MAKING MONEY THE OLD FASHIONED WAY by liuhongmei

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									MAKING MONEY THE OLD
   FASHIONED WAY
        By Joe martin


      USER AGREEMENT
          (To come)
                                                    FOREWORD

                                               Two books in one.
“Making a Business out of a hobby,” located in the second section, was originally a chapter published in a book I
wrote called “Tabletop Machining.” It is a story about how and why I started a company called Sherline Products,
a company that manufactures and sells miniature machine tools worldwide. I received so many favorable comments
I decided to write ”Making Money the Old Fashion Way.” This book wasn’t a story, but rather a series of observations
and rules that I developed while creating Sherline Products Inc. For you, the reader, what I’ve done isn’t as important
as the logic I used to do it. Solving problems with my own logic is what I’m all about, and this could be valuable
information that you can use in your business. Too many inventors stay at their mundane jobs believing they don’t
have what it takes to create a business. This book will explain what it really takes and inspire this special group to
at least consider striking out on their own. I believe I have a unique perspective on business because I’ve been
actively involved in every phase of business. I have taken the time to understand the causes and effects of business
interactions on a personal level. If you have the time, start with the story in the second section “Making a Business
out of a Hobby”, and you’ll understand how I developed my own logic in regards to business. Short on time? Start
directly with “Making Money the Old Fashioned Way.” You’ll find my writing useful, concise and easy to read. I’m
telling you up front that there is quite a bit a redundancy if you read both sections. Each section was written
separately and both contain information that I consider extremely important.




       MAKING MONEY THE OLD FASHIONED WAY
                                                    By Joe martin


DEDICATION
I dedicate this book to all the expert craftsmen in this world who work hard without being told; who live with their
agreements without being forced and always produce quality work because of pride. They are the foundation of all
nations.

ACKNOWLEDGMENTS
I would like to thank all my friends who took the time to read my writings and made so many intelligent suggestions.
Mark Rogo, of Morton Machinery, Los Angeles, Ca http://www.mortonmachinery.com went so far “beyond the call of
duty” of a friend that he deserves more than just recognition. I used so many of his well thought out suggestions that
I am deeply indebted. Special thanks for my former partner’s wife, Barbara Hammons, for her expertise in correcting
my grammar and spelling. It should also be noted that this project would have been an impossible task for me just a
few years ago when the marvelous programs created for computers that help me convey my thoughts didn’t exist. In
a sense, these programmers are the new craftsmen of the 21st century. The Microsoft WordÒ program that I used
was as much as a work of art as the marvelous cathedrals of the 17th century. We just haven’t acknowledged it yet.

PREFACE
This book is specifically written for the workers of the world who want to or have already started out on
their own. It contains the logic to go from a one-person shop to a company that requires several departments
with each department having an individual manager. Once this plateau is reached, a different set of rules
come into play. No longer is the company in a true survival mode. The next set of rules for these companies
will be so dependent on the personnel and profit available that these new rules must be developed internally
by that individual organization; therefore, I would never be so bold to suggest I could advise companies
that have reached this level. However, I do believe the logic I offer may be the very useful to department
managers in these companies when dealing with their employees. If you think about it, a department in a
large corporation is very similar to a small, specialized company. New and growing companies, with more
problems than solutions, have a tendency to attempt to solve simple problems with complex answers.
Perhaps my writings may help these managers get back to reality and review what it really takes to build a
business “The Old Fashion Way.”

INTRODUCTION
When I decided to go into business, I thought it would be wise to do a little reading on the subject; however, I would
give it up after just a few pages. Why? The authors were attempting to teach me how to run a large corporation when
all I wanted was to have my own 1000-sq. ft. shop. Hell, I didn’t have any money to worry about, and I figured
keeping track of it would be the least of my problems. My problem would be making it. This turned out to be so very
true.

I was a model aircraft builder for many years and usually flew my own designs. As a group we didn’t use the exact
standards of aeronautical engineers to design our aircraft, but we sort of knew what worked and what didn’t. Every
now and then a design would be superb, and the designer would get to do an article about it for an associated
magazine. Now the designer would have to come up with three pages of BS about why their model aircraft flew so
well. They just couldn’t tell the truth and write about the law of averages and luck, so in most cases, you would end
up with three pages of BS. I believe that most of the information published about starting a business has also been
developed in the same manner as the articles written by my fellow modelers about why their model flew well. All
BS.

I usually start on any project because I truly believe I can build a better “mousetrap”, and this book is the result of
that thinking. After 35 years of business, I still didn’t like what I could read on the subject, and I saw many friends
having problems getting their business off the ground. This convinced me of the need for a book that “tells it like it
is.” It also had to be short enough to be read in a couple of hours, for who has the time to study and get a business “off
the ground” at the same time? There is one thing I can guarantee and that is that you, the reader, will know that I have
“been there and done that” after reading just a few pages.

It may surprise you to know I do know quite a bit about tax laws and accounting. I learned this as a result of being in
business, and it isn’t necessary to know accounting and tax law to start a business. I believe this type of information
is the easiest to come by, and it shouldn’t be the slightest problem to an intelligent person. Your problem is to make
and keep enough money to have it be worth keeping track of. This isn’t a book about how to con anyone out of
money for a bad idea. It’s a book for that group of disgruntled workers who are willing to work hard, who believe
their way is better and want to strike out on their own to prove it.

A person starting into business needs information that can’t be found in graphs or endless columns of numbers. They
need to develop the skill to make educated guesses about their chosen field, their customers and employees. They
need to know that these are the skills you need to become successful. The skills needed according to business
schools are the skills that are easiest to hire. Look in the Yellow Pages for people with these skills, and you have
your choice of thousands if you are located in a big city. Advertise in the help wanted section for a bookkeeper or
manager and you’ll get a lot more applications than you will for a skilled toolmaker. Ask a Harvard graduate which
product your company should manufacture next and they’ll have so many consultants working on the problem
you’ll be in the poorhouse before you start. In other words, they can’t do it for you. The skills you need are knowing
what to do next without anyone telling you. Sometimes this is easy because the demands of your customers eliminate
the problem; however, if you really want to run your company you can’t have customers deciding your future. You
have to be at the helm. You have to be able to watch a customer flinch when you tell them the price that’s too high
or watch their eyes light up when discovering they can easily afford it. You have to develop a gut feeling to know
good employees and good ideas. These are the things that can’t be entered in the books but they are the things
determining your destiny if you chose to go it alone. The books only keep score.

Before starting on my book I want you to fully understand that the CNC machines (computer controlled robots) of
today are the future. They will be used to manufacture products in every country and for every industry. I don’t over-
emphasize these machines. Even third world countries, where wages are ridiculously low, use CNC machines because
it’s simply a better way to get a job done. CNC machines aren’t only used in machine shops. They will be used to
print this book and weave the fabrics of the clothes on your back. These marvelous machines are a part of our life
and they are unavoidable. You have to know about CNC whatever your endeavor in business.

My expertise came from starting both a service and manufacturing business, therefore, my examples come from the
machine tool trades. I used my service business, contract machining, to subsidize the manufacturing business until
it would stand on it’s own. What I write about are problems that effect all businesses, not just machine shops. I write
in my own style and you’ll find it easy reading. I try to write without using complex or excess words, somewhat like
a good design that doesn’t use complex solutions. I want to impress you with my logic in solving problems, not the
obscure words found in large dictionaries. Read this book one paragraph at a time. Think about what I wrote and
how it might be applied to your particular circumstance. There are many subtle things to think about. I don’t believe
the overall book would be very good if I attempted to write how my logic could be applied to every particular
circumstance. It also would have been an impossible task. This could be interesting reading while traveling or eating
lunch. Read a little; think a little.

I WISH I KNEW THIS WHEN I STARTED
This is a collection of random thoughts that came into my mind as I thought, “I wish I knew that when I started.” I
took these thoughts and sorted them into logical groups. Some may seem stupid or obvious, but each one cost me
more in money and time than I care to remember. This book could have saved me a million dollars when I
needed it most if I had paid attention to these details. These are things that you will usually learn the hard way.
As an example, I state “don’t hire employees who start talking about their careers.” Well I didn’t hire just one to
come up with this conclusion. I hired many, and they have all moved on after I paid for them to go to school or spent
thousands of dollars having the most expensive people in my shop train them. They didn’t leave because wages were
better at their next job. They are endlessly searching for jobs that don’t exist.

THE DEFINITION
(Dictionary) Entrepreneur: A person who manages a business and assumes the risk for the sake of profit.

(A better definition offered by Mark Rogo of Morton Machinery) Entrepreneur – A person who is self
motivated and approaches profit making as an art form, and can craft these two traits into a talent for
making money in the business world.

A NEW WORD
Did you know the first time someone called me an entrepreneur I had been in business for ten years and I didn’t
know what it meant? I was always too busy trying to survive to learn fancy terms like that. Looking back, I find the
dictionary doesn’t accurately define it. “Assumes the risk for the sake of profit.” Now that’s a joke. It’s like I had a
choice. Who in hell would invest in Joe Martin? To me, the true entrepreneur starts with a vision of a new and better
method, product or method of marketing and then goes on to accomplish that vision. No matter what we look at, we
see a better way. We don’t ask for help or screw anyone to get ahead. The bottom line means little as long as we
survive. Our trophies are our buildings and establishments. We enjoy our work, for it is our life. We impress you
with what we have done, not with how we look or what we say. This is a different group of people than you would
normally associate as being businesspeople. If you want to get along with us, skip the BS.

CONFIDENCE BUILDING
My own family thought I was going off the deep end when they found out I was quitting a good job and starting out
on my own. I can remember my Mother saying, “You think you’re too big to work for someone.” My Brother
explained how I didn’t know enough about business to succeed. Carl, my best friend who later became my partner,
spent a couple of hours trying to talk me out of it. Dad bought me a micrometer. With encouragement like that, how
could I fail?

ACE IN THE HOLE
Actually, I had an ace in the hole. I was a hell of a lot smarter than they thought I was, and I was willing to put forth
the effort it would take to survive. I never was very good at sports, and this was going to be my “big game” that I
didn’t intend to lose. Profits never entered the picture, and survival was the only success I was looking for. One day
at a time. One week at a time. Finally, 30 years later, I’m at the goal post, and I don’t know how to stop.

SURFING
I’ve always felt like a surfer riding a big-ass wave over a coral reef who doesn’t have time to stop and plan the next
move. I had to make my own rules on the spot and move on. There wasn’t time to discuss my next move in an
academic setting. These rules served me well over the years, for I have more satisfied customers and employees than
I deserve. The decisions I had to make were always compromises, but I believe they were “fair.” Of course, of the
many decisions I made, I wish I had a chance to make a few again, but who’s perfect. I’m not ashamed of how I got
to the “goal post.” In fact, I’m damn proud of it.

YOUR WORD
The most valuable thing you own when you start a new business is your word. You have the choice to make
it even more valuable or worthless. You should treat it as if it were made of gold and never allow it to be devalued.
Once it has lost its value there is little you can do to restore it.


                                      THE BIG DECISION
WHAT IS THE WORST THAT CAN HAPPEN?
You may find it interesting that I think it is easier to start a business with little money as long as you have a skill that
can be sold. You have little to lose and much to gain. The worst thing that can happen is that you will end up where
you are right now; working for someone else. Start with more money than brains, and consultants, advertising
agencies, attorneys, accountants will soon relieve you of the excess money supply. Lee Trevino told a story
that best represents getting a business started. When he was questioned about the pressures of playing a game of golf
where a hundred thousand dollars could be riding on one putt, he told the reporter that it was fun to be playing for
such high stakes. Then he added, “I’ll tell you what pressure is, and that’s playing for $20 when you only have $10
in your pocket.”

POSITIVE THINKING
A total waste of time can be standing in front of a mirror saying “I can, I will.” This isn’t the secret of success.
Positive thinking is taking the time to understand what you’re trying to accomplish and learning what is necessary to
accomplish this. Your everyday actions should reflect your positive thinking. You have to focus on your goal and
not be “sidetracked” by nonbelievers. When you start a business, success is dependent on what other people
think of you and your products, not what you think of yourself. The two things you have to sell are a good
product or skill and integrity. Integrity is something you have to show people you have by your actions; it is not
something you can tell them you have.

LEAVE ROOM FOR FAILURE
When I start on a new project I always estimate my chances of success. You have to realistic and know there is
always a chance of failure. I found that by mentally arriving at a percentage of success I have before I start,
a failure is simply a loss. It isn’t devastating because I knew the odds at the beginning and it didn’t work
out. This method keeps you from mentally putting “all your eggs in one basket”. Positive thinking isn’t the answer.
You have already thought positively to start the project, and being realistic about the project is what it will take to
get it to succeed. You also have to be realistic enough to know when to give it up and plan your next move.

WHO STARTS BUSINESSES?
Have you ever noticed how few engineers, scientists, and business-college degreed graduates start businesses? They
may acquire businesses, but they very seldom start them. The reason is they can’t work alone or not willing to take
the personal financial and ego-related risks to accomplish their ideas. It may also take millions of dollars of investment
to experiment with their ideas. What you find are craftsmen and hobbyists starting manufacturing business because
they know how to make and design the parts and tooling they need in a cost-effective way. Investors are finding that
hi-tech companies can’t be run without a CEO who has a complete knowledge of the technology in which the
company is involved. Things are happening too fast today to make decisions by committee. The venture
capitalists have discovered this fact and are willing to put their money into ventures where they believe the leaders
can stay abreast of current technology and lead at the same time. This is a marvelous trend. The engineers and
scientists of the world were getting screwed, because the products this group wanted to build or sell needed a capital
investment that few individuals have who can’t work weekends on used equipment, as I have, to build a business.

TAKING A CHANCE
I remember one employee who quit. He told me what was wrong with me was that I was “unwilling to take a
chance”. Can you imagine that? I’ve spent the better part of my life investing my own money in my own ideas, and
this guy tells me I’m unwilling to take a chance. Taking a chance and not liking his idea are two different things.
What is a legitimate risk in the mind of one man is a measurable failure in the mind of the next. This is what makes
the world of business so fascinating. I’ve been called a pessimist. I call myself a “realist”, and I look at all new
ventures pessimistically. This also includes using my own ideas. Optimistic people are always getting into
trouble because they resort to hoping things will turn out. By being a realist I’m convinced things will turn
out. You have to “nit-pick” every aspect of a new endeavor to eliminate the chance of failure. Think like a critical
customer and fix any problems you find through “their eyes” before it is a real problem.

THE DIFFERENCE BETWEEN SALES AND ENGINEERING
When a sales person sells a product; their satisfaction is that they closed a deal. When an engineer or designer sells
their product; their satisfaction is that they designed something that another person considered worth purchasing.
This fact is more of a difference than you might believe at first glance. My lack of sales skills have screwed up too
many “deals” by me not knowing when to shut up, but on the other hand, a sales person could never know the
satisfaction I have when I see my products being used by satisfied customers. This is something I have never been
able to put a cash value on, because in the cold world of business it is the bottom line that counts. Or does it? There
is a need for both types in this world, but there is more to making business than “closing deals.” Fortunately, there
are still a few salesmen out there who work with potential customers to solve problems and create deals where
everyone wins. It is the satisfied customers using products or a service they like that can keep a
manufacturing company going for the long haul, not a few quick deals where you won and the customer
lost.

HOW TO LOSE YOUR ASS
If you really want to lose your ass in your own business, get involved in something you know little about. If you
don’t have the desire to learn and think about every aspect of the customers’ needs that would use the products you
plan to manufacture or sell, quit while you’re ahead. To be successful you have to be extremely good at
knowing your potential customers and their needs. This is the most important thing. This is the information
you can’t get from outsiders or employees. You have to know your customers well enough to know how much they
will pay for the service or products you plan to manufacture and sell. You could pay thousands of dollars for market
research that was done by people who were far more interested in their golf game than your success. Excuse me for
being redundant, but this point is so important.

WHEN TO WALK
Did you ever notice that people tend to judge others by themselves? What I’m trying to say is if someone doesn’t
trust you, you shouldn’t trust them. I’m not interested in any deal that involves a partner who needs an
attorney to do his or her thinking. The only chance you have to break even on a deal like that is to have a better
attorney. It isn’t worth the effort. Of course, there are times where agreements have to be properly documented, but
if the deal can’t start with a simple handshake and a feeling of trust, forget it.

PARTNERSHIPS
When two or more persons get together and form a partnership where they plan to work together for an undefined
period of time, it is as close as it can get to a sexless marriage. The way you can make it work is by keeping it sexless
and not start screwing one another. Both sides must bring something to the table, and both sides must believe the
other side is bringing something to the table for the partnership to work. Lawyers will advise you to clearly define
ownership at the beginning. The problem with this is at the beginning there is very little to divide that has value. It
is more important to arrive at a method of determining ownership at a future date. Consider the hours
worked vs. investment. One partner puts $5000 into a venture and a second partner puts his skill and work into the
partnership. It could be quite possible for the working partner to put a couple of thousand extra hours into the
venture in just one year by working nights and weekends as I did. If their time were charged to the partnership at
only $10 an hour this could bring their investment to $20,000 in just one year, while the second partner went about
his life at his regular job. This is why I believe partners should accurately keep track of the time invested by each
partner as well as the money they may invest. Would it be fair for the investor of only $5000 to own half the
company (that now had a value of $40,000 because of the other partner’s hard work) while making income from a
regular job and spending weekends with his family? These problems usually don’t come to light until a spouse of
one of the partners wants a divorce.

From my experience working around the small start-up businesses located in industrial parks, I consider this the
most important paragraph in this book, and it might be wise to read it again. - Joe

PARTNERSHIPS CAN HAVE ADVANTAGES
The good part of a partnership is when two or more people with different skills team up and appreciate the skills of
the other partner or partners. Together they solve problems that would be impossible to solve alone. They have a
common interest and enjoy working together. Partners with the same skills have to learn that they can’t
always have their way, and that they cannot be competitive with one another and remain partners.
Partners with the same skills should rejoice in the fact that they can discuss their most technical problems with
someone who may help them find the answer to technical problems. Partnerships can be great, for mine was.

GET IN A BUSINESS YOU ENJOY
I believe that selling to a recreational or hobby market in which you are involved is your best bet. You
know your customers because you’re one of them. You like your customers because they are just like you. This is
the type of market you can deal with because it is possible for an individual to develop a new product, manufacture
it, advertise it, and sell it to this specialized market. I have, and have enjoyed every moment of it.

“NERDS” CAN BE HEROS TOO
The “nerds” that took over the computer market succeeded when old, well established companies with “snobby”
managers failed. Why? These nerds weren’t nerds to their customers; they were heroes. They were doing the
impossible, sitting behind their computers developing products that customers loved. Customers thought of them as
quarterbacks of their favorite team. Every time you see what Bill Gates accomplished think about this. To be
successful it isn’t necessary to look good to everyone, just to your customers.

