil Empire Competition) bought this same machine three months ago and he's flinging chips on the floor twice as fast as you.

While you may think this is a 'must have' purchase, think about it. Your so-called competition has to have enough work to stay busy so he can make the payments on that nifty machine and still make a profit. Is there enough work to keep both of you busy?

Be smarter than your competition.  When you get a job where his fancy machine would be an ideal application, call him up and have him bid that portion of your job. What you're saving is the sum of not having to pay the bank loan for the new machine, to train your employees on it and to keep it "fed" with new work. While the latest equipment is nice to have, the mentality of subbing work out has never been a problem with polishing, gun drilling and other secondary tasks. When you travel on a business trip, your first stop is to the car rental place to acquire short term transportation, not to a car dealership to buy a new car.

LESSON LEARNED - Purchase the equipment you need, not what you want, in order to accomplish your goals. If there's someone more experienced who already owns a gadget you might covet, its better business to partner with him than going through the purchasing and training expense.

Cause #3: Not Marketing

Marketing involves creating a strategy that drives demand for your services. Just because you're good doesn't mean everybody knows it. "We stand on our reputation" is a common comment. If you're standing on your reputation, it can be squashed under your feet. Look at the trade magazines of your customers: How come almost 90% of the mold builders advertising are from China? When was the last time someone called on your customers in person from an offshore shop? Answering these two questions should tell you something: The way to get noticed is to be noticeable: 

LESSON LEARNED -. Making a silkscreen print of a Campbell's Soup can wasn't brilliant artistry by Andy Warhol. However he was a shameless and perpetual promoter. His fame is legendary. If nobody knows you are or how good you are, you won't get any work.

Cause #4: Getting Paid

Everybody wants to get paid promptly. Write a policy on payment. Be Fair, Firm and Consistent.  State your terms (such as): 30% down, 30% at xx% completion, 30% on final completion, and 10% on submission (NOT approval) of samples in your quote. Repeat your terms on the last document that changes hands before you begin work. The trick is to enforce it. You won't begin work without the down payment. You invoice ahead of time for the other progress payments. All work is on a day-for-day drift if the progress payments aren't on time.   

Don't fall for the 'I'm withholding the last payment until the mold is corrected just to keep you honest' line. Really? Who's being dishonest? If they refuse payment per their contract and your policy, you refuse to work! Your last payment should be received in exchange for your submitting samples. No payment, no samples. The reason for this is that it is common for many people to withhold payment pending the other tooling being completed. This can take as long as six months.

Approval samples are not First Production. Give five or 10 'production typical' samples per cavity.  That's enough for functional, dimensional, and cosmetic approval. Since your contract is to produce parts per design, you have the right to hold the tool until approval is given and paid for.

LESSON LEARNED - You are not a bank financing your customer's project.  Get paid for the work you do per your agreed terms.

Cause #5: Giving Gratuities

Regardless of your ethics, commissions, kickbacks, givebacks and even bribes are sometimes the prerequisite to getting the job. But when someone gets caught, you lose business. Since the bribe you're paying is really buried in your quote, the customer is paying for it.

In your policy letter require that the appropriate tax form (W-9 Miscellaneous Income) must be completed before you pay anything. This gives you a business deduction. If the person who asked for it doesn't declare it on his income taxes or tell his employer, that's his problem.   

LESSON LEARNED - Even if the game is rigged, all the cards are on the table.

The success of most mold builders is really not what they build but how they gain exposure and how well they do business. Know what you do well and promote it. 

Simple?  Yes!

About the author: Bill Tobin is founder of injection molding and mold manufacturing consultant WJT Associates. PlasticsToday senior editor Clare Goldsberry edited the article.