Making Chips Podcast for Manufacturing Leaders

According to a recent article in Reuters, “The ISM said its index of national factory activity inched up to 59.9 last month from a reading of 59.5 in July. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy.” Manufacturing is on the rise, yet every industry is struggling with an impaired supply chain. Will things get better anytime soon? How can manufacturing businesses manage shortages in the meantime? We share some thoughts in this episode of Making Chips!  Segments [0:40] Check out ProShop ERP for manufacturing software! [4:15] A discussion about supply chain issues [6:57] What do we like right now? [11:30] U.S. manufacturing activity rises; shortages linger [14:08] The disruption that comes with reshoring [17:00] Accelerate your digital transformation with Xometry [19:40] How shortages are impacting industries [26:14] Learn about Amper Technologies machine monitoring systems [26:57] Will the supply chain get better anytime soon? [29:01] Tips to mitigate the pain of supply chain disruptions The Great Supply Chain Disruption Manufacturing is becoming increasingly busy but supply chain woes linger. It’s the #1 thing on our minds right now. Most machine shops are at or near capacity. But we’re having trouble getting aluminum, brass, steel, and finished goods. Even getting containers to ship the goods is a struggle. This phenomenon is being dubbed “The Great Supply Chain Disruption.”  Whenever you’re making a systemic change, it’s going to cause disruption. No matter how much planning you put into something, disruption happens. This should have been expected.  The disruption that comes with reshoring Reshoring is more relevant than ever. And this isn’t a new topic to our show. What is driving the reshoring initiative? COVID. Everything that was coming from overseas halted or decreased. Ships weren’t coming through the Panama Canal. Ships weren’t being unloaded because the workforce was at home.  When China started rethinking its business environment and they started to incorporate more free-market tendencies, they wanted to become an export economy. They didn’t have the technology to export high-end goods so they started on the low end. But now they’re catching up. Now, China is focused on export as well as making branded goods for their economy.  People spent their time in quarantine buying low-cost things that are sourced from Amazon—from exercise equipment to kitchen mixers. They’re buying computers, TVs, headphones, etc. Many things that are sourced from China.  Will the supply chain get better anytime soon? Lead time and prices are going to increase. Everyone is dealing with it right now. We can’t be the link that absorbs all the cost increases. The federal government knew that the influx of money into the economy plus the supply chain issues were going to lead to increased prices. This is going to lead to inflation. Inflation does slow growth. But everyone is saying that interest rates will be holding steady ingo 2022. We think the supply chain issues will continue into 2022 but it’s currently a game of wait and see. So what can manufacturers do in the meantime to mitigate the problems that come with supply chain issues? We share a few tips in this episode you don’t want to miss. Check it out!  BAM! – Jim Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! Camino Island by John Grisham U.S. manufacturing activity rises; shortages linger Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

Do your employees feel like they’re a means to an end? I think a lot of team members don’t realize—or believe—that we care about them. Some feel that when you hold them accountable to hit their numbers that data is all you care about. But that isn’t always the case.  At the end of the day, we’re all business leaders who need an efficient working environment. So where do we find a balance between data, accountability, and caring for our team members? How do we drive profitability without driving our employees away? Listen to this episode of Making Chips for the full discussion! Segments [0:40] Check out ProShop ERP for more information on manufacturing software! [3:24] Hold your employees to metrics they can control [7:33] Manufacturing News: A Generation of American Men Give Up on College [16:55] Learn about Amper Technologies machine monitoring systems [17:39] Avoid measuring data that is not helpful to the employee [37:33] Accelerate your digital transformation with Xometry Hold your employees to metrics they can control I’ve seen a trend where everything is about data. Everyone wants to harvest data. But can you take it a step too far? Can there be an imbalance in the data? On a recent episode of Russell Brand’s podcast, he talked about how Amazon’s delivery people have an app they have to use. The app tracks every move they make and everything they do when they deliver packages. But it appears that Amazon is tracking metrics that are outside of the control of the employee and using those metrics to evaluate them.  We believe when you hold people accountable with metrics it should be something that’s within their control. But Amazon has taken it so far that people are being fired when they don’t meet the metrics of the algorithm Amazon has in place for delivery drivers.  When Russell Brand described this, he pointed out that Amazon was treating their employees like zombies living in an algorithm—disposable cattle.  