AN INTERESTING ANOLOGY
One of the joys I have is purchasing and owning the buildings and equipment it takes to produce my product line. I
feel the same way when I look at my manufacturing facility as a farmer may feel when he looks over a field of crops
growing on a good day. Profit allows me to purchase new and faster equipment, and I love it. Farmers may purchase
more land and love it. You can never get the same satisfaction by adding zeros to your investment account.

INVESTORS
A decision that will have to be made by most business owners is “how much you are willing to give up to own and
control the company you started.” Notice I stated “give up”. Many times the amount of money you could make
would be higher if you sold a portion of your business. If an offer like this comes along you should take the time to
review your past and decide if you started your business only to make money. I started my business to do it my way,
and I find “moneymakers” very boring people. I wouldn’t want to be associated with an investor where I had
to explain my actions in terms of profit only. If money is all investors can bring to the table, then go to a bank;
it’s cheaper. A good investor is someone that brings more than just money. They can bring contacts, experience and
constructive criticism that could build your company to the point that your “smaller” piece of the pie worth more
money overall.
A WONDERFUL ADVENTURE
For me, business is a wonderful adventure. I’m never so sure where I’m going that it gets boring. One day I may
have to go with the flow to survive and a week later I’ll feel like a fish swimming upstream. You have to know when
to take the helm and when to go along for the ride. These are difficult choices because you’ll be dealing with the
employees’ personalities and financial survival at the same time.



                            DECIDING ON A PRODUCT
THE PRODUCT
Nothing that I’m writing will be of much good to you unless you can come up with a good product or service that
will keep you in business. It has to be wanted by consumers who are willing to buy at the price you are asking. This
is where it all starts. I will try to make you aware of many of the problems that I had to solve and some of the logic
and things to consider about new products, but you have to decide what a customer will find satisfactory
when the complex equation of cost vs quality is calculated. Customers all want perfect products, but wanting
perfect products and paying for perfect products are two different subjects. A customer will usually start with the
“low end” product if they have a choice between two items that are somewhat similar but have a major difference in
price.

WHERE TO START
First, you have to know more about your chosen field than your average customers do. If you think about this for a
moment, your work or your hobby will be your choices. Pick either and again you have a choice of two: eliminate an
irritant or add a pleasure to a task. The irritant could be cost, size, appearance and complexity. The pleasure that
could be added is lower cost, simplicity, appearance and pride of ownership. Next, ask yourself if you have built a
gadget or have performed a service that makes a particular task easier? If you haven’t, a better choice for a business
might be related to sales or service. In this case, team up with someone who can come up with products or services
but who doesn’t have the skill or desire to package, advertise and sell their ideas. In every case, the road to success
is a long one, and you need lots of money or a skill that can be marketed to keep the doors open until your products
can provide an income.

IDEAS
I consider myself an original thinker. I don’t copy other products or methods; in fact, once I make my mind up to
start a project I will go out of my way to avoid looking at what other people or companies are doing. When I start on
a project I have an uncompleted design in the back of my mind and looking too closely at something someone else
has done narrows my thinking. I believe I would lose more than I could gain. There is nothing wrong with checking
out the competition after you have developed your original idea, but don’t do it until after you have gone through the
process of developing your own idea past the concept stage, because you’ll be too influenced by what you discover.
Follow your own instincts and your own thoughts to their logical conclusion, then see what other minds have come
up with on the same topic. When I hear teachers expounding their theory that their duty is to teach students where to
find information rather than making students learn the information I would like to ask them how many good ideas
have ever come by putting several books next to one another on a shelf. Good ideas are the result of knowing a
great deal about many things and putting together many seemingly insignificant facts from millions of
combinations to come up with a new idea. Of course, the solution found with a good idea would have been the
“obvious solution” to a group who couldn’t figure out how to tie their shoelaces on their own.

SELLING IMPORTED PRODUCTS
Sometimes products can come to you by way of an overseas manufacturer. They can be found in import trade
magazines. The good part is you may be able to become an exclusive importer for them for a surprisingly small
order. The bad part is the agreement isn’t much good if you can’t buy all they can manufacture. I’ve personally seen
Asian products sold direct to the consumer at a lower price than an importer with an exclusive agreement paid. This
happened within months of giving the exclusive agreement and after that company spent thousands on advertising
the same goods. Try suing a company in Asia and you’ll see what I mean. Again, if you want to lose your ass, buy
a large quantity of merchandise used for something you know little about. You have to know how products
are discounted and sold in the area you plan to sell before you sign a purchase order.

SELLING IDEAS
We have a customer who is a professional inventor. He comes up with an idea and does all the design work to put the
product into production. He then goes out and sells the package to the appropriate manufacturing companies. He
doesn’t get up-front money, and when he shows them the product there is a prototype complete with packaging,
tooling designs, tooling cost and instructions; a very complete package. He is very knowledgeable about his trade
and doesn’t require agreements before he allows potential customers to see his idea. He told me he has never been
taken advantage of to date. Most companies are ethical and don’t steal ideas; however, the ease that products can be
copied in Asian countries today makes me more leery. Problems arise when suggestions are given that are not well
thought out. For example, a suggestion could be made to an oil company to produce a fuel that didn’t pollute and had
twice the energy at 25% of the cost. Any fool would find this idea worthwhile, but the idea is worthless without the
solution. Ten years later after the oil company has spent billions of dollars improving their product by 5%, they get
accused of stealing an idea.

PLASTIC PRODUCTS, A GOOD WAY TO SUCCESS
To start a manufacturing business on your own you need products that are difficult to duplicate. Injection molded
plastic parts may be the answer. The tooling is expensive but the part price is low. If you want to “test the water” you
can save money by building prototype tooling out of 7075 aluminum and do a little second operation machining to
eliminate expensive slides. Once the tooling has been built and tested the product is very easy to manufacture. This
is one type of manufacturing that can be successfully contracted out. The toolmakers that build plastic molds are a
very talented group of people and usually can improve the designs they work on if given the chance. Not all plastic
parts are cheap throwaway items. Profit can be higher selling to a specialized market that you understand and gives
you a realistic chance of success.

BUILD A CRUDE PROTOTYPE ASAP
Very few new designs will stand the test of a prototype. The design will usually change before the prototype is
built. In the past I would start by building a simple prototype using a simple drawing or sketch. Now, as my skills
with computer drawing programs improved, I find myself adding more and more detail to these first drawings.
However, it could be thirty years of designing products that allows me to do this. It is important to realize that the
original idea always starts inside your head, not inside a computer or on a sketchpad. You don’t have to put in all the
details to start, but the new idea should be there. You should develop a thorough understanding of the interaction of
the parts involved. I’m sure you have seen computer designs being manipulated in 3-D as they turn and rotate on a
video screen. When I can do this with a mechanical design in my mind I feel I truly understand the design.

The longer you take before building a prototype, the more difficult it will be to change your design. You should
always assume that your design can be improved and have a method to change it. Many times the new design is the
process involved to make standard parts. Again the final design should be put off as long as possible to allow the
changes to be made easily. A craftsman starting out is usually starting out with the basic tools of their chosen trade
but the future will lie by working with state of the art tools. A true craftsman may get by with what the tools they are
used to working with but a company can not. Labor costs in modern countries will not allow craftsmen to work
doing things the old way and remain competitive, however, tooling for your own products can still be built with
familiar tools. In this case, the tooling for a new product can be spread out over the run of this product. If you are
bidding on work of this type you may find you are not competitive without modern tools. In many cases, just to view
the work you are bidding on requires a computer and a working knowledge of the associated programs because
drawings are no longer available. Computer aided designs (CAD) along with computer aided manufacturing (CAM)
have simplified these processes and at the same time made designing more difficult. A different type of skill is
needed to operate these programs and machines. Only the manufacturing companies that develop the skills of CAD
CAM will be around in the 21st century.
CRAFT TYPE PRODUCTS
There is a fine line between a produced product and artist or craft type product. A craftsman or artist may come up
with an item that has a demand that is higher than they can produce. This fact starts the price to rise. The moment the
item is manufactured and the process is automated the item has little value. The value in products such as these is the
value added because the customer believes that the craftsman or artist personally crafted the item and that these
items have a very limited availability. Ask yourself how much value an autograph has that was printed in a book?

THINGS TO CONSIDER ABOUT MASS MARKETED PRODUCTS
Products that everyone can use have problems of their own. It takes so much money and organization to sell even a
simple product of this nature to an entire nation or world that an individual has little chance of marketing something
like this on their own. The companies that sell to this type of market usually can’t find the time to sell and market the
products they may have on the drawing board. This leaves you between the old rock and a hard place. You see
attempts for this type of products having their last gasp for life on late night television commercials. A big part of
making that final decision about to develop your career into is what your odds are for success. Even though Hollywood
stars make millions on each picture, the odds of achieving this kind of success are so overwhelming that it’s not
worth the risk. West LA restaurants are staffed by evidence of this; waiters who are wasting their life waiting for
their “next big break.” Choose something that has reasonable odds. Mass marketing doesn’t.

A MAJOR BLUNDER
I remember a joystick my partner and I designed for radio control transmitters. We were never paid for this project
and we were left with the plastic injection mold tooling. This was a complete design and build job and we had
thousands of dollars in it. One year before computer games became popular I sold the design and tooling to a
company in England for $1500. The next year the computer game “Pong” came out and the computer industry was
looking for these input devices. I missed my chance because I didn’t have the six months it took and the money to
build another joystick. If I had been paying attention to what was going on around me I would have seen the
potential for the tooling I owned in the corner of my own shop. The joystick market went on to become a 100
million-dollar a year business and I didn’t even get a little piece of the action. Excuse me while I take the time to
give myself another well-deserved kick in the ass. To survive you have to be an opportunist and you can’t
always take the easy path. I believe we all have opportunities pass by in life. You have to stretch to get the prize.
Did you ever notice that most people complain about things that they didn’t do as they review their lives?

PRODUCTS THAT CAN BE AHEAD OF THEIR TIME
A new product that requires a lot of explaining as to what it is used for can be the hardest to market even if there is
a definite need for it. The lower the selling price the bigger the problem. You can’t expect a sales person to
spend five minutes trying to sell a five-dollar item. Something in the packaging or advertising will have to do
that for you. The question now becomes whether you can sell enough products to pay for the ad because the ad also
has to large enough to explain what the product is used for.

COMPLEXITY
A clever simple product is impossible to keep control of unless you can come up with a method of manufacturing it
in such a way that you can’t be undersold. If the product were so simple that any home handyman could manufacture
it, it would be impossible to protect your right to sell and produce it even with a patent. Things that are difficult
to manufacture or produce at a very reasonable cost have the best chance of surviving because they are
difficult to copy. In my case I chose to manufacture a very complete complex product line. I thought I could protect
myself with the fact that to copy my complete product line would involve too much time and money for such a small
market. So far, I’ve been correct when it comes to the miniature tool line.

PERFECTION
After customers find out about the finer points of a particular product line, they then may be willing to spend the
extra money for perfection. Perfection is expensive and to improve a product just a few percentage points may triple
its manufacturing cost. Perfection isn’t a good choice of words when it comes to consumer goods. They are
manufactured to tolerances that are limited by the state of art. The tighter the tolerances the higher the cost. At some
point, the additional manufacturing costs forces the retail price above consumer acceptance, and true perfection can
never be reached. It’s the true entrepreneur that knows when he’s reached the point of no return and the inventor or
tinkerer that doesn’t. It is foolish to work to tighter tolerances than necessary, but as a designer I know how difficult
it is to design with liberal tolerances.

SHIPPING IS AN IMPORTANT CONSIDERATION
Suppose you came up with an item that would be useful to people who do their own landscaping and you could sell
it for $20 a bag. With a product like this the packaging and shipping can become more important than the product if
the bag weighed 100 lbs. It could cost you more than $20 to ship one bag to the next city and the only way to get the
cost down is to own your own shipping network and produce the product regionally. Companies who sell bricks or
other heavy items do this. To do something like this could require millions of dollars just to establish a distribution
and delivery network at a reasonable cost. If standard shipping rates were applied to some of these items, the selling
price would skyrocket. What I’m saying is that shipping is a very real cost that has to be passed on to the consumer,
and that the product you consider economically sound may not be when the actual shipping costs are added. The
Internet now has services available to the small manufacturer that allows him to piggyback with other small
manufacturers and thus get the same volume price-breaks that larger manufacturers do.

ELECTRONIC DESIGNS ARE EASIER TO CHANGE
Electronic designs have had an advantage that few products have had. Customers judge them by how they perform
and cost. Suppose I designed a truck with an engine that only weighed thirty pounds, but still developed the same
power as existing truck engines have. How many potential customers would I have after they looked under the hood
and saw a cute little box in place of a massive engine? You would have a “tough-sell” with that group. The same
group would buy a TV without ever “looking under the hood.” Too often good ideas fail because of an
unsophisticated market. Plan for these problems in advance and they will not be as much of a problem. Again, the
Internet offers a method of test marketing using email to potential customers, friends and business associates.

GOOD DESIGNS
A well-designed product is deceiving. The solution to a problem solved with a good design will look so obvious that
no one would consider doing it any other way once they have seen it. These are the designs you’ll get the least credit
for even though they are your best. The solution looked obvious and because it was obvious it was assumed the
problem was easy to solve. Any designer that has spent hours looking at a blank sheet of paper can explain
why it was so difficult to come up with such a simple solution, but who will believe them when the solution
was so simple?

PATENTS
I have my name on a couple of patents that took a lot of time and effort to get and didn’t pay off. I have the basic
patent for computerized timekeeping but after getting it I realized I didn’t stand a chance in hell of defending it.
What am I going to do, sue IBM? Patent attorneys make a living getting you patents and what you do with
it after that is your problem. Ask your patent attorney if they would defend your patent on a contingency and
you’ll get a lot of mumbling with the end results being “no.” If the patent they documented for you were so good
you’d think they would want a piece of the action. You should realize that if the idea you want to patent has been
written about anyplace in the world before you applied that it can make your patent worthless. One thing a patent can
usually do is to prevent someone with a similar patent from going after you. A patent search shouldn’t cost more
than a few hundred dollars to do and should be done to protect yourself. Patents can now be checked using the
Internet. You can’t put “patent pending” on a product unless it is actually being decided on by the patent office.
Applying for a patent will protect you and the longer it takes for the patent department to get to it can turn into an
advantage. You get 17 years of protection once the patent is awarded, but you will be protected upon application. If
it took five years for the patent office to get to it, you could be covered 22 years. Please remember I’m not an
attorney and I’m just referring from what I believe I learned from being involved with our patents. Patent law is
changing, especially in the area of the Internet. The U.S. Supreme Court is reviewing soft patents, and the U.S.
Patent Office is also taking a second look at how they approve soft patents in light of the Internet. In the age of the
Internet, these patent walls are coming down fast and furious and are becoming difficult and costly to protect. It
won’t get any better as China’s building middle class moves onto the net in the next decade. Looking closely at old
patents can be a humbling experience when you discover how smart people were one hundred years ago.
GIVE YOUR IDEA A QUICK REALITY CHECK
I always start on a new design by estimating how much a potential customer will pay, subtracting the discounts I’ll
have to give dealers to sell it, and then work with the amount I have left to manufacture, advertise, and ship the
product. This is a realistic way to look at it and gives you a way to accurately evaluate the market. You have to
know the discounts used for similar products in the market that you plan to enter to do this. You may find
your good idea can be forgotten about when this simple test is preformed. When I did contract machining I had
customers that were about to spend thousands of dollars for a run of parts, yet, have never given a thought about the
discounts of the market they were about to enter. You can find examples of this logic in salvage yards throughout the
world. Again, the Internet may be the ideal vehicle in which to avoid middleman mark-ups and established distribution
networks. A few thousand dollars spent on web designs and search engine registrations may be better spent than
dealer discounts spread out over a very short period of time. If there is any other effect the Internet will have in our
lives, it has been the ability to bring products to the doorstep of the general public in a cost efficient manner.

DON’T MAKE SPECIAL ACCESSORIES FOR OTHER SPECIALIZED PRODUCTS
A risky venture is to design and build products that can only be used with another specialized product. A design
change and your product will only fit their old models. The type of product I’m thinking of is not an accessory that
goes with any motorcycle but an accessory that would be used with an accessory to tune up a particular motorcycle
for example. A specialized accessory for a specialized accessory. You have little chance of being sure dealers will
buy yours. Being better or cheaper doesn’t guarantee results. Dealers are inundated with more products than they
care to sell and having to setup a new account to sell a $10 item may not seem worth the effort to a dealer who has
a thousand items on the shelf, with many not selling well. Your best chance is trying to sell it as an exclusive to the
basic marketer of the product and let the people who already control the market distribute it. Manufacturers will not
be interested because they usually sell only products they have complete control over. It can be too risky to have to
rely on someone without a track record. They also can usually manufacture the product themselves. The old “Build
a better mousetrap and the world will beat a path to your door” rule doesn’t always work well anymore.
Again, remember that the established lines are creating more products than dealers care to carry, and it can be very
difficult to sell one a product that is only a “little bit” better. I’m not saying it can’t be done I’m only trying to make
you aware of the problems you will be facing.

DON’T USE YOUR FIRST IDEA UNTIL YOU PROVE IT’S THE BEST
Before I commit to an idea I think of every possible way to accomplish the same thing. I don’t put a time limit on this
thinking unless there are outside pressures. Before I even mention the project I’ve already considered many methods
to accomplish the same thing; therefore, I may seem negative to an employee’s suggestion when I can immediately
chose to use this method rather than the suggestion of the employee’s. Sometimes I’ll see a design and make the
statement “It looks like they used the first idea the popped into their head.” There is something about designs that
have this look. A good analogy would be of food that has been prepared properly and then placed on a plate in an
unappetizing way. Well-designed products have a look that you don’t have to justify.

YOU CAN GET SCREWED
I really got had with a line of products I developed to be used with full size machine tools. The 5C collet (a clamping
device) is the most popular collet used in machine shops today. On a standard lathe it could take 30 minutes to
switch from a collet set up to a 3 or 4 jaw chuck. I designed a 3-jaw chuck that could be mounted in a lathe in place
of a collet. This could save machine shops considerable time. To make it a complete product line I produced at the
same time adapters to fit the not so popular lines. I sent samples to the major suppliers and sales were going great.
Soon after sales for our most popular item dropped to non-existent. I couldn’t understand it. I happened to notice a
mail-order sale in tool supplier’s flyer that had what I thought was the product I manufactured at a very low price.
We contacted them and found out that they no longer purchase this item from us. The bastards had my product
“knocked-off.” That wouldn’t have bothered me as much as they were using the pictures I sent them in their catalog
and probably used the “free” samples I sent them to copy. They were also using the thousand of dollars I spent on
advertising to get sales. I was pissed to say the least. Fortunately, that was the only time that it happened to me so
blatantly.
WHETHER TO MAKE COMPONENTS YOURSELF
This is a question that can have so many variables that it becomes very complex to answer. I don’t believe a product
can be produced and remain competitive over a long period of time by contracting out your main component parts.
Everyone will end up making a profit on your sale except you. The only way you can get reasonable prices is to buy
in quantities that are so high that the inventory for that component could cost as much the equipment to build them.
I found I could buy a used machine and make my own parts, but I also had the skill to do it. If you don’t have these
skills, you don’t have a choice at the start, but these are skills that can be learned by a company by hiring a skilled
employee.

PRICING A NEW PRODUCT
When I price a new product, I may have to run a piece of equipment at a lower rate than I want to keep from out-
pricing the product in the market place. Doing this allows me to make a profit on the other operations involved and
as long as the overall product line remains profitable, it can be a wise decision. Think about the times when brand
new factories costing millions of dollars are shut down because they were not profitable. In many of these cases, if
the basic overhead rate is calculated on what they could recover from the investment, rather than what they invested,
it could be very profitable to leave it open. Maybe the return on their investment might be lower than they originally
planned, but it could be a return rather than a loss. Automobile manufactures do this all the time.

NEW AND BETTER DESIGNS BECAUSE OF CNC MACHINES
Designers are no longer limited to simple shapes. They can design a part exactly like they want it. CNC machines
can cut a complex shape as easily as a straight section. No longer are expensive cutting tools needed to produce
complex shapes. The machine is capable of cutting the complex shape with the same tool used to produce a straight
section. If the program has been properly written all the shapes developed can be checked with two dimensions.
CNC machines allow a small producer to make economical production runs in lower quantities than
ever. In many cases, a machinist with the skill to operate these machines could produce more parts than a purchasing
agent could buy and keep track of in a month when dealing with small quantities. These machines can make you
money if you learn to use them. They are the robots that make our lives better by building better products at a cost
all can afford. These robots will not be sweeping the floor in your living room, but they will be used to build the
tooling and assemble the vacuum cleaner that you can purchase at very reasonable prices. They are fantastic!



                                            MARKETING
POST OFFICE BOX
Unless you have a company that is known nationwide don’t use a Post Office Box number for an address. You are
better off using home address such as Fairway Lane than a P.O. box. Potential customers have been trained not trust
such an addresses. Too many swindlers that have used P.O. boxes in the past and you’ll have a strike against you
before you start. There are very few businesses that can be successful working out of a home. You need a
place of business to build on; you need a place where it all comes together.

LOGOS AND COMPANY NAMES
If you personally have a name that is used by a large company, you can’t necessarily use it. Your name may have
already been registered and they own it. Some companies will go to extraordinary efforts to protect it. In any case
make sure you can legally use the one you choose before spending money on printing or advertising. Craig explain
the procedure

The first thing you have realize about logos (the symbol representing a company’s name) is they are not as important
as advertising people think; however, since they are so easy to produce with a computer graphic program, it would
be foolish to have a ugly one. The company makes the logo famous; it isn’t the other way around. If logos were
important General Electric wouldn’t be one of the largest companies in the world. Don’t try to tie your logo directly
to the products or services that you are presently planing to market. In time you and your company may head off in
an entirely different direction making the logo obsolete.
MAKE A PROTOTYPE AND TRY TO SELL IT
A quick check to find out if you have a winner is take your expensive prototype to an appropriate market place and
try to sell it. If you can’t afford to give up your prototype put a price on it too high to sell. See if you can get anyone
interested in it. A local swap meet would even work. When you are coming up with a new product everyone your
working with may be saying what a good idea you have. If you take the time to think about it you’ll probably find
that most of these people have something to gain by your going ahead with the project. They might be employees,
contractors, advertising agents, engineers or maybe just a friend that thinks they should get one for free. They may
all want something from you but would they really buy one? To find this out see if you can get a total stranger
interested enough to at least haggle about the price.

ADVERTISING MAY HELP YOUR COMPETITOR
If you are coming out with a new product line to compete with existing well-established products, you may have a
tough row to hoe. Just because your product is better doesn’t mean dealers are going to stock it. Dealers and
distributors are more interested in selling what they already have on the shelves than selling a new
product line. In a way, I don’t really blame them for this trait. They are trying to survive just like you and don’t
have time to tell potential customers the fine points of five similar products that only sell for $10. The next obvious
plan is to advertise in such a way that the potential customer knows why your product is better. Suppose your ad
convinces a customer to buy your product and they go to a store to purchase one. If the dealer doesn’t stock your
product, the dealer will then ask the customer why they would want to buy a new and untested product instead of the
better established product line they already have on their shelves. The customer agrees and purchases your competitors’
product.

KNOWING YOUR COMPETITOR
This is advice that I can’t honestly say I’m practicing what I’m preaching. I just don’t have the urge to “spy” on my
competitors when I’m so busy expanding my own product line. Common sense tells me I should spend more time
and create comparison charts, but I haven’t. If I was more of a salesman I would have done it years ago for I realize
that any product you about to produce should already have a spreadsheet comparing and contrasting the benefits and
drawbacks of your product compared to the competition. If you haven’t done that, then you’re moving ahead on very
slippery ground. Part of process is to understand completely and distinctly all of your competition and what they
have to offer. The ideal situation is to produce a product or have a service that is unique. The problem with this type
of product is you may have to explain what these products and services are used for.

THE CUSTOMER IS KING
To be successful you have to get rid of any stupid idea that since you now have a business, your accountant and
attorney are more important to you than your customers. This kind of thinking is the beginning of the end. Nothing
is more important than a satisfied customer. It takes a good product to satisfy customers and it takes satisfied
employees to keep these customers satisfied. Customers like to build a relationship with the people they do business
with, however, they will only be interested in you or your employees if you have products or service they want.
Customers must remain satisfied even if they are wrong. Proving the unsatisfied customers are wrong will only
make the situation worst. Protect your product’s image in the marketplace by servicing the hell out of any customer.
A bad experience with a customer may cost you ten to twenty other potential sales.


LOYAL CUSTOMERS
If you plan to be in business for the long haul you can’t do it on your own. You need loyal customers as well as loyal
employees. Loyal customers can’t be bought. Loyal customers don’t ask for special treatment unless it’s very
important. This will be your chance to be a “hero.” You have to earn loyalty from this group by going out of your
way. It’s important to offer service on a business level, rather than an ass-kissing contest with no business value to
it. A stable of loyal customers is worth their weight in gold. They carry their own momentum. They will start
trusting you and your company because you have put in the extra effort in the past to keep them satisfied. They stop
shopping strictly for price and trust you and your company. They know you’ll work a weekend, if necessary, to solve
their problem You’ll never gain a customer’s loyalty by taking a month to send out the literature they asked for,
lying, not returning phone calls, using a technicality to worm your way out of mistakes, not living with agreements,
using answering machines, having dirty business establishments with filthy restrooms, cheaping out, allowing crappy
workmanship, having employees that look like “dirtbags,” having employees that don’t treat one another with
respect, selling poor designs, overcharging, and blaming customers or employees. If you don’t get the idea of what
I’m referring to by now, do us all a favor and don’t go into business. On the other hand, I’ve purchased many
bargains at their going out of business auctions.

FREE ADVERTISING
Most trade magazines have a new product section. You don’t have to pay to get in this section and magazines are
quite ethical about submissions. The main criteria to get a product listed is to have a product that the editors believe
their readers will be interested in; therefore don’t waste editors’ time by sending items that don’t apply to their
magazine. When you find a magazine that you believe would be interested look closely at the format. Send an 8 x 10
commercial grade photo (things are changing so fast that by the time this is printed scanned pictures on a disk or sent
by email may be the only method accepted) and a description of your product. The description should contain the
same amount of words they are using to describe other products in that section. Don’t expect an editor to pick out
100 words out of a 2000-word description. They don’t have the same interest as you do. Your own web site can give
these details so try to have the address listed with your description. Invest in an 800 number for people to call.
People still like to pick up the phone and call, and phone costs are so low that an 800 number is a wise investment.
We should all be so lucky that a free advertisement would result in hundreds of 800 calls about a new product!

PAID ADVERTISING
Paid Advertising comes in a variety of designs today. It can include the purchase of e-mail addresses, fax numbers,
direct mailroom simple postcards to fancy packages, institutional advertising, line-item advertising, and so forth.
This is a field all by itself, but a simple one that can be understood by anyone willing to take the time. The most
important thing to do is come up with a budget and stick to it. Then figure out the best way to utilize advertising
dollars and reach the largest potential customer base. Somewhere along the way there is a middle ground between a
30 second spot on networks during the Super Bowl and a couple of free e-mails on the internet.

Think about times when you have seen full page color ads in very expensive advertising media never to see the
product again. Advertising can be the quickest way to the poorhouse when you’re starting out as I can think of. You
can’t start a business with an expensive $75,000 ad. Don’t believe that because a magazine puts out 200,000
copies that you’ll sell 2000 if only one person out of a 100 buys your product. It doesn’t work that way. Fifty
inquires would be a realistic number. The reason you can’t sell 2000 units is you don’t have a method to distribute
the product to the consumer yet. On one hand you can’t sell your product because the consumer doesn’t know about
it and on the other you can’t sell it because it isn’t available. It is sort of the chicken and egg problem. Remember
that you have to survive to be successful and few will be lucky enough to find success the result of a single action.
This is one of the reasons I’m such a fan of the Internet. You can put a new product in front of the world for only a
few dollars a day. Learn how to use it.

DON’T HIDE THE PRICE
I believe the price of a product should be prominently placed in advertisements. Be proud of the selling price. The
first thing a customer has to know is whether they can afford it. The logic used by not giving the selling price is that
when a customer calls to find out the price sales will have a better chance of selling the item by personally talking to
the potential customer. I personally believe that you lose more than you gain with this logic. Customers are busy
today and they will not take the time to find out the price of an item they can get along without. The
pricing will also allow a company to avoid phone calls from numerous people who waste time on the phone when all
they’re really interested in is the price to begin with. The price can be called a “Qualifier.” Having to call around or
be put on hold by an answering machine to find out the price of a twenty-dollar item is more than customers can
bear. The truth is many potential customers shy away from a product because they may think it costs more than it
really does.

TRADE SHOWS
The first thing you have to realize about trade shows is they are put together by the organizers to make the organizers
of the show money, not you. You have to be very careful about picking a show out to attend. It would be worth your
while to talk to other people in the same “arena,” but not a competitor, as to which trade show to attend. Be sure to
mention that you’re starting out and can’t afford to waste money when asking for advice like this. You’ll never
believe you could feel so low until your flying back home after spending several thousand dollars going to a show
2000 miles away without a sale because the organizers didn’t spend any money advertising the show. Most booths
start at 100 sq. ft. and cost $10 to $20 a sq. ft. for a large show and $2.50 for a regional show; however, the cost of
traveling, hotels, shipping and just plain getting ready shouldn’t be overlooked. You have to develop a “line of bs”
to show and sell your products or services and this can be learned at a regional show. By not having this line of bs
and a sales plan you could lose more than you can gain at the national shows. Put your effort into selling to potential
customers, not into people who attend shows as a form of entertainment. If there isn’t any potential customers there,
you’re at the wrong show. Don’t participate in trade shows that are only open to the trade when starting out because
you need to be talking to the end users to perfect advertising and selling strategies. Trade shows will bring to you the
reality of selling your goods. You need every opportunity you can find to show your products or services to the
public who will eventually do the purchasing. You can always team up with a friend to share a booth, as a way of
cutting costs.

GIVING AWAY YOUR PRODUCT
One thing I learned about the pros a long time ago is that if they think they will be better off by using your product,
they will buy it. Few consumer products will stand up to the requirements needed by pros. When you consider that
a Grand Prix motorcycle, as an example, costs over $250,000 to build; it is safe to assume that they will not be
interested in saving $25 on a handlebar. It would also be safe to assume that a consumer would not be willing to
spend $750 for a titanium handlebar for a $4000 bike. Following pros around like a camp follower is not time well
spent unless you take the time to learn from this group. Look closely at their problems and how they have solved
them. This can be a source of good ideas for consumer products or services. Giving exceptional service to the
customers who have bought your product will produce the best results in the long run. On the other hand I’ve seen
products become successful overnight because of a “stars” endorsement.

MAKING A POSITIVE OUT OF A NEGATIVE
Some our most loyal customers came to us the hard way. We screwed up their order or shipped them a defective
product. Why then would they have such good things to say about us? The answer is simple. We admitted our
mistakes and took care of the problem as fast as possible. Unfortunately, it seems this is unusual occurrence
today. Customers don’t start calling and complaining about things that work properly. I will not go as far as saying
the customer is always right; but I’ll let the customers think they are right. Good service isn’t expensive to offer
when you consider how much poor service can cost. It is easy to be a “hero” in today’s world.

WASTING TIME
A complete waste of time is to ask potential customers if they would buy a product without a prototype, delivery
date or selling price. A successful company can do what I’m saying a newcomer can’t because they have a track
record and customers to discuss new products with. There is a big difference between a customer and a
potential customer. You have to believe in what you are doing enough to complete your “homework” before
offering it to potential customers and this usually requires much time and money. I have found it is harder to arrive
at the selling price than to design a prototype. To arrive at the selling price you need a complete understanding of
how the components will be manufactured and how much these manufactured components will cost. Ideas are a
“dime a dozen” when you are starting out and you have to focus on a particular plan. Don’t become a salesperson
that can’t focus because they only remember what the last person said. People like this never arrive at a plan because
the customers constantly change their mind. It is your job to convince the customer to do it your way, not to have the
customer to convince you to do it their way. If you’re not sure why you are right, you shouldn’t be doing it.

SELLING OVERSEAS
The biggest difficulty in establishing a market outside of U.S. is the discount structure. Everyone wants to make
40%. For example, in this country large chain stores will order direct from a manufacturer in Asia, mark the product
up around 30% and sell it direct to the consumer. In Asia an importer will import a U.S. product, mark it up 40% and
sell it to a distributor who then marks up their cost 40% to a dealer, who also wants to make 40% on the consumer.
I’ve had the discounted price of my products increased over four times on products sold overseas. Needless to say,
these attempts failed. The different method of marketing in foreign countries makes it very difficult for
U.S. companies to compete. This will change rapidly because these countries are beginning to develop marketing
methods similar to our own. I no longer waste my time working with anyone who doesn’t have a method of selling
direct to the consumer. Competitive consumer pricing no longer allows this multi-tier system of distribution.

DON’T SHOW A PROTOTYPE TO CUSTOMERS
An error I’ve made several times was to show an “unfinished” product to a potential customer. People who have the
insight to come up with new products have a tendency to believe a potential customer can see past the flaws of a
prototype and understand what is trying to be accomplished. When you hear through the “grapevine” that your new
product isn’t any good because of the flaws you explained were going to be eliminated in the production model,
you’ll understand what I’m saying. Never show anything to anyone that you wouldn’t be proud to display in
a Show Booth or ship directly to a customer.

SELLING WITH THE INTERNET
A few years ago I believed that a company couldn’t grow to any size without outside help from dealers or
representatives. The Internet is rapidly changing my opinion, but advertising is still needed to make potential customers
aware of your web site. The Internet has become the most marvelous tool ever invented for new companies
that sell specialized products. It is a way for manufacture’s of unusual products and specialized services to find
customers worldwide and for customers to find these goods and services. The cost for this type of advertising is so
inexpensive when compared to normal advertising you could almost consider it free. Don’t pay other companies
money to list your site. The search engines of the Internet will find your products. Money would be better spent with
small ads in appropriate magazines referring potential customers to your sites. The Internet can sell your products,
take the order and write the invoice 24 hours a day from all over the world. We have over 600 pages of information
in our web site for only a few thousand dollars a year. Of course, putting it all together had a high cost but we did it
in house. The way I looked at it, if we did it right it could last for years. The results have been so positive we keep
improving it. We have had several customers claim we have the most useful and best web site they have come
across. One thing worth noting is that you’re not printing thousands of pages where errors or a price change can
result in trash; you can correct or change a web page in minutes. Linking your site to other similar sites in exchange
for allowing them to do likewise could be your secret to success.

Craig, it would also be useful to explain some of the tools they need to enter the web game, i.e. the ISP, modems,
web developing software, etc.


                                           ACCOUNTING

ACCOUNTANTS ARE SCOREKEEPPERS
I never ask a bookkeeper or accountant for any more information than what the score is. That is the only information
the are capable of giving. They don’t know your customers or product line. They only know what your finances are.
This isn’t the only information needed to make intelligent decisions. Statistics are only numbers that haven’t
any bearing on your particular circumstance. They are just averages. For example: Suppose your thumbing
through a trade magazine and you discover that your competitor has come up with a new product that is better and
priced at 60% of yours. It doesn’t make a bit of difference that the industry-average for new product development is
8% per year. You better get your ass in gear and spend what it takes to stay in business or sell the business to some
fool that believes that because a business has been profitable in the past that it will be profitable in the future. Now
don’t get me wrong and believe accountants can’t give you useful information. The score can be very difficult to
determine as a business grows; however, when you are starting out with little money and few profits, your checkbook
should control your next move.
BOOK VALUE
A thing a set of books will never disclose is the value of good ideas and good organization. Book values have little
value in the real world and are used for tax purposes. How can you put a value on good ideas or the employees who
produced these good ideas with a set of books? In a sense, a business is a living organism that is too complex
to put a value on by putting it on a simplistic scale. The value of a company is in its ability to produce a profit
in future years and not what the profit was last year; these facts will not show up in book value, but a warehouse full
of worthless inventory will. The future value of a giant corporation may be being determined as you read this;
however, it isn’t being decided in the boardroom of their leaders. It is happening inside the mind of some nerd
playing around with junk they bought yesterday at the electronic swap meet. If you think about it, the really great
ideas have come from individuals working on their own. IBM had the opportunity buy Microsoft and Bill Gates for
very little money before he became what he is today. Bill offered them his operating system called DOS many years
ago at the very beginning of its inception and they turned him down flat. Now he could buy IBM with a small part of
his $20 Billion in cash reserves. As the ideas of these individuals were being developed, they had to do so without
the help of large corporations. The Internet was built without the help of the large electronic companies. I find it
somewhat ironic that Microsoft didn’t hop on the Internet bandwagon until the Internet was well on its way. The
larger corporations believe they have the only methods capable of coming up with good ideas. They never learn.