The data doesn’t always show the full picture Nick had a conversation with leaders at AME and Hennig about compensation for their salespeople. Commissions are results-based compensation and the result is why you work. But there are other activities salespeople do that add value. They do activities to achieve an objective to create a result. So his company talked about activity-based objectives they could compensate their salespeople for. They decided compensation should be a mix.  Salespeople are driven by increasing their compensation. So they tend to focus on what would compensate them the most. But if your company wants them to focus on other activities not directly tied to making a sale, you might have to compensate them. You have to match the compensation with the desired behavior.  Situations when data-tracking is necessary I just took off the month of August and ZENGERS had a record month of sales while I was gone. I’m not trying to micromanage my team. They have an overall objective—sales and profitability. My goal is to train them on the right things to do to achieve that goal. I’m not saying they need to make a certain amount of calls a day or track every detail. I give them an overall mission to achieve but I don’t track their every movement. I feel like asking your team to track everything they do is the kiss of death. But is that true for every business?  For Jim, due to Carr Machine & Tools AS9100 certification, they are mandated to document all of the results from their machining process. He runs a data-driven and oriented business where he has to measure, record, validate, time-track against jobs, and more.  And of course, each individual on my team has those types of quality measurements that they have to hit. We record data that contributes to useful management of your team. But I don’t want my team to record data that’s pointless. Nick’s brother always says that any data that you record and isn’t used to make an improvement is wasted money. Wasted information is wasted action.  The bottom line is that everyone needs to take a step back and think about this. Are the right activities being tracked? Are you gathering useful data, or just wasting time? You need to collect the right data that helps you drive profitability for your company. Listen to the whole episode for the full conversation.  BAM! – Jason Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! A Generation of American Men Give Up on College Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

The U.S. labor market is still struggling despite record numbers of job openings. Businesses aren’t able to hire as quickly as they need to. What’s the holdup? Is there a lack of candidates in the market? Are people choosing not to return to work? In this episode of Making Chips we dissect what’s happening—and a few things you can do about it.  Segments [0:18] Check out ProShop ERP for manufacturing software! [2:30] What’s happening in the Making Chips world [8:43] Manufacturing news: The U.S. Labor Market [19:41] Accelerate your digital transformation with Xometry [20:36] What I’m learning through the hiring process [35:35] How to recruit high caliber candidates [41:34] Learn about Amper Technologies monitoring systems The U.S. Labor Market Isn’t Adding Up—And This Is Why According to Andrew Hunter’s research, we’re seeing a high level of job openings but low levels of hiring. Millions of Americans are quitting and many aren’t re-entering the labor market. It’s claimed that the labor market is healthy, but the numbers don’t add up. Why?  Subdued Employment: 8.7 million Americans remain unemployed. Before the pandemic, 5.7 million Americans were unemployed.  Record Job Openings: The number of job opportunities is high and rising, reaching 10.1 million at the end of June with 590,000 more openings than the month before.  Low Hiring: Hiring isn’t keeping pace with job growth. June saw 6.7 million hires, but that’s 3.4 million short of the number needed to fill open roles. High Quits: Referred to as the “great resignation,” 3.9 million people quit their job in June. It’s partly the response to job opportunities. Workers are confident in their ability to find better jobs.  The incentive to stay home and not work will decrease as the double unemployment payments are pulled back. The economy is recovering but worker confidence isn’t returning at the same pace. Autumn 2021 may bring the correction needed to balance the market. The outlook is optimistic. But until things turn around, what do manufacturers do? Find creative solutions to your problem A client of Jason’s had a key person in their shop that was doing some things that he deemed worthy of firing. But Jason’s client couldn’t afford to lose—and be forced to replace—this person. So he took a risk and sat him down for a conversation. He gave him the option to fix the problem or he’d be fired. This person turned his life around completely. This may not be an option for everyone, nor will it work in every scenario, but it was a creative way for this business owner to solve a problem.  Two ways to hire for difficult positions Recruiting for regional sales positions has been a huge focus of mine recently as we are restructuring our sales. But I don’t want to hire the first warm body. Everyone has heard “Hire slow, fire fast,” right? But if your machinist quits, you can’t hire slow because it causes production problems.  