TAXES
Taxes aren’t as complex as you are led to believe. The only taxes that you have to be familiar with are the tax laws
that pertain to your business. CPA’s have to know all the tax laws. Businesses have to use an accrual bookkeeping
system. This means you have to include money owed to you as income, however, the money you owe for inventory
and expenses is subtracted. Money spent for capital equipment has to be depreciated over a period of time. Taxes
have to be paid but don’t pay them any sooner than you have to. You have to realize that any increase in inventory
and accounts receivable will be considered income when the taxman comes, but you have more control over this
number than you may think. The tax system is quite logical and there aren’t many tricky things you can do to avoid
them, but you can pay taxes a lot sooner than you have to with bad choices. The two choices you have to eliminate
taxes are to lie and risk jail or screw up and eliminate profit; both are bad choices. No one every went broke by
paying taxes; just by spending profits that should have been saved for the taxes. Bankers and the IRS have conflicting
interests in the financial statement of the small business; bankers want to see substantial profits and the owner wants
to show little profit to avoid taxes. Most small business owners make it their quest in life to pay as little as possible
in taxes. There are legitimate ways to avoid overpaying taxes, but none available to avoid paying any taxes. Taxes
are the rent we pay for living in the U.S. and it’s really a small price to pay for living in the most
developed democracy in the history of the world. Forget about the IRS. That’s only an issue if you’re audited
and you violated the law. More importantly, your banker, should understand when you explain why your corporation’s
profit was low and at the same time you paid yourself a large end-of-the-year salary and then loaned the money back
to the corporation, etc. But if you’re at that point than you could probably write this book rather than learn from it!

A BIG TAX MISTAKE
One of the biggest mistakes a business owner can make is trying to impress themselves or a banker with a set of
books. A bottom line that looks good to a banker will also look good to the IRS. Remember that the example
I’m trying to explain will usually be in a set of books that have many pieces of information in it so the mistake
doesn’t jump out and beg to be corrected. Usually the mistake would be a combination of the same error, however
the cost could be the same. The term “last in first out” means that the value of your inventory stays at the first
purchased price and the product your are selling is valued at the new price. This doesn’t have a tax advantage if the
present purchase price has dropped because of quantity purchasing rather than rising because of inflation.

MISTAKE 1
Suppose you have a product that is injection molded and the retail selling price is $5, however, the cost per part is
only $.20. You have spent thousands for the tooling to produce and advertise this part so the price isn’t as outrageous
as it first sounds. The way you got the low price per part was that the company that did your molding had some
excess material and machine time and they quoted you this attractive price if you would order 100,000 pieces
instead of your normal order of 20,000 pieces. The book value of the part had been set along time ago when you only
purchased parts 1000 pieces at a time and with a wholesale selling price of $2.50 you entered an inventory value of
$2.00 and forgot about it. Now look what can happen in a situation like this. The inventory value has now become
$200,000 even though it only cost you $20,000. This will show up on your books as a $180,000 profit without selling
one. The accountant won’t see this error because accountants use the numbers you give them. Don’t ever have the
inventory value determined by the selling price.

MISTAKE 2
Many plastic parts are manufactured in what is called family molds; that is, the mold will produce a complete set of
parts in one shot. One company I dealt with kept track of the each part individually; however, one of these parts was
subject to failure. Each time this part was purchased the rest of the parts molded at the same time became worthless
but they were kept in inventory. The parts didn’t have any value because they didn’t fail and wouldn’t be used as
spare parts. They couldn’t be used to produce the product without being a complete set. The value of the material
used was so little that it wasn’t worth modifying the mold to run the replacement part separately. The end result was
these worthless parts would be carried on the books as good inventory, which resulted in higher taxes. This is
something you should look for if your purchasing an existing business with an inventory. Again, these are very
simple examples to make the problem easy to understand.

THE COST
With state and federal taxes it is very easy to be in 50% tax bracket and that means $180,000 over valuation of the
plastic parts could cost you $90,000, which becomes due and payable at the end of your tax year. The same could be
said for carrying money owed by customers that will never be paid. It will be considered income as long as it’s there.
There are specific accounting rules for getting bad dept off your books but the moment you are sure you have been
had, write it off.

END OR FISCAL END OF THE YEAR TAXES
After your tax year ends you don’t have any control over the amount you owe. A clever CPA isn’t going to come
along and save you thousands in taxes unless you have a big mistake in your bookkeeping. Bookkeeping
mistakes could also result in owing thousands. Like it or not the taxman will get his due. One simple thing you can
due legally is to delay a shipment so it falls into next year sales. By doing this you can have these items listed as
inventory, which has or should have the lower value than the sales value would be. Consider $50,000 worth of goods
that have an inventory value of $20,000. If you were in the 50% bracket (state and federal taxes), a one-week delay
in shipping could turn into a saving of $15,000 on taxes for that year. Things like this don’t cheat the government out
of any taxes; it only changes the time you have to pay them.

THE ACCURAL BOOKEEPING SYSTEM, THE ENEMY OF NEW BUSINESSES
One of the biggest problems a new successful company can have is being cash starved. Success results in more
money being owed to you and higher inventories and this takes all the profit your company can make just to stay
abreast of your finances. The accrual bookkeeping method is the downfall of growing companies. You can be
“done in” by having to pay taxes on income that is owed to you; use any clever method you can to delay
the payment of taxes with should be used. Read the letter I sent to my Senators and follow it up with a letter of
your own if you believe as I do. A well-written letter to your representatives is like a thousand votes.

LETTER ABOUT CASH INSTEAD OF THE ACCURAL METHOD OF BOOKKEEPING

May 20, 1999

Dear Senator *****,
I’m probably one of the government’s best examples of an entrepreneur. I’ve enclosed a catalog of the products I
manufacture to give you a general idea of what I do. You may also find it interesting to look at some of the
marvelous projects my customers have built using our tools. You could also look at our web site at
www.sherline.com. I manufacture and sell products that I have designed. I started in my garage and now have over
50,000 square feet of manufacturing space. I sell these products throughout the world and have around forty-five
employees. I’m far too busy to start a crusade about taxes, and, at age sixty-four, any change in legislation will be
of little help to me, but I’m sure there are many more entrepreneurs out there who could use this help. I’m not
some nut who believes the government is wasting my money and wants to do away with the IRS; in fact, I don’t
find the tax rates objectionable. I understand the current tax laws that pertain to my business and the logic behind
these laws. My problem with the current tax laws isn’t the amount of taxes paid; it is when these taxes have to be
paid. Please take the time to consider the following problem.
My company is a corporation, and it is also a sole proprietorship. I have a fiscal year that ends June 30th to
eliminate having to do personal and corporate taxes at the same time. This last year has been the best ever for my
company, and I’m finally realizing my dream. Instead of rejoicing, I have the usual sinking feeling because I’ll
have to take all the working capital out of my company and pay it in taxes. I’m talking several hundred thousand
dollars this year. Accountants pat me on the back and tell me I’m doing great, but no one seems to understand my
plight. I hope you can.
The amount of profit in a company is based on several items, and the two that create a problem for my company
are “accounts receivable” and “inventory.” The IRS considers my account’s receivable to be money I’ll receive,
but I look at it as money I’ll never see. By the time I receive this money, another equal or larger amount is owed
to me. The only way I can get it is to “close the doors.” I should get an investment tax credit for it. The same
could be said for my inventory.
Here is my problem. At the end of this fiscal year, my accounts receivable will be around $500,000, which is an
increase of $150,000 over last year. To do this extra business it obviously takes more inventories, which increases
my inventory value, and both these increases are exactly the same as income when tax time comes. I have had to
increase my investment in my company by approximately $300,000 to do this extra business, and I haven’t yet
figured in the new $2,200,000 building I bought or the $400,000 I spent for manufacturing additional equipment.
By the way, the deprecation for the building is now at 39 years, which is probably longer than its useful life in a
manufacturing environment, and modern computer-controlled machines can depreciate faster than allowable rates
if there is a change in technology. It is not a deal I would have invested in without a sincere desire to have a home
for my company that I can be proud of.
You don’t have to be much of an accountant to realize I’m spending all my money to take care of the increased
business. The government now comes along with the “straw that is about to break the camel’s back.” Taxes are
now due on the money that is owed to me as well as the money I invested in increased inventory. Being in the
50% bracket with the state tax included means I have to come up with $150,000 just to cover these increases, but
I already had to spend all my money to cover the growth of my company. I’m enough of a businessman to know
that if I start to borrow money to pay taxes I’ll be heading in a very dangerous direction, so each year I take all
my money, send it to IRS and start over.
This is the way it has been for twenty-five years, and I find myself asking, “when do I get mine?” I own a
business worth several million dollars that I created. To sell it would be like selling my child. The tax system is
designed to encourage me to “cash out.” If I sold out, the money I would receive would be a long-term capital
gain, and I could put several million in the bank. The government encourages its most productive members to
retire rather than to go on being productive. An accountant might suggest that I solve the problem by getting
investors to put money into the company, but I would not feel comfortable making business decisions with other
people’s money. If I make a mistake, it is only me that is hurt. I don’t need the additional worry of justifying all
my decisions to a group of investors.
A gambler using Wall Street is given incentives with the use of long-term capital gains deductions, but the only
tax credit that has ever helped me was the “investment tax credit.” This was taken away more than a decade ago,
but to stay competitive I still have to buy machines that cost more than my house. Accountants and bankers don’t
really understand people like me, for they consider all business dealings as investments. People like me, and there
are many of us, have the need to create new products just like an artist needs to paint. I often wonder about the
number of products I could have brought to market if I weren’t impeded by these simple facts. Go to a small
industrial park on any weekend and you’ll find entrepreneurs working on new ideas or just trying to pay the rent.
Our hours aren’t limited to 9-to-5, and most don’t have the time to understand taxes or write this letter, but we are
out there creating tomorrow’s businesses. We are the very core of America’s financial strength, and, as a group,
we deserve something better.
There is a very simple way to eliminate this injustice, and that is to allow entrepreneurs to run their businesses on
a “cash book” system rather than an “accrual” system. This would eliminate paying taxes on money that hasn’t
yet been received or inventory that hasn’t been sold. It wouldn’t change the amount of taxes the government
received, only when the taxes were received. This could prevent the “rug being pulled out” each year at tax time.
I’m an avid fan of C-span’s Washington Journal and realize how hard our elected officials work. I do hope you
can find the time to take a look at this problem. If you or your staff can’t find the time, could you please pass it on
to someone who may have the time? If you are ever passing through the North San Diego County area and would
care for a quick tour of my facilities, I would be honored to show you around.
Sincerely Yours,
Joe Martin


                                            PURCHASING
PURCHASING AGENTS
A company has to be pretty large before they need a full time purchasing agent and they don’t come cheap. By
nature they are “empire builders.” They have an amazing amount of power over suppliers and some use this power
in very unethical ways. They can spend you into the poorhouse by buying items in quantities that are too high,
however, at the same time they’ll be convincing you that you’ll save thousands of dollars by doing so. You have to
be very careful when you allow your name to be put on orders that may cost thousands of dollars. It can
be as dangerous as giving them a credit card to use as they see fit. I wouldn’t want to put a “wheeler-dealer” in
purchasing because you need good vendors just like you need good employees. A purchasing agent that goes beyond
just getting the best price can hurt more than they can help.

THE GOOD OLD YELLOW PAGES
One of the best ways I’ve found to find sources for goods and services is the Yellow Pages which is part of the local
phone book. They are free and you need one for the closest large city in your area. Start with the index of what
you’re looking for and then look at the individual advertisements. I start by calling around and give a brief description
of what I’m looking for. If the company doesn’t offer what I’m looking for, I ask if the have any suggestions who to
contact. In most cases, you’ll get a very thoughtful answer. On the other hand, purchasing from local suppliers can
also be very expensive for a company. You may find “shopping” nationwide can save thousands of dollars using the
Internet. We recently found a 40% difference on an expensive electronic component. When you’re purchasing
items that can be purchased or produced from many different sources you should take advantage of
your position. Another good use for the Yellow Pages is to find out how much local competition you have for
service-related businesses before you start. You have to find competition from similar manufacturing businesses
though the Internet.

CHECK THEIR PRICES
Never trust a sales person so much that you do not to check their prices. The moment they believe they have the
upper hand you’ll pay way more than you should. It’s their nature so don’t hold it against them. It was your fault for
allowing it to happen. For example, we buy aluminum in five thousand-pound quantities. A ten-cent per pound
difference is $500.00. This is the easiest money you can make. A couple of phone calls and “bingo,” you save a
thousand bucks. I’ve seen more than $.50 a pound difference between companies that we normally do business with
which amounts to over $2500 between high and low. Again, this can be the easiest money you will ever make. My
partner saved our company thousands of dollars simply by asking if that was the best price that they had to offer.
You don’t have to be rude, just ask. The many factors that affect pricing include how bad the seller needs to make a
sale, how much they have on hand, how busy they are, and the mood the sales person is in. Selling is a personal
business. Don’t expect a good price if the seller had a big argument with their boss that day. Sellers have to know
that you, the buyer, will shop to get the best price.
LIVE WITH YOUR AGREEMENTS
On the other hand, if you want good prices you have to work with the terms you have agreed to. In other words, pay
your bills on time and if you can’t you should keep the suppliers aware of your problem. You’ll find most suppliers
will understand your plight for they too have been there.

DON’T ALWAYS USE THE LOW BIDDER
Not all items can be shopped for in such a simplistic manner. Quality and information have a value that is difficult
to evaluate. An advertising agency that produces very economical ads that do not sell your product isn’t a very good
deal; however, paying a big buck agency doesn’t guarantee results. You have to be the best judge of where and how
your money should be spent.

GETTING BIDS
You have to know enough about the process to produce the special parts your company may need to get the correct
company to bid. Each company is usually better for a particular size range or quantity than another. Be up front and
ask a potential shop if this size part and this quantity would be a good job for them to do and if they believe they
could be competitive before they bid. They don’t want to waste their time biding on jobs that don’t stand a chance of
getting. For example: Small diameter screw machine parts would be best ordered from a company with Brown &
Sharp single spindle screw machines if parts are ordered in less than 5000 parts. However, it may be possible to get
20,000 of the same parts by ordering from a company that runs Davenport’s at less than half the part price. Very
small diameter accurate parts should come from a company that runs Swiss machines. Complex accurate parts in
low quantities should go to a CNC shop. Of course, these companies need clear accurate drawing with tolerances for
every dimension. You want companies that can easily deal with the quality and quantity you need.

      ABUSING THE BIDING PROCESS
It takes more time than you think for companies to give you an accurate price and you shouldn’t abuse this privilege.
Having ten companies bid on a $400 job is abusing this privilege. It could cost each company over $40 to bid your
job which results in over $400 spent by this industry to get $400 worth of work. You shouldn’t have a part bid that
you don’t intend to order. Many times engineers think nothing of sending parts out for bid to check to see if their
design is economically sound. Can you imagine asking an engineering company to see if your design is structurally
sound for free? The reality of the situation is there isn’t any difference. I’ve always felt companies should be paid to
bid because it is an engineering process. With email and faxes companies it is too easy to send out more bid
packages than the project deserves. Obviously this is one of my pet peeves for I’ve been one of the poor bastards
who worked late into the night, bidding jobs for a company, who I later found out, had no intention of purchasing
what I was bidding on. In one case a potential customer came in with a crude drawing without any tolerances. I made
a new drawing for him with the appropriate tolerances and gave him a drawing to sign-off. A week later I stopped by
a friend who had a shop similar to mine and saw my drawing on his desk. He got the job and I got the shaft, however,
I realized my friend had nothing to do with it. Another lesson learned the hard way.

INSURANCE
If you thought the government works in strange ways you’ll really wonder about insurance companies.
These people change their minds faster than a child in a candy store. One day they are begging for your business and
the next day they quote a rate with a 200% increase over the last year without ever having to pay a claim. Three years
later they are begging for your business again and quoting the lowest rate ever. What it boils down to is you have to
make them quote a price each year and you have to come up with a bid package so the insurance companies involved
are all bidding for the same basic package. I’ve had to pay thousands of dollars for product liability insurance since
it came to be a problem over twenty years ago. In all this, time I have never received a nasty letter; yet, in 1999 we
had a problem finding an insurance company because they feel “we are due.” How can anyone deal with logic like
that?

A COSTLY ERROR CAUSED BY NOT CHECKING A PRICE
I became involved in the manufacturing a model radio controlled helicopter that had already been on the market but
was no longer being produced. We had been making a few of the parts for their model when an aircraft crashed
through their roof and burned the manufacturer out. The company was located near an airport. A few years later the
owner of this company offered us the opportunity to put this product back on the market. I was told “the phone
would ring of the hook” when his customers found that the helicopter was being reintroduced. I’ve always loved
model aircraft so I have a soft spot in my heart for projects like this, however, this time I believe it gave
me a soft spot in my head. For outside purchases I used the original manufacturing cost and started to redesign
and manufacture parts to reintroduce this product to the hobby market. We had many parts manufactured when Carl,
my partner, started to check prices for ball bearings. The cost sheet had them listed at $50. The best quote I could
come up with was around $120. The $70 difference was the profit we had planned on. When I talk to the original
owner about this difference I was told I had to order a higher quantity to get to an affordable price and suggested that
I just “go for it.” He wanted me to put my name on a purchase order for over $300,000 worth of bearings without
having one order in house. This is the order he had previously put his name on. The big difference was I never order
things I don’t intend to purchase and I had a million dollars of equipment, money and inventory to go after if I
canceled. The project ended with me losing thousands of dollars and many hundreds of hours of effort.

NEW OR USED EQUIPMENT
I could write a book on this subject alone. Used machines can be bought for as little as ten cents on the dollar so why
would a person purchase a new one? The two main reasons would be, speed and accuracy, but not all new machines
are faster. New machines can be bought for as little as 10% down and the increased production rates may be enough
to offset the monthly payments. The answer isn’t this simple when you find it would take a $1,000,000 of new
equipment to produce the product and you only have $50,000. All is not lost when you find you don’t have an
investor who is willing to foot the bill if you are willing to purchase used equipment and get it working as I have. If
a single CNC machine could be purchased that could fill your manufacturing needs I would suggest getting a new
machine from a local reputable dealer that had the ability to service the CNC control. For the specialized machines
I would purchase used machines that are good enough to get the job done. You can usually find a craftsman who
would be willing to help you get a specialized piece of equipment operating by paying them a reasonable rate, which
would be around twice what their regular pay is or their shop-time rate. I don’t want to take off on a tangent on this
subject because it is a subject that rules can’t be developed for but I came up with one. “If you don’t like to get
your hands dirty buy new equipment, or better yet, buy an existing business where you can sit in an
office and play boss.”

PURCHASING USED EQUIPMENT
Purchasing used equipment is quite a bit different than a buying new piece. You usually can’t find another one
available at the same price or quality. If it is a good buy, you have less time to make your decision because good
buys sell fast. One thing worth noting is that used machinery dealers will usually offer a money back guarantee
which you will not get on new equipment without a lawyer. There is a great deal of time and expenses associated
with moving, installing, and getting specialized machinery operating. To make these purchases without a lot of
thought is an error and for all parties. Again, this is a decision that shouldn’t be made casually. The best buys are
usually found when the seller is attempting to sell an item that doesn’t fit in with their normal market and they want
to be rid of it. The same holds true at auctions, which I consider a sport, when they sell a special piece that doesn’t
go with the main theme of the auction. Bidders don’t want to waste a day only bidding on one piece so you may not
be bidding against anyone who really wants it. The best buys are usually found on very specialized items that have
very little value to a small shop. Items that are primarily used by large corporations don’t have a good market used
because these large corporations usually buy new equipment. Of course, there can be a large degree of risk associated
with purchases of this type but the money that can be saved may make this risk acceptable.



                                      MANUFACTURING
MANUFACTURING DRAWINGS
I became painfully aware how important the mechanical drawings were when my partner of 30 years died suddenly
from a heart attack. Carl had done all the detail drawings for all our products. At the time, this amounted to 450
detailed drawings. I decided to teach myself a computer-drafting program rather hiring someone to do the drawings.
To teach a new employee our product line seemed more difficult than teaching myself a drafting program. I chose to
use AutoCADÒ . At the time I needed something to focus on for I lost far more than my partner, Carl was also my
best friend with whom I shared thousand of lunches and my plans. The problems with Carl’s drawings were that they
weren’t to any standard. The floppy disks that the drawings were stored on were also unorganized. There were
multiple copies of the same drawing and I couldn’t easily tell which version was correct. This was a job that I had to
do for I was the only one in the company that truly understood the interaction of our product line. I worked around
sixty hours a week for two years to correct this problem. This fact alone should convince you how important I
believe the drawings are. The drawings are the heart and soul of a company that produces a product and
they must be accurate and up to date. I came to realize that these drawings would keep my company going long
after I’m gone. They will be my monuments. When you think about it, I’ll still be telling employees what to do with
these drawings after I’m gone, indirectly of course. They can’t get rid of me.

A SET OF BOOKS FOR THE SHOP
Always have a backup plan to keep expensive equipment operating. This is why documentation is so important. You
can’t have all your eggs in one basket with a single employee or yourself. If your key employee or yourself was hurt
or fell ill could the business continue operating? This could happen to your best employee. To protect your company,
which is also protecting yourself along with the employees and customers, take the time to document shop projects
in such a way that another person skilled at the trade could get the job operating. The job folders should contain
where the tooling and programs are stored and how they are used. Information has to be accurate; remember data
that contains 5% errors isn’t 95% accurate. This is information that pertains to your business only. A new skilled
employee needs to know where these things are stored even if they already know how to get the equipment operating.
The digital cameras that recently came on the market are an excellent way to document setup information. I’ll
never understand why companies will go to such effort to keep track of every penny they make and
spend, and then leave thousands of dollars worth of information laying around in an unreliable employee’s
head.


TOLERANCES
One of the first things you are going to learn a great deal about in manufacturing is about tolerances. Even if you
make parts for your own use the limits of what will work has to be known. A production drawing should have
the limits of every dimension. These limits cannot be arrived at casually or there may be a terrible price to pay. A
part that doesn’t “work” has no value. Having to put $5,000 worth of parts in the scrap-bin because the tolerance
allowed a part to be manufactured that was too small for its mating part can make you painfully aware of what I’m
writing about. There are few parts that can be reworked if they are undersize. Computer drawing programs can help
you sort out tolerances but it takes quite a bit of time and skill. The need for a through review of the importance of
tolerances will come about right after you have just produced $1000 dollars worth of parts that will not work. The
problem will be considered seriously when you discover the same error just occurred with $5,000 worth of parts.
You could take a few moments and reread this section and save yourself thousands of dollars and much grief.

MORE ON TOLERANCES
Tolerances should be considered as a percentage of the total dimension. Consider a dimension 3²(75mm) long. If a
tolerance of ± 0.001² (0.025mm) were held, the error would have a total of .03%, which is a very small amount. A
diameter of 0.050² (1.27mm) would have an error of 2% if the same tolerance were held. In most cases, this would
be totally unacceptable. I found that by manufacturing my own products I have better control over the quality and
cost of the products I sell. We attempt to manufacture components as close to the nominal dimension listed on the
drawings as possible. We use the tolerance listed when we inspect the parts for acceptance. If components are
manufactured just to pass inspection, the tolerances will have to be tightened because you will have to assume that
all the components are at the extreme end of the tolerances. You’ll be amazed how fast you can end up with unusable
parts by being “sloppy.” You’ll also be amazed how difficult it is to determine these limits beforehand. I don’t want
to bore you with these facts, but these are mistakes that a novice will always make and experts will occasionally
make. The biggest problem for a novice is that they usually don’t have the finances to throw thousands of dollars of
parts away and they may be forced to use them. This in turn could result in products that are unsatisfactory in the
beginning when the product has to be perfect.
GOOD TOOLING IS THE ROAD TO SUCCESS
The specialized tooling that it takes produce products can be the difference between success and failure. Good
toolmakers can often take an average idea and turn it into a great idea. A high volume, low cost product is
usually the result of extremely good tool making. I’m a diabetic and have to inject myself several times a day. Good
tool making have allowed these syringes to be manufactured perfectly for pennies. They are so inexpensive they are
disposable. This has eliminated problems with contaminated needles, a major problem of the past. I believe the good
ideas that made these disposable medical devices available are more the results of good toolmakers rather than good
engineering. To come up with the idea to manufacture a sterilized needle .015² in diameter, cut it off so it is
perfectly sharp and without any burrs for pennies a thousand is something that can’t be developed at a computer or
drawing board. Just because you can draw something doesn’t mean you can manufacture it.

DON’T ORDER BATCHES
Unless the product you’re introducing has a very limited market and you know how many you can sell don’t order
components in batches. I believed this was one of my better decisions and was important to get a very complex
product line on the market with very little money. The fact that I made most of the components myself must be
considered. My plan was to be in business for the long haul, therefore, if I made a batch of 200 machines
I would run out of every component on the same day. What I did was to run inexpensive parts in quantities that
would lower production cost and allow me to inventory them. Expensive parts would be manufactured in lower
quantities closer to the rate they were used. This was the start an assembly line method of manufacturing and we
started to build components in economical quantities for inventory.

MAKING YOUR OWN COMPONENTS
I believe that the reason that I’m able to compete on a world market is by making the components in house. The cost
to purchase non-standard parts can be much more expensive than one would think. When you have parts manufactured
for you by a vendor that you don’t control, delivery problems are inevitable. This usually results in higher than
necessary inventory levels. Added cost must be added for the expensive purchasing agents that must be employed to
keep track of these orders, shipping to your company from the vendor, and incoming inspection. Of course the profit
of the vendor has been added to the price quote. If I had all the special machined components of my product line
manufactured by contract machine shops I believe my payroll wouldn’t drop because of the large purchasing and
inspection departments it would take. For myself, I prefer working with craftsmen than dealing with the excuses of
vendors and your own purchasing agents. The right answers for a company starting out lay in the middle.
Manufacturing the parts that are used in quantity plus having control over the process is always beneficial. Contract
out the specialized processes that you know little about.

MODERN CNC MACHINES
I once described the manufacturing process as first taking big-ones (raw material) and making small-ones (components)
and putting the small-ones together to make big-ones (product). There are few processes involved that don’t use
computer-controlled machines. Even the clothing industry uses CNC machines. They are unbelievably accurate and
reliable. CNC machines are today’s robots and modern manufacturing couldn’t exist without them. They
are also very expensive. Thirty years ago you could buy an old machine and fix it up and it would be almost as fast
as a new one. Today the technology is changing so fast that a machine just five years old may run at 60% of the speed
of a new one. The laws of physics will soon put limits on these dramatic improvements. Their real advantage is
sometime overlooked. These marvelous standard machines can be turned into specialized manufacturing tools in a
matter of hours. The specialized machines of the past may have taken years to build in the past and they would only
be useful to produce a single part. Change the design and you needed another specialized machine that took years to
build and could cost millions. Today many of these specialized machines have a value of scrap metal.

OVEROOKED IDEAS WITH CNC MACHINES
Computer controlled machine tools are slowly changing the way we design and manufacture products and that is a
big error. We should be leaping forward to use these marvelous machines to their full potential. These are the robots
of the 21st century. Each machine, in a sense, is a complete manufacturing facility that can be instructed to make
many different parts. Suppose you wanted to manufacture your product in several countries. You would only need
the complete engineering staff in your home facility. The machines you send to other facilities will know how to
produce the parts by using the same programs that’s used at the home plant. There isn’t any language barrier for
all these machines speak the same language. The new plants will only need the personnel to setup and operate
these machines. This fact will have a terrific impact in they way the manufacturing plants of the future are designed
and located. Local suppliers could be used for raw material and heavy products could be manufactured locally,
eliminating high shipping and packaging costs. Think about it. High-speed CNC machines save more than wages.
These are the machines that today’s workers like to operate. A machine that can make parts in half the time can also
make twice as many parts with the same floor space. With floor space in industrial parks getting close to $.75 a
square foot a month, the time has come to consider the efficiency of floor space.

MANUFACTURING OVERSEAS
A quick way to get screwed in this world is having your product manufactured in third world countries. The first
thing you should realize about third world countries is that they have very intelligent dedicated workers and managers
but what they lack is the capital to carry out their own plans. Giving them the capital to develop your product could
be an error. The moment you can’t buy all they are capable of producing, you’ll find yourself competing
with a product that is very similar to yours. Under their name they will look for new markets for your products.
Look what happened to the U.S. manufactures of outboard motors. American manufactures now have to compete
with several Asian manufactures. This would have been inevitable, but I’m sure the process was speeded up when
American companies had their “low-end” models built in Asia.

PACKAGING
Newcomers to business usually overlook the true cost of packaging and shipping by at least 100%. Packaging has to
get the product to the consumer without damage. In most cases products will have to be double packed to prevent the
product from looking shopworn on a dealers shelf. Surplus boxes that can be purchased at substantial savings could
be used for this purpose. With the cost of medium size boxes purchased in small quantities at $1 to $2 dollars it is a
cost that has to be dealt with and it is worth shopping for the best price. The packaging has to prevent damage if the
box is dropped a couple of feet. Not doing so could result in spending an extraordinary amount of time on the phone
with customers and shipping companies resolving unneeded problems. You can learn a lot about shipping by taking
the time to look closely at goods that have been shipped to you. In looking you will find that double packaging,
which can be expensive, can easily solve most of the problems that occur.

PROBLEMS WITH DELIVERING YOUR FIRST ORDER
The first orders you ship will have as much to do with surviving as profit. This is what you are going to be judged on.
When you’re starting out the profit that can be made on your first shipments won’t amount to a pee hole in the snow
compared to your overall investment at that time. The damage that you can do by shipping a product that is
“not up to specs” can do you in. This isn’t the time to try and get your investment back. Your only interest should
be shipping the best product that can be built for the intended selling price. This is a rule that I wish I could say I
followed better, but the demands of delivering at a promised date and shortage of money bent my own rule. When
you have a product that is made of many individual components and a $.50 item that isn’t perfect, but still works, is
stopping you from shipping a $300 item, you’ll probably ship it as I did. At this time in my life I wish I hadn’t. On
the other hand, I wonder if this was the decision that helped me survive.


                                             MANAGING

NOT ENOUGH HOURS IN A WEEK
There comes a time when you can’t solve your problems by working weekends. Even if you were capable of
working nonstop you still couldn’t get it all done. This is when you are going to find out if you have what it takes to
run a business. You have to have the ability to get other people to do your work for you. To accomplish this, work
has to be allotted to managers in such a way that it is challenging, but not impossible. Teach your new managers the
logic it takes to decide the order of importance in getting work done. The hardest working person in the
organization can’t help if they are working on the wrong project. The best organization tools is the weekly
Production Meeting or Staff Meeting for larger companies. Keep these meetings to the point, make sure everyone
comes prepared, and follow up the next week. A good secretary will keep track of what is promised and promises
kept and promises broken.

WHICH IS HARDER? MANAGNENT OR LABOR
I’ve been on both sides of the fence and have come to the conclusion that the side you are on is the most difficult.
The fence is way too high to see the problems of the other side. Going home physically exhausted from an unrewarding
job can be just as demanding as a making a decision to spend thousands of dollars on a new product that you are not
quite sure will sell. There is such a difference in these tasks; one can not see the problems of the other. The businessman
living in a million-dollar house may feel just as broke as a shipping clerk that just blew the engine in his car. Wealth
can’t be defined as the amount of zeros in your savings. It is really how long you can keep your current
standard of living. Twenty-dollars to a street person might be enough to last two days and which may seem like an
eternity at their present status; while a multi-millionaire may feel broke because $700,000 a month is going out and
only $500,000 is coming in.

WHAT IS YOUR BEST TIME TO SOLVE PROBLEMS?
If you have to work with your own ideas it is important to set time aside to do this, but it must be done at a time when
your mind is capable of working on new ideas. You can’t control your mind like a light-switch, so it is very
important that you know the best time to set aside. There are very few original good ideas that have come out of my
head after ten in the morning. Once I get to the business my mind switches to solving immediate problems, which is
a different thought process. Therefore, I do all my design work, planing, and writing before I get to work and my
mind gets cluttered with the problems of the day. I’ve had friends that could do work like this in the late evening.
Whatever it takes.

STATUS QUO
Not much will ever change in your company without forcing your employees to use new ideas. Employees find
doing things the same way easier than switching. They already know how to do it the way they are doing it and don’t
want to take the time to learn a new way. In many cases, the reason they don’t have the time to change is because
they haven’t changed.

COMPUTERS
If you don’t know how to use a computer, learn. The computers of today are very easy to use and learning will keep
you from being at the mercy of your employees. The Internet, email, word-processes and spreadsheets are the new
tools for today’s managers. I couldn’t get along without them. There are still a few managers out there who still
haven’t understood the difference between faxes and email. When a document is sent to you by email you can work
with the information in your computer without reentering it. When it comes by fax, you can only look at it. Consider
a complex drawing of anything that comes to you by email. With the proper program, you can get data directly
entered into your design program. I have found the Microsoft ExcelÒ program easy to use and worth every dollar.
The only problem with it is it now does so much that it has become too complex. They should put out books to teach
programs like this in two levels. The first book should be simple and give you the information to do simple spreadsheet
programs. The next levels should be taught in specific groups that accomplish specific tasks. Attempting to teach
students the entire program and then leaving the students to determine what is useful is the common error made in
writing these books.

DEALING WITH ACCOUNTANTS AND ATTORNEYS
Don’t get in bs sessions with your professional friends when the time clock is running. They’ll charge you for it and
at the rate they charge today you’ll wish you didn’t ask how their new car is running. I always try to have a plan for
them to implement at the start of a meeting. If they think it is the wrong they will tell you and you can start your
meeting in the proper direction in a shorter time. Asking professional people for advice can be very costly if
they don’t know the specific area you are concerned about. Attorneys and accountants would have to review
your entire company before they could ethically discuss the overall subject; however, they can easily answer specific
questions. Unless you have too much money and time to wait for committees to come up with answers, you are the
one whose shoulders the decisions will fall upon. Read something on the subject beforehand and you’ll find the time
has been well spent. The Internet is a good spot to come up with basic information of this type. It is usually easier
reading than you would expect. The professional tax books that are available are very well indexed and surprisingly
easy to read. Remember that professional people have to know all the laws and rules, you only have to know the ones
that apply to you. One thing I believe worth noting is that I haven’t spent $10,000 in attorney’s fees since I started in
business over thirty years ago. You don’t have to spend thousands of dollars a year for their service if you deal with
people you trust.

CONSULTANTS
If you want to waste a lot of time and money, call in the management consultants. First you’ll have to spend a lot of
time explaining what your company does and the problems you are having while they are charging you a great deal
of money. They will smile, frown, nod their head at the appropriate time and ask more questions. It is sort of like
going to a head shrink. They will agree with your conclusions and make you feel so good that you won’t mind
paying them a great deal of money. For this you will get a report about the information that you gave them. If you
are starting out in business you know so little about you believe you need a consultant, you’ll find there
are a lot better ways to throw your money away. I feel you’re better off by getting some good friends together
who are intelligent, and asking their advice. It’s amazing how valuable those little beer sessions can be, or as they
call it today “networking sessions.”

MANAGERS WITH TOO MUCH CONTROL
I remember a friend that had about 200 employees and put a new manager in charge of an existing department. In the
first week the new manager got permission from Jim to make personal changes to “streamline the operation.” Jim
felt the department was in good hands and gave him the old “do what it takes.” After a couple of months on the job,
the new manager came into Jim’s’ office and quit because he didn’t have any employees working for him that knew
what they were doing. It turned out that the new manager had fired them all in his streamlining process. This was a
very specialized department and Jim was now the only one in the company who knew what and how it ran, however,
he hadn’t had to deal with it for years. With a lot of effort by Jim, he got his department going again and vowed an
error like that would never happens again. I think this story makes my point.

DON’T TELL THEM SHOW THEM
Managers or supervisors shouldn’t tell employees how to do a job unless they can show how to do it. This is one of
the big advantages of having managers that worked their way up through the ranks, because they can show them.
Employees that are forced to use a bad idea will become alienated to their job. There is nothing wrong with
managers telling when and how many to do, but when you start telling people how to do something you can’t do
yourself, you’ll really piss them off. Owners of many companies spend more time on the shop floor than most
outsiders could imagine. They know that if the parts aren’t produced efficiently, accurately and profitably, the rest
of the company can fold up their tents and go home (sales clerks, secretaries, receptionists, accountants, etc)

DON’T ASK FOR THE IMPOSSIBLE
A quick way to destroy a good employee is ask them for the impossible. The impossible comes about in stages and
you should ask for it in stages. Can you imagine the frustration an electronic engineer in 1960 would have if you told
them to design and build a chip with ten million transistors that only was the size of a small watch? Each stage of
a project needs a feeling of completion and rewards for a job well done.