So what am I doing right now? Finding a way to work with a candidate before we commit to hiring them full-time. If there’s a way to test the relationship, do it. Making Chips is a podcast and marketing agency. We brought someone on as a contractor to try out on a trial basis before we commit to hiring him full-time. It’s great for both parties to make an educated decision about each other. You can even put it in writing so it’s transparent and fully agreed on.  What else can you do to hire for a difficult-to-fill position? Use LinkedIn’s recruiting tool. The price is steep—approximately $30,000—but you’re given access to highly qualified candidates interested in a new position. LinkedIn will even train you how to use it. The opportunity to do it yourself is available for larger companies who can make that number work.  Listen to the whole episode to learn more about how the hiring process has gone for me and get some in-depth details on my two strategies.  BAM! – Nick Shameless plug: If you are interested, we’re all hiring! Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! The U.S. Labor Market Isn’t Adding Up And This Is Why Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

I wanted to differentiate myself among other machine shops in the area with the new Carr Machine & Tool location. The shop floor is where we make our money. I took extra steps in the process to create a new image for my shop. I wanted to present it in a way that was sophisticated, high-tech, polished, and professional—while remaining efficient.  That’s where IMEC came in. I reached out to them for some technical collaboration to help design an efficient shop floor. I worked with both Dean Harms and Tim Maurer and it was an amazing experience. So in this episode of Making Chips, I’m sharing what the collaboration and design process looked like with IMEC. Segments [0:24] Check out ProShop ERP for more information on manufacturing software! [2:46] Why I chose the new Carr Machine & Tool location [4:17] What’s happening at ZENGERS? [6:19] Why investing in your business is important  [10:32] President Biden Announces Support for the Bipartisan Infrastructure Framework [12:55] The process of designing a new facility with IMEC  [15:10] What IMEC (the Illinois Manufacturing Excellence Center) is all about [19:16] Amper Technologies machine monitoring systems [19:59] How the infrastructure bill will be distributed to MEPs [25:43] My experience working with IMEC to design my shop floor [36:50] Other types of shops IMEC works with [38:55] Accelerate your digital transformation with Xometry What IMEC (the Illinois Manufacturing Excellence Center) is all about Dean Harms is a Regional Manager with IMEC. It’s his mission to help others any way he can on a daily basis and have fun along the way. Sounds like us, right?  IMEC is part of the Manufacturing Extension Partnership (MEP) National Network. It’s connected to the US Department of Commerce through the NIST organization. IMEC launched in the 1990s and is about to celebrate its 25th anniversary. There are 51 MEPs (one in every state + Puerto Rico). Their overall mission is to provide solutions and improvements to small and medium-sized manufacturing companies to help them navigate the changing landscape, drive profitability, sustain growth, and become globally competitive.  IMEC is a non-profit that is both privately and publicly funded. They are a channel that brings tax dollars back into the state of Illinois by specifically serving manufacturing businesses. Dean Harms makes sure the money is applied where it’s needed most.  My experience working with IMEC Dean cold-called me after I was on a live Facebook interview. I mentioned I was about to move my shop, so he reached out. He knew that there was probably something IMEC could do to help with the move. I heard that they could help design my shop floor and I really wanted a high-end polished shop. Dean introduced me to Tim Maurer and said he would be the perfect guy to collaborate with to design my shop floor. Tim has decades of experience not only with IMEC but also with Caterpillar. After I met Tim, I knew I was dealing with someone who was competent and knew what a manufacturing floor should look like.  The shop floor design process Tim’s design process was thorough, starting with the vision for our future and ending with the execution of the move. We started by setting objectives: Where did we want to be? What type of work would we be doing? What new technologies will be utilized on the shop floor?  We did a physical walk of both of the properties. He took physical measurements of the new building, all of our tools, and made sure the room was big enough for a CMM. After he did the physical layout, we met again to go over the flow of the room and nail down the workflow. We placed the machinery and equipment in the prime areas of the floor to maximize the square footage.  He established power needs, air drops, water needs, an eyewash station, etc. He developed the CAD and we talked about future automation and made sure they’d be room around the machines. He delivered the final layout to us in a CAD model. The best part? On moving day we had a roadmap to mark where everything went. We knew where every single thing would go.  The design process was an investment in our future productivity. I would never have completed this process as well as Tim did. I highly recommend working with IMEC through a big move to create a more efficient shop floor. Don’t be afraid to delegate design to the experts.  BAM! – Jim Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! Connect with Jason on LinkedIn Why Investing in Your Business is Important President Biden Announces Support for the Bipartisan Infrastructure Framework Connect with Dean Harms with IMEC Connect with Tim Maurere with IMEC Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

Everyone is familiar with the concept of networking. But how many people actually implement it to grow themselves and their businesses? In this episode of Making Chips, Jim, Jason, and I dive into how networking has impacted our businesses in unexpected ways. To hear the good, bad, and the ugly—give it a listen! Segments [0:18] Check out ProShop ERP for more information on manufacturing software! [3:04] Learn what’s happening at ZENGERS [3:51] Nick welcomed a baby boy to his family on June 27th! [4:54] Boeing Slows Dreamliner Production After New Manufacturing Issue [9:17] Can Networking Change Your Manufacturing Business? [12:41] How networking has changed Jim’s business [16:10] Amper Technologies machine monitoring systems [16:54] The Making Chips Network of Manufacturing Leaders [20:59] Should increasing sales be the objective of networking? [24:41] A working relationship built on mutual interests [26:15] Ad-hoc networking: Keep your ears to the ground  [28:58] Accelerate your digital transformation with Xometry [30:09] Networking is like growing a 401k Networking is what brings us together today I think it’s important to point out that networking is why all of us are here. It’s why we all know each other and host a podcast together. But where did this partnership start?  Jim was spending money at ZENGERS and was a great customer for them. So Jason loosely knew who he was. Why did Jim purchase from ZENGERS in the first place? One of his friends—a production manager at a shop—recommended ZENGERS. One would’ve thought that’s how their relationship started. But it wasn’t.  Jason and Jim were both asked independently to be on an AM radio show at 6 am on a Saturday (the time slot when you know only serious entrepreneurs and business owners would be awake and listening). Jason was talking about creating a vision for your company and Jim talked about social media marketing for manufacturers. They were both impressed by each other, their business acumen, and how well acquainted they were with the industry. They realized they’d make a great combination and the podcast was developed from there.  The question is—without networking, would they have gotten the opportunity to speak on the same radio show? How networking has changed Jim’s business Jim had a strategic vision for networking for his business. He became a member of the Technology and Manufacturing Association (TMA) who had recently hired a marketing manager to help machine shops with their marketing. Jim got on the phone with him and they got along. He became instrumental in helping Jim develop networking within the association.  Jim was asked to join a young leaders group where he was able to meet like-minded people. He knew if he committed his time to networking and building relationships within the community, that he would grow in some capacity. He didn’t know where it would take him but that he’d walk away from networking events learning more.  If you go to a networking event and leave feeling like you learned nothing, you’re doing something wrong. You’re either in the wrong place—or not asking the right questions.  Jim also joined the Greater O'Hare Association and the Valley Association. He met great people in all of them. Networking is a great way to listen to other people and learn from their experiences.  The Making Chips Network of Manufacturing Leaders Some of our Making Chips sponsors have been a great way for us to realize connections across the industry. Amper can help you better understand your shop and help you solve problems on your shop floor. Nick, our guest on a previous episode, also works with Amper. It was a game-changer for him. Nick had emailed me a year or so ago and I hadn’t followed up with him. Luckily, Jim met him again at a networking event and we all got back in touch. Another sponsor, Xometry, asked us to be part of a focus group consisting of manufacturing leaders. This shows that Xometry cares about their network. How often do companies hire a credible third party to dig into discovery? How often do they dig into their segments to find out what they care about and need? They got a third party to investigate and find out what’s happening. They wanted to re-engineer their value proposition to serve their customers better.  In the Xometry focus group, we heard that four of the individuals were all ProShop ERP users—and had heard about them through the Making Chips Podcast. These leaders all loved ProShop. It certainly gave us more structure for our processes. You’ll become more efficient, productive, detail-oriented, data-driven, and results-oriented.  They heard about ProShop because Jason and Jim had the courage to create a podcast just for the manufacturing industry. I joined them because I’m just as passionate about the space and I know that this show delivers valuable content. People tend to think networking has to be about growing your business and making connections to make sales. Why is that the wrong mindset to have? What mindset should you embrace instead? Learn more by listening to the whole episode! BAM! – Nick Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! Boeing Slows Dreamliner Production After New Manufacturing Issue Amper Technologies machine monitoring systems Greater O’Hare Association Michael Gaunce YG-1 5th Axis Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