BE A BENVEOLENT DICTATOR
Employees can be somewhat like children. They are always testing your limits. To avoid problems of this kind,
employees have to know the limits that will be imposed; however, you have to have some consideration for their
personal life when imposing these rules. I remember a movie I saw and believe the name was “The Lion and the
Wind.” It was about a desert king who caught a couple of nomads stealing and cut off one of the head of one thieve
and let the other go. His reasoning was that by letting one go and cutting the head off of the other, the one he let go
would tell others what a fair King he was, but would also say how you had to obey his laws. A lot could be learned
from this story, but I don’t recommend cutting off any heads. One of the best methods of setting limits is creating a
“Company Policy Manual.” Set it all down in writing, making sure you can live with these rules, and referring to it
when an employee asks for a special privilege.
HONEST EMPLOYEES WITH ETHICAL BOSSES
The best way to have honest employees is to have employees that have an ethical boss. You can’t spend all your time
screwing everyone and not expect to get screwed in return. This isn’t the way to make money. To go through life not
trusting anyone or having to remember what you said and who you said it to may result in some short term financial
gain, but will also lower the quality of your life. Success is having good friends and a clear conscience. Success is
unattainable unless you can be proud of the way it was attained. I’m sure everyone can point to seemingly
successful businessmen who attained wealth by screwing everyone they dealt with. I hope the readers of this book
can differentiate between wealth and success. A lack of money can make life miserable, but an excess amount of
money doesn’t guarantee happiness or satisfaction.

SIGN YOUR OWN CHECKS
This is a ritual that has to be done every week. It keeps you in touch with the reality of the financing of your
company. Look at every invoice and see if the price is in the ballpark. If you don’t have the time, at least set up a
system where the person who ordered the items OK’s the invoice before it is paid. Turning this task to the girl in
charge of the office can lead to disaster. A misplaced decimal place can amount to thousands of dollars. Office
managers don’t always know what the price should be and many will pay any invoice that comes through
the mail. Many successful scams work by sending professional looking invoices for services never ordered or
preformed. Unordered advertising scams have been around for years. When you don’t have enough time to sign all
your checks, at least sign the big ones and always have the bank mail canceled checks directly to your home so they
can be reviewed.

EXCESS CASH IN THE CHECKING ACCOUNT
One of the first things you’ll notice of a slowdown in business is a buildup of cash in the checking account. What
happens is the money that has been owed to you in accounts-receivable is coming in faster than you have to spend
money to deliver new orders. It may look good but don’t be too eager to spend it for you may need it sooner than you
think.

A SIMPLE WAY TO KEEP TRACK OF MONEY
A problem that must be avoided is to find out you are broke after the fact. Usually these problems can be avoided
with a little hard work before you are in trouble, but you have to put this effort before the fact. I decide how my
company is doing by the balance in the checkbook. You can’t pay employees and suppliers with accounts-
receivable and inventory. Having the ability to pay your obligations on time is what it’s all about. Once you lose
this ability you are headed for disaster. Every other week I have a simple report printed that tells me what I owe,
what they owe me, and how much cash I have available. I take the amount of dollars we spent in the last two weeks
and divide it by 80. This gives me the actual cost it keeps to keep the doors open per hour. You may find this
simplistic but in a short time you have an average cost per hour. This use of averages could confuse you because
earlier I state averages aren’t important. The difference is I’m not using this average to predict the future and I’m
only using this average to keep abreast of my present situation. What this gives you a quick way to appraise a
potential expense. For example, if your current expenses are $600 an hour, a $300 piece of equipment that may
improve efficiency may seem like a better deal. Somewhere down the road a good “line of credit” may change your
views on my line of thinking but my method will keep you out of bankruptcy court.

ACCOUNTING CAN CREATE TO STUPID DECISIONS
Overhead cost is created with averages and when you start believing that averages are individual facts you can get in
trouble. I remember a friend with a machine shop that did aerospace work. A major customer of his purchased a new
computer controlled lathe that cost around $300,000. They planned to do most the work he was doing for them with
this new piece of equipment. Obviously, he was worried but he was saved when the accounting department of this
aerospace company put such a high overhead number on that machine that they decided that it was cheaper not to
run it. This allowed my friend to continue doing their work and the aerospace company’s machine sat there and
became obsolete. Once you have made a capital investment, it has the same basic overhead rate whether it is used or
not. In this case, the machine could have been run at a lower rate than originally planned and still have been
profitable.
DON’T MAKE EMPLOYEE DECISIONS WHEN YOU ARE UPSET
Try to avoid the unavoidable and make the important decisions when you are in a good frame of mind, particularly
when it comes to employee dealings. You have to keep your “cool” for you’ll be judged on how you act in trying
situations. If you act like a jerk word will spread to all your employees like wildfire. It is all right to let people know
you are pissed, but don’t ever lose control because you’ll end up being the big loser. Firing a skilled employee over
a dumb mistake can be the biggest error. The only employees who don’t make mistakes are the employees
that don’t do anything. Skilled employees can easily go out and get a new job but an employer can’t easily hire a
new skilled employee. The chances are high that a new employee will make the same mistakes again as the employee
you fired. I always blame myself for most mistakes. I was the one that allowed a system in my company to exist that
allowed a big mistake to happen. You always need a double check system in place to keep costly mistakes from
happening. Any business owner is only as good as the people that work for him, so keep that in mind. Compassion
and an open ear is the best policy here. It will reap huge dividends in employee loyalty. Looking back on our lives
we find our accomplishments are always bigger and our errors were fewer, but you and I know the awful truth. Give
them a break.

A BALANCING ACT
The skill in managing is to survive and surviving is to balance the inventory against the orders and cash. You need
all three to stay in business. If you have a lot of cash, orders and inventory are less of a problem if you don’t mind
losing your cash supply. If you have so many orders you can’t deliver because of a lack of inventory, you may lose
your business to a competitor. If you have more inventory than you need for the orders that are coming in, you can
go broke paying for the inventory along with the associated expenses. I always think of the joke about “The way to
make a small fortune in automobile racing is to start with a large one.” The same could be said for starting a
business. I realize this sounds so basic it isn’t worth writing about but this fact is the toughest and most important
decision you can make. When you have to decide how many items you should buy or build for a product
that you are not sure will sell and you don’t have a sleepless night doing it, you should.

WORK ON PROBLEMS YOU CAN SOLVE
It is foolish to spend much time thinking about problems you can’t control. Deal with the problems at hand and
many long-term problems will go away. Don’t think of problems as a group because they can’t be solved as
a group. They have to be solved one at a time. Solve the immediate problem first, and the first choice should always
be is to satisfy the customer. I’ve seen friends that own businesses get so depressed when the bills started to pile up
that they stopped shipping orders to their customers when this was their only source of income. Many times a couple
weekends of hard work would have solved their problems. If you really want to have your own business, you can’t
always get to watch your kids play soccer on weekends.

PROBLEMS
Problems can be categorized in three areas:
a) Immediate fires that need your immediate attention in order to maintain the daily efficient operations of the
   company.
b) Short term problems that can wait until a meeting or thinking in the shower, such as whether to create a new
   position or whether to sign the advertising agreement for 3 months or 6 months, etc.
c) Long range problems that require a period of time uninterrupted with any distractions in order to properly
   understand the issues at hand and make an educated decision. These kinds of decisions are the most important
   because they set the tone and tenure of your company. A long time ago I discovered that talking about these
   problems with intelligent people would speed up the process of solving these problems

DON’T SCREEN CALLS
For each annoying sales, call you’ll get one that will help with information to run your company better. Did you ever
notice how most companies start new office employees out by answering incoming calls? There is nothing wrong
with this as long as they are allowed only to direct calls, not to “screen” them. If given the opportunity to decide who
is going to talk to their bosses, they will always decide “no one.” They believed they failed if a call gets through even
though these calls may have made the boss aware of a problem that the rest of the company is trying to cover up or
doesn’t think important. Customers don’t ask for the “person in charge” unless they have a good reason.
DON’T HOLD A GRUDGE
I was riding in a car with a friend and I couldn’t help but notice how upset she was with every other driver on the
road. Everyone pissed her off. I thought this gal couldn’t have much of importance going on in her head if she can
take the time to consider what other drivers are doing and why they are doing it. I have so much going on I don’t
even think about another driver’s motive unless they hit me. I also don’t have the time to hold a grudge. If an
employee screws up and I give them hell, it is forgotten at the end of the conversation. If they did something so bad
you can’t forget it; you should have fired them. You can’t get much done holding stupid petty-ass things in
your mind. Record it in their employment file if you think it should be on record but not in your head.

A RULE WORTH REMEMBERING
I came up with a great rule when I first had employees working for me that I didn’t hire directly. “If you hired
them, you have to fire them if they don’t work out.” Managers can’t leave this nasty task for anyone but
themselves. Managers who can do this too easily aren’t any better than managers who can’t make this decision at all.
It is a responsibility that has to go with the territory.

DON’T GIVE YOUR BUSINESS AWAY
I’ve had several friends give a portion of their business to what they thought was a promising employee. In all cases
it turned out somewhere between bad and horrible. In one case the employee sold his share within a week and in the
other, the employee sued him as a minority stockholder claming that the owner was no longer mentally capable of
looking after his interest. There are too many far reaching implications in giving away something that may
be of little value at the time, yet could be worth millions in the future. Partners and minority stockholders
may have “rights” you don’t know about.

A SIMPLE NOTEBOOK
Much can be gained from carrying around one of those small note pads that can easily fit in a shirt pocket. If you
agree to do something with another party write it in the book while they are watching and mutually arrive at a
completion date. Before the due date is up, stop by and see how it’s going. Offer help if needed, but try and stick with
the agreed date. This will bring about better organizational skills to your future managers. This is letting them know
in a very polite manner that they shouldn’t forget this agreement while at the same time giving you a method of
keeping your thoughts organized.

TALK SOFTLY
If you want people to listen to you, speak softly. Ramping and raging results in employees blocking their mind
to all you say. You have to be able to take a “hit” as an educated person. If you have an employee that throws
something when they get mad, get rid of them before they get you in big trouble. When I was working in the building
trades doing heavy construction, I traveled into many different areas of the country to work. I was always amazed at
the difference in the personalities of the workers in these different areas. I came to the conclusion that the way the
group acts becomes the standard. In one case the workers in general would all be excellent craftsmen and nice
people. Just a few hundred miles away and I could be working with a bunch of jerks that couldn’t produce good work
if their life depended on it. I think these traits were developed long before the present workers were working at the
trade. I believe that if you start an organization and allow your workers to behave in a manner that isn’t conducive
for a good working atmosphere, you have to correct the problem immediately. By not doing so may end you up with
a company of jerks.

HAVING EMPLOYEES GET ALONG WITH ONE ANOTHER
I always tell new employees that their job is to get along with other employees, not to tell me about other employee
traits unless they are stealing. If you think about it, most employees spend as much time with their fellow workers as
their families and it is important that this becomes “quality time.” It is management’s job, not the employee’s, to sort
out the employees who don’t fit in. In the last twenty years a major change between employer and employees has
been about the importance of wages. It is no longer possible to buy loyalty. Satisfaction can’t always be found by
the work that employees have to perform today, but employees that like to work with one another may find it.
Recently I had a television tour of a company that made candy called See’s Ò . Many of the employees had worked
there for years packaging boxes of chocolates and making candy. The employees got along so well that I was truly
envious. Having employees that work side by side for years and still enjoy working with the other employees in their
group takes a management skill that few have. We should all strive to be as good.

PROBLEMS CAN BE DIFFERENT THAN PLANNED
Major problems sneak up on you and hit you from the blind side. The problems you thought you were going to
have usually are solved by knowing about them. It is the problems that come along unexpectedly late in the
project that are costly in time and money. This is why I believe the final design should be put off as long as possible.
Work with prototypes as much as possible in a realistic setting before making any commitment. Don’t start a
production run of special parts until you are positive the design doesn’t have flaws. These can be very costly
mistakes. Been there, done that.

WHAT IS A GOOD IDEA WORTH?
Good ideas aren’t of much value until you use them. Millions of dollars worth of good ideas are forgotten hourly.
Make a note of a good idea immediately. Reward employees who come up with good ideas for things other than
what they are paid to do. The reward should be more than a token gesture. I’ve seen employees who are original
thinkers but poor employees. In most cases they can hurt as much as they can help; jobs must be developed to make
employees with this special gift totally useful to the company. They need freedom to perform and some sort of job
that will cross between sales, engineering, and manufacturing is where they belong.

YOU NEED A SURVIVAL PLAN
It will take a lot longer than you may think to get a new product on the market. Once you are in the market the time
shortens because you already have a method to distribute your product, but starting out is tough. One of the best
methods of getting new products to market is working with good mail order companies. These companies can do a
good job for you and perform a real service to consumers by giving them a way to order specialized goods from one
source. The problem is their method of marketing is with catalogs that are printed once a year. This could result in
an 18-month wait when the time it takes to produce and print a catalog is considered. It should also be noted that you
have to quote a price that will be in effect well into the future. You have to survive in the mean time. I did it with
contract machining, designing and building tooling. When I had open time on my machines, I would run parts for
my products. It really helps if you have a second skill to fall back on. This is the big advantage of being a craftsman.
Do what it takes and you can survive. This is what positive thinking is really all about.

A NEW DIRECTION
Most new businesses don’t have the resources to plan very far into the future. You have to be an opportunist and do
what it takes to survive. This fact will sometimes turn the direction and the future of your company. I’ve seen
companies that had to make a special component for their own product find a better market for that individual
component than for their own product. They went on to become successful in an entirely different field than they
planned. You have to be there to play the game and the fact is starting a business allows you to be a player and
success can’t be measured only by the immediate “bottom line.” By surviving you are still a player that still has a
chance for a goal. You can’t score a “goal” sitting in the grandstand.

DON’T LET PEOPLE YOU PAY TELL YOU WHAT TO DO
Don’t allow an employee, accountant, attorney, or whatever to tell you what to do. Be up front that you are only
asking for advice. You are at the helm and you set the course. When you allow another to take control of the
helm for a short period, you have to be sure they understand that they steer only your course. If you don’t want this
responsibility, perhaps you would be better off working for someone other than yourself.

INSTRUCTIONS
Some of the best time that can be spent is putting good instructions together. I wouldn’t want to make a guess of how
many billions it cost consumers to deal with poor instructions, but I’m sure it cost the people that put products out
with insufficient instruction a likewise amount. The top people in an organization can only answer complex questions.
This doesn’t allow them the time to work on the projects they were hired to do. I can’t understand why some
instructions are so bad when they are so easy to check. All you have to do is hire one of your potential customers for
a day and see if they can understand your new instructions. An employee who isn’t associated with the project could
check your instructions out. If customers can’t understand your instructions, rewrite the instructions;
don’t be mad at them. I’m a self-taught person and have found some of the real expensive things I bought came
with the worst instructions. I’ve purchased $75,000 cnc machines that had 3 model changes since the given instructions
were printed and never updated. They get away with it because these are not items that can returned to a store in a
few hours. Items such as these are purchased because they are needed for specialized operations and don’t always
have a great deal of competition. Long lead times eliminate the chances for a quick replacement and you have to
work with the technical support to see the project to its end. The only satisfaction you can gain from a situation such
as this is in making sure it cost them as much as it does you to resolve the problem.


                                            IN GENERAL
A HOME FOR YOUR COMPANY
One of the best investments a business owner can make is a building for your company. I’ve seen companies that
have been in business for 20 years sell out and find out the building they bought was worth twice than the business,
however, this is a simplistic view. The real advantage of a building you can be proud of is it gives your
company a stability that can’t be attained in any other way. Everyone associated with you will gain confidence
in the operation when they know you are there for the long haul.

BUILDING SPACE
Working in small cramped quarters will cost you a lot more than you save in rent. Employees not having their own
“space” become irritable and unproductive. The strange part of employees is the fact that they have the ability to
turn a new building into a filthy dump and then quit because they don’t want to work in such an untidy atmosphere.
You have to be a general pain in the ass to keep this from happening. You don’t need a country club atmosphere, but
you need clean restrooms, plenty of light and reasonable temperatures. Just one year ago I moved into my new
34,000 square foot building and I have already made plans to move again. It was poor planing on my part, but I
didn’t foresee the increase in sales that came about after I was already committed to that building. Rather than
working out of cramped quarters for years and waiting to be forced into larger quarters I decided it was better to take
control of my error and fix it. Never look back.

OPEN OFFICE
I don’t believe in having lots of small holes for employees to hide in called offices. This is best way to start empire
building and eliminate working together. Office workers shouldn’t be given the opportunity to talk about one another
secretly. When the need to speak to another member of the staff they shouldn’t have to make an appointment.
Putting workers together in one big room doesn’t hurt and I believe it helps. Busy workers are happier and when they
realize everyone is working hard the insignificant problems they were arguing about disappear.

ANSWERING SYSTEMS
I believe people who got great enjoyment out of pissing off an entire nation with one bad idea have invented
answering systems. They are universally hated but still used in almost every business today. Why? My answer
would be answering systems have been put into use by managers who believe their time is more important
than their customer’s time is. Not true.

GERMAN DESIGNS
For the hell of it, I thought I’d put in my viewpoint on German designs. We have been brainwashed by clever ads
claiming the quality of European designs over the years. What I find is they often take a bad idea and keep tightening
the tolerances until it works. They stick with the same design so long that time improves the quality. Americans, on
the other hand, will take a good design and change it for the sake of change. Americans may also ruin a good design
with the use of cheap components.

MODERN DAY PROSPECTING
I’ve always enjoyed “poking around” industrial salvage yards. You never know what you might find. I’m always
amazed what large companies are capable of scrapping out. To find something of value that you can purchase for a
few cents on a dollar makes me feel like I’m beating the system. I probably could find better ways for me to spend
my time, but as I said, I enjoy it and like to see how other mechanical problems have been solved, scrapped out
tooling has become a source for new ideas.



                                            EMPLOYEES
EMPLOYEE RELATIONSHIPS FOR A SMALL BUSINESS OWNER
Maintain a close personal connection to your employees on a “Business level.” There is a difference. You should
always have time to listen and advise employees with problems, who are valuable to your company. Most small
business owners will find themselves playing “father” to more than one employee and making a personal loan or
helping buy a first car or advising on a personal situation. Never let them feel you’re above that. Always listen to
them. I would recommend not lending to employees that “beg.” People who pay their bills never resort to “begging.”
Make the small loan with no interest in mind only as a tool to make sure they stay employed. Of course the agreement
should be that the loan has to be paid in full if they decide to leave the company for any reason. This is an important
method in a management style that breeds employee loyalty and is the right thing to do.

WHO’S AVAILBLE
You’re dreaming if you think you are going to have the same choices available as the big corporation you may be
presently working for when it comes to hiring employees. You will have to take chances and give people a
chance for a new start. The employees with the credentials get jobs with the larger employers that offer benefits
that are impossible to offer by your new company. This is the time to consider the benefits of a partnership with a
friend with the same long-term interest. If your new business requires a full time office employee you need an all
around office person. They are sometimes called a “girl Friday.” This group likes the varied duties of a small
business and they don’t like the pecking order associated with large businesses. They can have much to do with your
company’s success. In any case, your first employee should be capable of doing and willing to perform the tasks that
you shouldn’t be wasting your valuable time doing. Legible handwriting and the ability to talk clearly is a must
because they will be answering the phone and taking messages. Banks can take care of payroll for you and it isn’t a
big deal to do it yourself using the payroll programs available. Don’t get involved with paying anyone working in
your shop straight wages and calling it contract work. You could end up paying their taxes even though you didn’t
deduct them. You could also be sued out of existence if they were injured at your business. Workmen’s compensation
insurance can be very expensive; for example, a roofing contractor may pay over 40% of a worker’s wages on that
insurance alone. Labor laws are quite clear about contract work and agreements between employee and employer
aren’t considered unless they are legal. Labor laws and OSHA rules are not as bad as you are led to believe.

PAY A LITTLE MORE AND EXPECT A LOT MORE
If employers looked at their employees as their customers, we would all be a lot better off. The days of slavery are
gone and you have to work with employees towards a common goal. Each employee deserves respect and
recognition no matter how low on the totem pole they are. Wages are the way employers have to express
employees worth to the organization. Some employees’ worth can be dependent because of what they know, but
others can be worth the same amount because of what they do. How many roofers could you get to spread tar on a
roof in the middle of a hot summer day if the basis for their wages was the intelligence to do the immediate job?
What about a brilliant person who has absolutely no interest in the job they were hired to do? The janitor will have
more value in this case. The employees take their cues from you as the owner as well. Make a point of appearing on
the shop floor as often as possible and be sure to ask employees how he/she is doing, what improvements can be
made, etc even when they may be “low man on the totem pole.” It’s the right message to send.


WAGES AND HOW MUCH DOES AN EMPLOYEE REALLY COST

The number I’ve always used to figure what the direct cost of an employee has always been their wage plus 30% for
a quick mental calculation; however, the real cost can be quite a bit more when you start considering what it cost to
hire and train each employee.
Below is what it cost a year for a $10 an hour employee working in the machine shop

Employee #1 @ $10 x 40 = $400 wk x 50 wks = $20,000

Benefits & Employer Expenses

State & Federal Unemployment Insurance = 2.9% of first $7000 = $203
Fed Social Security & Medicare = 8.65% of gross wages
Workers Compensation = 3.42% of gross wages
Employers share of Medical, Dental, Vision, and Life insurance = $1230/yr.
Vacation benefit 2 wks pay = $800
Paid holidays = $700

Employee Earned Wages = $19,440
Vacation – 2weeks           800
Paid Holidays - 7 days     560
Insurance Benefits        1,230
Workers Compensation     711.36
Unemployment Ins.           203
SS & Medicare             1,799
3% Profit Sharing           624

Adjusted Wages              $25,637.00 which equals earned wages ($19,440) plus 30.5% ($5927)

NEGOTIATING WAGES
I have found it is best to give an employee wage increase without the employee asking if they deserve a raise. This
way you control the situation. If you allow an employee to get so unsatisfied with their wages they already have an
offer from another company you have lost. Competing with a company making an offer for your employee puts you
at a disadvantage. If the employee doesn’t perform as expected at another company, that company could get rid of
them. In your case, if you give into their demands “you own them,” and I’ll guarantee you that employee will be
knocking on the door for another wage increase within 6 months. Now you have an overpaid employee that is
bragging to their fellow employees about how much more they make. I have given up on negotiating wages with
employees that have another offer; however, if an employee brings a good point to the table I’ll consider it.

PAY SKILLED EMPLOYEES WHAT THEY ASK
After being in business for awhile, you learn the going rate for different jobs are. For skilled shop people we usually
start employees at the rate they are asking, however, there is always a clear understanding that the more they make
the more we expect. If they can’t do what they promised we then offer them the opportunity to work for wages we
think they are worth or lay them off. You can usually determine the value of a new employee in a very short period
of time. I don’t like the way workers are treated today. To take American workers and force them to take major pay-
cuts by threatening a move to another third world country is disgusting. Who do they think can afford to buy these
products if only a select few make decent wages in this country?

TOOLMAKERS, THEY JUST DON’T GET ENOUGH RESPECT
Toolmakers come up with more good ideas in their lifetime than most engineers could in two lifetimes. The problems
they solve building the fixtures to produce a part at a reasonable cost are usually far more complex than the part they
are producing. They get used by both management and engineering. What usually happens is management will have
a meeting with engineering to discuss a new process that must be developed. After the meeting the engineers of this
company head for the shop and talk to a toolmaker that has worked there for more years than anyone can remember
to see if they can do it. After sleeping on it the toolmaker comes up with an idea and the project goes ahead. It works
out everyone gets credit and a bonus for a job well done. The toolmaker that made it all possible? Oh, they had to get
rid of him because he was old and his area of the shop was always dirty.
THE EMPLOYEES CAREER
If a potential employee starts talking about “their career” during a job interview they are saying to you that they will
work for you until they find something they believe is more interesting or better. Consider your company as another
stepping stone. This will be a short-term employee and you have to decide if you can come out ahead. They may
have a skill that could be transferred to your company in a short period of time. This would be the only condition I
would hire this employee. You have to use these employees just like they plan to use you. If you have a job opening
that involved a lot of training for a new employee, consider moving a presently reliable employee up to fill this new
position. This is a good thing to do and all your employees will think better of you for it. All our good employees
have worked their way up through the ranks. Many times an employee can get trapped in a low-paying job
because they do it well. If you want to help an employee with their career, start with the reliable employees you
already have, not with a new employee that in a sense has told you up front that they will be short-term help.

ALCOHOLICS
I had the unfortunate experience of hiring several employees with a severe drinking problem. Twice I tried to be a
“hero” and work with their problem. These people have a problem that an employer can’t solve. The time I
wasted with alcoholics was very frustrating because they were talented employees. What I found was that they
would go along just great and when you really needed them they would disappear for a week or so. I believe the
added pressure of knowing that they had to “come through” would create an atmosphere they couldn’t handle. The
choice you have is to put employees with this type of problem in a job where they can’t affect the overall operation,
or let them go. Getting involved with their personal life isn’t a good idea.

THE NEW MANAGERS
CNC machines allow a smart worker to produce more work than ever. Rather than eliminating the need for intelligent
workers, these machines require organizational skills that few managers have. The machines they control are
very complex and the employees who can control these machines are as valuable to a company should
be at least equal to that of standard managers. In the past managers were considered people managers. The
managers that control these machines are robot managers. When you consider how important these machines have
become to the quality and efficiency of manufacturing a product, the group of workers that controls these machines
will soon be equal with the managing staff of any company in prestige and wages. Today management still hasn’t
grasped the concept of this point, but soon they will be forced to accept this condition when they find their million
dollar machines operating at half speed. A few years ago before purchasing a new CNC machine, I went to another
business to see the same model in operation. There was only one employee there that could operate that CNC
machine. A few years later I received a brochure for an auction at the same company. I found out the employee left
and they never found a replacement for him. The machine he ran cost over $200,000 and the employee quit because
they wouldn’t pay him $16 an hour. The $4500 a month payments without a skilled operator bankrupted the company.
This should make my point.

HIRING UNSKILLED EMPLOYEES
The term “unskilled” is used too often these days. I’ve never hired a person that I would consider totally unskilled.
I hired several that had personality problems that were so severe they had to be replaced, but they still had a skill.
The skills that this group has can’t be found on an employment application. I’ve found that when you try to hire
using employment applications as your guide, you’ll end up hiring employees that are good at filling out employment
applications. The educational system in this country has made the high school diploma worthless and it can no
longer be used for a standard. However, a potential employee that has enough interest in their chosen craft to go to
a trade school may be more valuable to a manufacturing business that an engineer. For machine operators I like to
hire employees that can fix their own cars or have hobbies that take skill. In today’s world the skill to operate a
computer is always a plus. A potential employee who has taken the time to teach themselves a skill on their
own is a major plus. Taking the time to find what this group is capable of doing will give any company a surplus
of skilled workers. By giving them the opportunity to advance, you’ll find a group of loyal skilled employees that all
companies need.
SARCASTIC EMPLOYEES
A major error can be having a sarcastic employee talk to customers. A receptionist with a problem of this nature can
cost you more business than a good salesperson can get. If questioned about their actions they can usually recite
exactly what they said and it will not sound so bad. The problem wasn’t what they said but how they said it. Listen
carefully to how employees talk to customers. I personally find sarcastic people quite humorous even when it is
directed at me, but having employees piss a potential customer off while giving them directions of how to get to your
business is inexcusable.

                                                     THE END

I apologize for the abrupt end of this section. The different subjects were never written or sorted in their order of
importance and after sorting SARCASTIC EMPLOYEES was simply at the end. I have edited out much of what I
had written realizing that it was too specialized and what remains should be useful to all. Hopefully the readers that
got this far have learned from my logic and may eliminate some of the pitfalls I had to learn the hard way. Joe
martin



                MAKING A BUSINESS OUT OF A HOBBY

      WHERE I’M COMING FROM WITH THIS STORY
I’ve always been a “builder” and can’t remember a time in my life when I sat around with nothing to do and have
idle thoughts filling my mind. Whether it was school or hobby or job, there was always another technical problem to
be solved. Building a business was just like building the boat I built in High School or my latest Sherline accessory.
Each has consisted of simply solving a series of problems until the project is complete, then on to the next. Writing
this book hasn’t been any different, and it has created many new and interesting problems for me. The main problem
I’m having with this book is similar to a design that starts out simply and then too many nuts and bolts are used to
add on more pieces. This in turn makes the design a “loser”. The “nuts and bolts” I’m referring to in this story is the
word “I”. As I read and rewrite this story I can’t seem to get rid of it. As I’m trying to explain the problem I keep
adding it. I don’t want to sound like a bore at a cocktail party, but every sentence I try to put together has the word
“I” in it. In thinking about the problem for a while I realized it was the result of simply not having enough money.
I’m not talking about money for a better education where I might have learned more about fancy words and proper
writing. I’m referring to the money it takes to be able to pay other people to solve your problems and do your work
for you. I have always had to solve the problems or make the decisions myself. Money to spend on something I
could do myself just wasn’t there, but I wouldn’t have wanted it any other way.

You may also come to the conclusion that I spend too much time on CNC machines. This isn’t the case for if you
wish to manufacture a product in the future. These are the new workers for the manufacturing world. The managers
that control these marvelous machines will become more important to a manufacturing company than the managers
that control your finances will. These will be the machines that will create the profit a company needs to survive.
Whether you build the product or “farm the work out”, you have to have a general knowledge of the systems
available whatever your endeavors to have competent suppliers.

     STARTING A BUSINESS WITH LITTLE OR NO MONEY HAS ITS ADVANTAGES
It may surprise you to find that I believe starting a business without any money can actually be easier because you
don’t have anything to lose. A lot of the pressure is taken away because the worst thing that can happen to you is you
may have to go back to working for someone else again. This is the logic I used when I left my good job at Kraft
Systems and started out on my own again. I hope you may find a use for the philosophy I used to create Sherline
Products or at least find it interesting. There are still thousands of products that haven’t come to market, and the
opportunity still exists to strike out on your own. However, please don’t take on this challenge if your success is
going to be achieved at the expense of someone else. There are already enough “wheelers and dealers” in this world
and we don’t need any more.
      MAKING GOOD DECISIONS
My story may be useful to someone with a fair amount of skill and intelligence who is willing to work hard, but not
to a person who didn’t take the time to discover how things work. Standing in front of a mirror convincing yourself
that you can and will just doesn’t cut it in my world. “Feeling good about yourself” doesn’t result in success; it
results from success. Success comes from making good decisions, and decisions are simply educated compromises.
You can’t make good decisions without a great deal of knowledge of your subject. Being a self taught person, I
probably suffer from a bit of “tunnel vision”, but I’ve knocked a lot of meat off my knuckles working for other
people. I’ve been on both sides of the fence and the conclusion I have arrived at is whatever side you’re on will be
the most difficult. The fence is too high to see the problems on the other side.

      GETTING AN EARLY START WITH RADIO CONTROL MODELS
After graduating from Cranston High School in Rhode Island in 1953, I started building radio control model aircraft
in my spare time. (My full time job was working at the building trades as an asbestos worker.) I had been building
model aircraft for some time, and the radio control aspect of modeling excited me to no end. The controls at that
time were still rather crude; in fact, transistors hadn’t been invented yet, but having the ability to control a plane and
land it in the same field from which it took off was like science fiction to me. My job in the building trades required
that I travel often, but I still managed to get my models built by taking a week or so off at the end of each job.

      A “NO EXCUSE” HOBBY
What was really interesting about the hobby to me was that a good modeler could design, build, and fly his creation
without help. If all three of these things weren’t done correctly the model aircraft would crash. A good model may
have had hundreds of hours of labor and many dollars invested which made the first flight very exciting. Your
money and prestige was on the line when a model was released for its maiden flight. A good flight was a win.
Success or failure wasn’t a shared experience, and that’s the way I liked it. To make it more interesting, you could
compete against one another at model aircraft contests. It is as much of a sport as any ball game. You are controlling
an object that is traveling at speeds in excess of 100 miles an hour. The timing has to be perfect to execute the
maneuvers required. Your aircraft has to be “set up” just like a racecar. It is a very difficult hobby and sport because
failures are crashes. This teaches you the facts of life when it comes to designing and building anything. Do it wrong
and you crash. What a simple rule. You can’t make excuses because you did it all yourself.

      A CRAFTSMAN IS ACCOUNTABLE FOR HIS WORK
Workers who build things understand this rule, for if you tell a machinist to make a part, it has to be right or he loses
his respect as a craftsman. Compare this to the job of a salesman. You sit down and start negotiating on a new car.
The salesman makes you so mad, you leave and go to another dealer. The salesman screwed up everything so badly
that his dealer lost a good customer; however, the salesman can tell everyone that the customer was an idiot who
didn’t understand automobiles. He has someone else he can blame for his failures. There is no good way to evaluate
people in jobs like this. With a craftsman it is simple: the part is either good or bad. I believe this is why I have
always preferred to have friends who build things. They don’t have time to make excuses. If they don’t do it right
they crash.

      BEING A BUSINESS OWNER—MY FOURTH BEST TALENT
Starting a business was a natural thing for me to do. My modeling friends were starting all types of businesses to
supply this new hobby. I will always consider myself a modeler first, a product designer second, a machinist and
toolmaker third and a businessman fourth. Being a business owner is easier if you can do everything yourself as I
can, especially when it comes to the tooling. The specialized tooling it takes to manufacture a product at a reasonable
cost can be very expensive. I paid for it by working an extraordinary amount of hours. Don’t think for a moment that
I was smarter and learning is easier for me than other people. The difference is I’m persistent. I can remember
screwing up a part on a Sunday night after working all weekend on it, going home and catching a little sleep and be
starting over by six Monday morning. There are very few projects I seriously started on and didn’t finish. People that
don’t finish projects on their own shouldn’t start a business unless they have enough money to pay other people to
finish what they start. I don’t spend much time looking back unless it is for information I can use in a positive way.

The secret to success when it comes to working with people is simply that; you work with your employees more than
you have your employees work for you. All you have to be is fair and accept their mistakes the as you would accept
your own errors. As your company grows your own errors will grow exponentially. The reason for this is your
decisions are only for the “tough ones”. Your managers will make easy decisions. You get stuck with “the dammed
if you do and dammed if you don’t” type. One of the hardest decisions to make is when to let someone else make a
decision. You hear all this crap about micro managing. These can be buzz-words for people spending other peoples
money, but when your spending your own money and you don’t have much to spend it takes a lot of guts to turn your
back on anything that could speed you on your way to the poorhouse.

I have a couple of rules at my company that has worked quite well over the years. One is: “You can’t tell a worker
how to do a job unless you can do that job yourself.” I don’t mind management people telling workers how many
parts to make or when to make the parts. They can suggest a new method, but the craftsman who does this work has
the final say unless that manager can show him how to do it better, not just tell him. Another rule I would like to slip
in is “If you hired an employee, you fire them if they don’t work out.” My managers can’t leave this nasty task to
anyone but themselves. It has to go with the territory they control. Managers who can make this decision too easily
are not much better than the ones that can’t make it at all. If a company wants employees who “care” a company has
to care for employees in a like fashion. Employees have to believe they are more than a machine that runs eight
hours a day. Many managers have never learned this because they have never worked at a job where their performance
was easy to check. Having a recent engineering graduate with a stop watch stand behind a worker with twenty years
of experience isn’t a good way to build unity in a company.

      A FIRST EXPERIENCE WITH MINIATURE MACHINE TOOLS
My interest in miniature machine tools started while working for a company called Micro Avionics, which
manufactured control systems for model aircraft in the late sixties. At that time we were using better control systems
for model aircraft than the military had developed for their own use. I was asked to extensively modify a couple of
model airplane joysticks to control a model of the moon lander being developed by NASA. To simulate weightlessness
in space they flew a large transport aircraft in a trajectory that temporarily eliminated gravity. For a few minutes at
a time they would try to control this contraption with jet nozzles in zero gravity. Micro Avionics had taken the
contract for the control electronics without giving much thought to the switches that would control the device. When
we found out what they really wanted for joysticks we were in big trouble because we didn’t have time to contract
out the machining. I worked with mechanical devices at the company so it was my “baby”. All we had for tools was
an old drill press. Fortunately for me, one of my modeling buddies, Carl Hammons, who would later become my
partner, had an old Unimat lathe and let me use it for a few weeks. These lathes came out around 1955 and sold for
$99. They were packaged in a nice wooden box and became an immediate hit. They sold thousands. The only
machining experience I had prior to that was one year of metal shop in school, but I was a modeler. A good modeler
can accomplish what needs to be done with what he has at hand. Modelers have developed this trait by simply not
having enough money to do it any other way. The Unimat wasn’t rigid, making it difficult to hold tight tolerances,
but it was a lifesaver to me and I got the job done on time.

Don Mathes who owned Micro Avionics was typical of some of the real clever designers I met in my life. He drank
way too much. I’ll never understand why this talented group can find so much happiness in a bottle. Don was
supposed to do the electronics on this project and he went on a drunk. With only two weeks to go he showed up one
morning looking like death warmed over. He was shaking so bad that if he were standing on beach sand he would
have disappeared into the sand. By four in the afternoon Don again took on the appearance of a human. He worked
all-night and laid out a circuit board with black tape at a scale of four to one. He skipped the component layout
completely and laid out a board that had over a hundred components in a very short period of time. This was long
before computer programs and multi layer boards. It was a work of art with the components spiraling towards
center; in fact, it was so good it appeared on the cover of an electronics magazine. As soon as it was checked out Don
was off again to complete the drunk he started and came back a couple of weeks later looking good and never
mentioning where he was. Don died long before he should have.