Part of being a machine shop owner—and a business owner in general—is that every day there’s a new challenge to navigate. A machine might break down. Perhaps someone who has been a team member for decades quits. Your factory could burn to the ground. Or your Dad—the owner and manager of the shop—gets sick with cancer. That’s how Nick Sainati was thrust into becoming the GM of Belden Universal. In this episode, he shares his journey. It will resonate with some of us, fascinate most of us, and impress all of us. Don’t miss this inspiring family story! Segments [0:26] Amper Technologies machine monitoring systems [6:24] Dealing with supply chain issues caused by COVID [8:09] Fun facts about family-owned businesses [14:07] Create a Formal Business Succession Plan in 7 Steps [16:52] Today's guest: Nick Sainati, GM at Belden Universal  [24:00] Check out ProShop ERP for more information on manufacturing software! [27:42] When everything changed: How Nick took over his Dad’s machine shop [40:10] Managing a machine shop through COVID [44:35] What the future looks like for Belden Universal [46:32] How Nick’s experiences have prepared him for the future [48:42] Accelerate your digital transformation with Xometry The history of Belden Universal Belden Universal is an AS9100 manufacturer of precision universal joints and drive shafts. They started in 1970 as Belden Tools, founded by Nick’s grandfather and his brothers on Belden Avenue in Chicago. They used to buy tools from ZENGERS, which was just down the street!  Instead of going into the family business, Nick ended up in San Francisco in investment banking. He spent two years at an eCommerce startup and eventually moved back to Chicago. After both he and his wife got an MBA, they moved to Seattle for her job. After running a wine business, Nick transitioned into Starbucks Corporate in brand management. He helped launch the Starbucks evening program that tied-in with wine. He transitioned to a strategy team after that. He learned about culture, managing people, and running complex projects.  How Nick took over his Dad’s machine shop Two months after Nick’s first daughter was born, his parents came to visit them in Seattle. They told Nick that his Dad had a rare form of Leukemia. He needed to take time off of work for treatment. They were going to have to sell the business unless Nick or his sister could come back and run it. Nick was shocked. His parents were healthy active people who were never sick.  After processing the news and discussing it with his wife, Nick decided to move back to Chicago to take over Belden Universal, an AS9100 manufacturer of precision universal joints and drive shafts. Four months later, he was in Chicago running a machine shop—and he knew nothing about manufacturing. Nick bought a large book about manufacturing that was for a college-level manufacturing class and dug into back episodes of Making Chips, which helped him get immersed in the language of machining.  Navigating challenges while learning the ropes When Nick took over in 2018, the machine shop had just moved into a new facility, doubling the size of their manufacturing floor. They had a tenured team and people to help get Nick up to speed. But he was also their boss—and couldn’t do most of their jobs.  Soon after taking over, Belden lost their biggest customer—which was one of the reasons they had moved into the bigger space. They immediately lost what would have been ¼ of their business. Nick knew it would be his first challenge. But then his sales manager of 19 years quit three months in. Instead of panicking, he took stock of the situation and helped define where they wanted to go in the future. They hired an internal candidate for the sales management position. She blossomed as a leader and got their team back on track. They worked hand-in-hand on the culture so people were excited to come to work every day. In an era like today where every shop is competing for employees, the culture matters. A shop can’t survive with a negative culture. 18 months later, after continuous incidents with the production manager (who had been there 29 years), Nick decided it was time to part ways. They let him go. But this man had been involved in every part of the business. The benefit of letting him go was that Nick was forced to get more involved in floor operations. He began to work closely with his engineers on improvement projects and personnel issues. He got to know the people on the factory floor. He stepped up and earned respect from his team. How did Nick manage the machine shop through COVID? What does the future hold for Belden Universal? Listen to the whole episode to hear more of his unique story.  How Nick’s experiences have prepared him for the future What did Nick learn? The most important thing is that problems can look very daunting in the moment—especially multi-faceted problems. But the most important thing is to take a break, formulate a plan, understand what the desired end outcome is, and start chipping away at it. Family businesses have long timelines where things don’t have to be solved overnight. They can make progress every day, month, and year towards that vision. Eventually they will find success. A problem now may seem like a bump in the road over the arc of your career.  — BAM! Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! Create a Formal Business Succession Plan in 7 Steps Amper Technologies machine monitoring systems Check out ProShop ERP for more information on manufacturing software! Accelerate your digital transformation with Xometry Book: Humanocracy by Gary Hamel and Michelle Zanini Learn more about Nick Sainati Belden Universal Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

What is the Cybersecurity Maturity Model Certification (CMMC)? The DOD is implementing the CMMC to normalize and standardize cybersecurity preparedness across the Federal government’s defense industrial base. Meaning? If you’re doing DOD work, they’re mandating that you get this certification. So you need to know what this is all about. We’ve brought in Paul Van Metre and John Bilek to help fill in the blanks. Check it out! Segments [0:00] Amper Technologies machine monitoring systems [3:39] Cybersecurity Maturity Model Certification (CMMC) [5:05] Let’s talk acronyms (there’s one for everything) [7:20] What’s happening at ZENGERS? [8:20] The amount of money wasted on cybersecurity [11:05] We welcome our two guests to the show [14:48] What is CMMC really all about? [17:09] Who is impacted by the CMMC requirement?  [19:44] Check out ProShop ERP for more information on manufacturing software! [20:44] The five levels of CMMC compliance [21:56] The CMMC implementation process [27:19] What does “CMMC Compliant” mean? [29:02] What ProShop ERP is rolling out to enhance security The amount of money wasted on cybersecurity Cybersecurity is a large problem. Most attacks originate from Russia but there’s also a lot of domestic hacking happening. Because of this—according to MXD—the DOD is now spending more than $300 billion each year on government contracts. The DOD Directive 8140 requires that any contractor must satisfy specific training and certification provisions to ensure sensitive data remains secure. The qualifications can be transferable and useful across the board.  Jason points out that this cybersecurity effort is how we protect our country, industry, economy, and more. Our enemies want to steal our technology, which is why we must keep it secure. Because manufacturing is a huge part of what the DOD does, anyone in their supply chain must follow the same cybersecurity protocols.  Who is impacted by the CMMC requirement?  CMMC applies to anyone in the defense contract supply chain. That includes both contractors who engage directly with the DOD and subcontractors who fulfill and/or execute those contracts. The CMMC standards will affect over 300,000 organizations. If you want to continue to do work for the DOD, you will have to get certified over the next 4–5 years.  Paul has heard of shops that are starting to lose work because they aren’t on track to get the CMMC certification. John has been asked multiple times if he’s been certified. While you cannot get certified yet, he is working toward compliance. There are five different levels of CMMC compliance. Most machine shops are expected to be certified at level three. How soon do you have to implement this? Paul points out that you can’t sit on this. There are very few approved auditors, so if you wait until the last minute you’ll lose out on a significant amount of your sales. If 30% of your business deals with the DOD, you could lose millions without the certification.  The financial impact on machine shops In May 2021, an entity was announced that would start handling the CMMC audits. What kind of costs will be put on machine shops? It’s going to be far more expensive to implement than an AS9100 audit. The CMMC is built on cybersecurity standards, the main one being the NIST 800-171 standard.  If a company is already compliant with that standard, they can likely check off the boxes for CMMC Level one. If you aren't compliant with this standard, to reach level one compliance could cost you between $5,000 to $25,000. For level three, it will be around $15,000 to $100,000, depending on the size of your shop. This is going to be a large financial hit no matter what you do. The certification is costly—but if you don’t get it, the loss of business may cost you more. A shop in Florida was quoted $100,000 for a company to “help” them get CMMC certified. Be wary of who you look to for help—a lot of unscrupulous people will take advantage of this rollout. Find accredited and reputable consultants. There will be grant money offered to help companies get this certification. Can you swing the cost of the certification?  What can help cover some of these costs? IMEC gave Carr Machine a grant to get ISO certified years ago, which covered some of the implementation and auditor fees. IMEC will be giving grants out to augment the cost of implementing this. Paul points out that the MEP gets its money from the Federal government and allocates it to different organizations like IMEC. The unknown? The amount of labor you may have to invest in to get to level three certification.  So what does CMMC compliant actually mean? How is ProShop ERP implementing updates to help you walk through the process? John and Paul share a few examples, so keep listening! If you have an idea for a MakingChips message, please ask us a question or leave us a message at 312-725-0245 and let us know! Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! John Bilek MXD USA The DOD Directive 8140  ITAR IMEC Making Chips Episode #1 The NIST 800-171 standard 85 FR 51161 - Award Format for DoD Grants and Cooperative Agreements Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

In this episode of Making Chips, Jim and I chat with Paul Van Metre—the Co-Founder of ProShop ERP—about the process of selling his machine shop. We dissect the process, including how to understand the valuation of your company and how to make your shop more attractive to potential buyers. If you’re considering selling in the next few years, this episode is full of actionable tactics and strategies that will help you succeed.  BAM! - Jason Zenger Segments [0:07] Amper Technologies machine monitoring systems [3:10] How to sell your machine shop [5:11] Ozark Technical Community College offering a two-week manufacturing bootcamp [7:49] Jim shares what’s new at Carr Machine [8:42] Paul Van Metre’s experience selling his machine shop [13:42] Is this a big change in the manufacturing industry? [15:27] Why would a strategic buyer pay more?  [16:40] Understanding the process of valuation  [17:35] Check out ProShop ERP for more information on manufacturing software! [26:10] The experiences of Paul’s customers buying shops [28:12] How to make your company more attractive for buyers [30:53] How buyers can make sure they’re getting a fair valuation Now is a great time to sell—or buy—a machine shop  I bought ZENGERS from my Dad in 2019, right before the pandemic hit. learned that there’s a lot involved in buying/selling a machine shop. Not only that, but it takes multiple years to get to the point to learn how to run a shop by yourself. Running any business that employs a team of people takes a lot of work.  A lot of people are looking to retire and sell their machine shops. The youngest people of the Baby Boomer generation will be 65 by 2030. And of the 18,000 machine shops in America, the majority are owned by Baby Boomers. The vast majority will have some type of transition of ownership in the next 10–15 years.  Jim is getting calls from M&A companies all the time about buying his shop. He isn’t even close to ready to sell. I’m on the buy side, and I think this is a great time to buy a machine shop. Whether you want to merge, participate in a roll-up, etc. now is the time. Even if you’re not ready for several years, you need to start planning. The experiences of Paul’s customers buying shops Paul notes that owning a business is one of the most significant financial decisions anyone can make in their lifetime. These shops are the baby of their owners. They’ve poured 10, 20, 30, 40+ years into them. Leaving that behind and passing it on to the next generation is a difficult and taxing process. Some shops may close their doors and sell off their machinery.  A client of Paul’s, Mike, was deeply involved in the M&A and private equity space. He was trying to sell a shop where the owner wasn’t interested in making her business attractive for sale. They couldn’t sell the shop for years. So Mike decided to buy the shop himself. He knew it was a good business at the core and got it for a great deal. He also recently acquired another machine shop. Paul worked with a small shop in Colorado—Focused on Machining—who was in banking before moving into manufacturing. He looked at 4–5 shops before landing on this one. Because he was in banking he understood the financial side and has done an incredible job growing the business. Paul’s experience selling his machine shop Pro CNC was founded in 1997 when Paul was just 23—straight out of college. When they sold in 2014, they were a mature company with 17 years of experience under their belt (Paul shares his story in episode #98 of Making Chips). In hindsight, Paul had been preparing the company for sale for many years. They started hiring people to replace the three partners so they weren’t working in the business every day. They then hired an M&A company to take them to market (the whole process took around a year).  Sadly, Paul points out that 80% of businesses that get listed for sale never sell. Many businesses end up selling off their assets. Those people are likely making only a fraction of what their company could be worth. So how do you set your business up for success? What can you do now to make it more attractive to future buyers? Listen to the whole episode to learn the process! Resources mentioned on this episode Get The Boring Bar Newsletter - Text CHIPS to 38470 to subscribe! Ozark Technical Community College offering a two-week manufacturing bootcamp Paul Van Metre’s Story: Episode #98 of Making Chips Check out ProShop ERP for more information on manufacturing software! Modern Machine Shop magazine Focused on Machining The E Myth: Why Most Businesses Don't Work and What to Do About It Built to Sell: Creating a Business That Can Thrive Without You Connect With MakingChips www.MakingChips.com On Facebook On LinkedIn On Instagram On Twitter On YouTube

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