     WITH A PARTNER, I START MY FIRST BUSINESS
My next project in machining came when Carl and I started a business to manufacture connectors for the radio
control industry. Micro Avionics decided they could get along without me because I found it impossible to get
along with the owner’s girl friend. She had the ability to destroy perfectly good parts faster than we could make
them. The straw that broke the camels back was when she and her girlfriends were assembling servos and a gear
shaft had a burr on it and she decided to use a hammer to force it into a plastic gear less than an penny in size. After
I showed her how to deburr the shaft and assemble the gear train properly, she reverted back to her hammer and
destroyed two trays of parts worth $500.00. I blew my top and got fired. Don and I still remained good friends
because I knew he was between the old rock and hard spot. He soon realized I was the only one who knew how to
build their connectors. He offered me an opportunity to start my own business to supply them. I rented a 1500 square
foot shop in an industrial area in Upland, California and I was in business.

I didn’t need many tools to produce these connectors and I got started using the modeling tools I had at home.
Summer came and I found out how hot a small shop could get. At that time my idea of a successful business was one
that could afford air conditioning. I would work long into the night building tooling when it was cool for I had to
build connectors during the day to “pay the rent”.

In reality, I was just assembling connectors. The existing design was somewhat of a compromise, and I wanted to
redesign them and make them properly. Most radio control manufactures at the time were using a connector
manufactured in Mexico. Because of the low labor rates in Mexico I had to come up with a way to match their prices
and at the same time make it small and easy to use. It would have to be injection molded from plastic. A local mold
maker gave me a price. To build a mold for our product would cost over ten thousand dollars! This is where my
career with machine tools really starts. We bought an old mill and a lathe from a company that wasn’t using them
any more. I was informed that these were the tools that had been used to start their business. These machines had a
sentimental value to the owners and they sold them to me at a very reasonable price. I believe they were thinking,
“Maybe these tools can start one more business before they end up in a junkyard.” We rescued them along with an
old four-ounce Van Dorn injection-molding machine that Micro Avionics didn’t need anymore after firing me.

      IF YOU CAN’T AFFORD TO HIRE A TOOLMAKER, BECOME ONE
There was a mold maker in the area that suggested that I should attempt to build the mold myself. He gave me a
general idea of how a plastic mold was made and where to buy components, and I was in the mold making business.
Getting me pointed in the right direction at the start was my friend’s real contribution and it would be hard to
evaluate how much time he saved me. I have always found if you need help on a project, don’t ask for too much. I
started on the project and didn’t ask for help until I really needed it. I read what I could on the subject, but my friend
saved me from a many time consuming errors. I consider it an accomplishment that we were even better friends after
the mold was completed. You shouldn’t attempt to have your teachers do your work because at that point you start
using them. Who wants to help a lazy person?

      MINOR IRRITATIONS IN WORKING WITH QUIRKY TOOLS
The milling machine we purchased would “drive me up a wall” when I started building tooling for plastic molds.
The handwheel for the table turned in the opposite direction from the way it should. Normally, if you turn a handwheel
clockwise on any machine tool, the slide will move away from you. This may seem simple, but when you have a
cutter in a mold cavity that you have been working on for a week you take the chance of ruining it by turning the
handwheel in the wrong direction. Just thinking about it would make me break out in a cold sweat. Also, if you allow
a cutter to run in a corner too long it may chatter and undercut the cavity. This wouldn’t ruin the job but it could take
countless hours to get rid of the flaw with polishing stones. This backwards handwheel never came naturally to me,
and it was like trying to drive a car that had its steering reversed.

A few doors away from my shop there was a machine shop that allowed me to use a surface grinder to put the
finishing touches on my mold. Each time I used it I would clean the grinder up to show my appreciation. Since then,
I have helped several people in the same way and let them use my equipment in my shop when they were in a bind,
however, I never seem to find my machine any cleaner when they are done.

It took about three months to complete my connector mold. I was quite proud of it and it was what is called a family
mold, which meant a complete group of parts would be produced at every cycle. When the mold closed, 180 pins
had to mate with the opposite side and the diameter of many these pins were 1/32². Now I had to teach myself how
to operate an injection molder. The injection molder we purchased was old and old machines had a plunger type
injection system which left much to be desired, however, I didn’t know enough about it to realize how much of a
problem they could be. Setting up this machine was a big deal for me because it was my first experience with an
automatic piece of equipment. This fascinated me because it could be doing work without me standing over it. It
took about four hours to get a “good shot” and soon the machine was producing good parts at a rate of 90 cycles per
hour. I sat in the office with a big smile on my face listening to the old molding machine make good parts. You
would think after thirty years of owning and operating automatic machines they would have lost their fascination to
me, but they haven’t.

The contacts for the connector would have to be made on a Swiss type screw machine. It is a specialty type machine
and I didn’t have the skill or the time to produce these parts myself. It was by chance that I contacted a company
called Screwamatic, which was listed in the Yellow Pages. I could never have found a better source. The Yellow
Pages have been very useful over the years, and it is where I usually start looking for something new. The next
choice at that time was the Thomas Registry, which is a collection of books that lists manufactures of most everything.
Today I use the World Wide Web or the Internet to help locate new sources, but sometimes I still start with the
telephone directory. Many companies will refer you to another if they can’t help you. We started with orders for
25,000 pins and worked our way up to ordering a million pins at a time. Their quality was 100% and it inspired me
to improve every project I have worked on since then.

Each new tool I would acquire would be treated like a treasure in my shop. They were always used and somewhat
worn out, but I could usually find a way to get them running and put them to good use. I soon had enough tools and
skill to build simple plastic molds and did a small amount of contract work. How I wished I could have afforded the
time to work for a mold shop for a couple have years too properly learn the mold making trade. I really liked that
type of work. I found it exciting to test a new mold I built and see if I didn’t make any errors.

Looking back at it I often wondered whether I would have been better off buying one new machine rather than
buying several used machines. I could have contracted out the work that required these specialized machines and
concentrated on only doing basic machining. In some cases learning to operate some of these specialized was in fact
learning a new trade. As I think about it, the main thing I learned was how to teach myself how to do different things
without a teacher. On the other hand, each time I contracted out work, I would end up with problems with their
delivery dates or price. At least I had control over my old equipment and I found it less frustrating to fix a machine
than argue with a supplier.

Our next project was a servo for RC aircraft. At that time, it was to be the smallest servo on the market. Injection
plastic molds were a lot harder to build at that time because EDM machines (electrical discharge machine) were not
available to small shops. To build a new mold and keep the doors open at the same time with only two employees
took great effort on my part. It could take over 500 hours to build the mold. I usually worked on it when I was alone
after hours. Twelve hour seven day weeks were normal. A vacation was to go to Los Angels to a machine tool
auction.

     A PARTNERSHIP WITH KRAFT SYSTEMS YIELDS MUCH NEEDED CAPITAL
We started selling our connectors, but we weren’t surviving financially. Carl, my partner, was still working at
General Dynamics as an engineer and the business was more of a hobby to him. Carl might come up with a few
hundred dollars to by an interesting machine but when it was necessary to pay the thousand dollars of bills for rent,
labor and supplies, I would have to go without a paycheck. Phil Kraft, owner of Kraft Systems Inc., offered to buy
me out and start another company to manufacture our connectors for his company. We would also supply connectors
to “Heath Kit” for their radio control kits. I would be a 25% owner and Carl would be a 10% owner of this new
corporation that would be called Multicon Corp. At this time, Kraft Systems was rapidly becoming the largest
manufacturer of radio control products in the world.

My job would be to integrate our connectors into their products and develop products for the model aircraft industry.
The servo Carl and I developed would be turned over to another division. I wasn’t too happy about this arrangement
but realized it could create problems if I marketed it. We had hundreds of hours of labor and design in this project
and were only paid for the outside cost we had spent. Unfortunately I wasn’t in a position to argue this point. Kraft
Systems sold over one hundred thousand of these servos and it pleased me that our design was accepted, but the fact
that Carl and I never made a penny on it wasn’t.

Kraft Systems was profitable and could afford to pursue new ideas. A division was also formed to manufacture a
model aircraft engine. I sat in on an early meeting to discuss this project and I lost faith in its success when we were
told to the penny what it would take to build an engine. It would be impossible to predict costs this accurately and I
don’t trust people that bs me. Roger proved me wrong about having the skill to build an engine but also proved I was
right when it came to anticipating cost, which was off by 100%. We beat our brains out trying to build an engine
that could be sold at a retail cost of under $100.00. The biggest error we made was not realizing how much the future
modelers would pay for a good product. We should have been trying to build a $300.00 engine that was really better
than any model engine currently on the market.

Phil Kraft, the sole owner of Kraft Systems Inc., was an interesting person to be around because of his many
interests. He started in business by designing a small single channel radio control receiver that would fit into the
plastic case that nickel cadmium batteries were sold in at that time. Transistors and nickel cadmium were new to the
market at that time and modelers were putting both to good use. Phil even put the box to good use. It was one of the
few receivers that actually worked and gave Phil a good name in this new industry. It wasn’t long before Kraft
Systems was a leader in producing new equipment for this industry. A spin off business that became successful was
the joysticks we used to control our models. One of our first customers for joysticks was a manufacture of electric
wheelchairs. Then the computer people found a use joysticks and sales took off. They became the major part of sales
for Kraft Systems after Phil left his company.

The fact that Phil was a serious contender at any RC contest and even won the world championship was of great
value. I remember a photo session taken outside of the Kraft building in Vista where all the modelers (aircraft) who
worked for Phil Kraft lined up with the trophies they won on the ground in front of them. This picture wasn’t rigged
and we had so many trophies on the ground we didn’t put them all in the picture. How I wish I could have had the
advantage of all his input in my own company. In thirty years of business I’ve only had two employees take an
interest in hobbies that would use the equipment we manufacture. The reason could be that it isn’t a diversion for
people who work with machine tools for a living. Never pass up a potential employee that takes an interest in the
products you manufacture.

Phil was also buying expensive sport cars and aerobatic aircraft at the same time. I’m sure you have heard the
expression “He who dies with the most toys wins”. Phil was and still is a serious contender in this event.

     VALUABLE LESSONS LEARNED
I was becoming a mold maker who could make molds for my own products but was not really good enough to make
molds for industrial customers. This really didn’t bother me, because I wanted only to make molds for my own
products, not do contract work. I made several other products, such as a joystick and a retractable landing system for
the R/C industry at Kraft Systems. I learned a lot of doing it. Phil wanted me to develop a ready to fly RC aircraft and
I was working diligently on the project until he told me he wanted a retail selling price under $100 with a 45%
discount to dealers. It became an impossible mission because I had over $30 in outside cost. It wouldn’t be worth the
effort financially because it left only $25 to build, package, advertise and sell it. I couldn’t work on the project
without an attainable goal and wanted out.

All and all, I learned about good design, tooling, packaging, advertising, and the value of good instructions while
there. All of what I learned would come in handy later. As I look back at my stay at Kraft Systems it was good for me
and I believe it was good for Kraft Systems as well.


     MY FIRST LOOK AT A SHERLINE LATHE
Kraft Systems owned part of a company in Australia that assembled and distributed Kraft products in the South
Pacific. They sent us a Sherline lathe, which was built in Australia, for evaluation. It was of interested to me because
of the experience I had with the Unimat working on the NASA project. The Sherline design was far more rigid and
had some other features that were superior to the Unimat. My love of tools told me there was a market for a small
lathe such as this. At about the same time Phil Kraft decided to sell Kraft Systems Inc. to Carlisle Corp. There wasn’t
any interest in the Sherline lathe at Kraft because radio control sales were growing rapidly, and with the new owners
taking over, the lathe was forgotten by everyone but me.

 I stayed on at Kraft for a year or so but the interest in the job I had before the sale just wasn’t there any more. This
fact was brought about when another partner, Chuck Hayes, asked me during a conversation at lunch “If I was so
dammed smart, why in the hell was I working here”. I thought about that for about five minutes and gave my two-
week notice that afternoon. I was a person who needed to have more control than I could have while working for
someone else. It was very difficult to work on a project I didn’t believe in and I wanted to make my own way. Chuck
only brought this fact to the surface and I didn’t leave because I didn’t like the people I was working with.

Once I had made up my mind to leave I was fascinated by the fact how fast I lost all interest in the company. Until
then, I would wake up in the morning thinking of the days, weeks or year’s task to perform at my job. Suddenly the
interest was gone. It was as if someone flushed all the problems from my mind. I slept like a baby even though I
wasn’t sure where I was headed. It was obvious that this was a good decision for me.

My friends and family thought it was a very bad decision and wasted a lot of time trying to talk me out of it. I didn’t
get any help from any of the contacts I made while I was at Kraft Systems but I didn’t expect any. My biggest loss
was not having the time to be a real modeler anymore.

      THE NEXT VENTURE: A GREAT HOBBY KNIFE THAT DIDN’T SELL
I took the money, $40,000 after taxes, from my portion of the sale and started another company. Carl, my old partner
and friend stayed at Kraft while I started Martin Enterprises. I contacted Ron Sher in Australia and told him that I
left Kraft and was interested in marketing his products in this country. Ron needed someone to represent him in this
country and at that time I don’t believe he had to many choices. We agreed to take this to the next level and I ordered
a few machines to start the venture.

I had lots of time while waiting for the first machines and started thinking about a new product I could make. I
wasn’t lacking ideas but the product had to be one that could be produced with limited funds. The first product I
chose was a hobby knife that locked from the back end. I had used tools like this for years and what I disliked about
them was the blade would come lose if you turned the handle counter clock-wise when the blade was taking a heavy
cut. I had given myself a nasty cut because of this flaw so I designed one that would eliminate this flaw and use the
standard blades available. I had a screw machine shop make me the parts for two sizes. I didn’t know enough about
manufacturing at the time and added too many costs to the product with my inexperience. It and never sold well
enough to make it worth the effort.

From this venture I learned that if you build a better product, the world will not beat a path to your door unless a
distributor can make more money on your product than he is presently making on the similar product he is now
marketing. The first question usually asked by distributors was “What’s the discount?” If they didn’t like the discount
they wouldn’t even listen to your sales pitch. It makes more sense to me now that I realize that sales organizations
are more interested in selling the products they already have on the shelves than they are in selling yours. They will
stock something new only when they are forced to by consumer demand. I also learned that if you advertise your
product and it isn’t on the shelves in the appropriate retail market, you may end up selling your competitor’s
product. The storekeeper is going to try and sell what is on his shelves first. In other words, if a Sherline ad inspires
you to purchase a lathe and you go to your local hobby shop and they have an old Unimat on the shelves, that is what
they will try and sell you.

     CONTACT WITH SHERLINE IN AUSTRALIA LEADS TO A CONTRACT WITH SEARS
Before Ron Sher and I had any agreement, the Australian Consulate in Chicago had Sears interested in selling the
Sherline lathe and for Sears to sell the lathes Sears needed to deal with a US representative. We met in Chicago at the
Sears Tower. A representative from the local Australian trade office had arranged the meeting. A representative of
Sherline Australia, a buyer for Sears and myself were there. We all knew what the other party was going to pay for
the product and charge for the product as it passed through our companies. It still took another trip to Chicago to get
the order. The buyer was very apologetic and informed me the sample machine we had sent in was stolen. Jokingly
I told him that our product was so good people will steal it if they can’t buy it. Actually I was glad it was missing
because I never had a chance to go through it and from what I had seen of the quality so far, I was worried. Sears
gave us an order to produce the lathe with a “Craftsman” label but I’ll always wonder if we got that order out of
sympathy because they lost our machine. I was in business again. The main problem for my family and I was eating
regularly until these orders materialized.

      AN EXPENSIVE FIRST FIFTY MACHINES
It was never my intention to manufacture this product. I only wanted to import and service the machines and
possibly make a few accessories for it. The first fifty machines were supposed to have been air freighted in time for
an upcoming trade show in Toledo, Ohio. They didn’t make it in time for the show but I still sold around twenty
machines. At the time, air cargo rates to the South Pacific were very expensive, about $30 for each lathe. The
shipment to me was late, so they were delivered to the customer by UPS air to keep the customers happy. Now I had
$50 in each machine just in shipping. The machines were also sold at a very reasonable price to get the product
introduced. It worked out that $40 per machine was lost even if overhead and my labor weren’t included. In addition,
the quality of the product as it came from Australia just wasn’t good enough for the American market, and I had to
rework the machines by matching parts and had to cannibalize several machines for parts. Not too good a way to
start a new business.

On the other hand, there are few products that can be manufactured and be financially successful on the first go
around. The profit in manufacturing comes from low manufacturing cost and this isn’t possible at the introduction of
a new product. There are only two ways to lower production cost. You have a choice of higher quantities or better
“tooling”. Consider another advantage of CNC machines which lowers unrefundable tooling cost. The machines
may seem expensive but these machines also hold their value. Compare that with a special machine built to build a
special part that may take a year to get built and cost more than a standard CNC machine. You’ll be lucky to get one
cent on a dollar if your product bombs out. I would never recommend higher quantities as you could end up without
any money and with a lot of product that was worthless if it didn’t sell. It would be better to take a loss as I did on the
first machines to see if the product will sell than to have thousands of dollars in parts left over. Price the product so
it reflects a price that could be charged if it becomes successful.

     BIGGER HOLES WON’T SOLVE THE PROBLEM
The biggest problem I had with the quality of Australian made machines was sloppy tolerances. A good example to
explain this type of problem would be two holes drilled and tapped in a plate. Now you have second plate you want
to bolt onto that plate using the tapped holes. You go to assemble the two plates and they don’t quite fit. Now you
have two choices, start over with tighter tolerances or drill larger clearance holes in the second plate. If you are
dealing with production parts and you make a choice to drill bigger holes you will find out why Henry Ford succeeded
when others failed. It becomes impossible to profitably manufacture a product that doesn’t have tight enough
tolerances. When the tolerances get sloppy it takes your best (and highest paid) employees to assemble that product,
because they have to “mix and match” parts. Never get into the habit of “drilling larger holes”.

       PROBLEMS WITH THE SEARS CONTRACT SHIFTS PRODUCTION TO THE USA
My name was on the contract with Sears, and I knew I was in trouble if I couldn’t get the quality improved. The
amount of profit I would receive from a sale wouldn’t allow me to spend time reworking the machines. Before going
on with this venture I decided to visit Ron in Australia. It is important to realize that by this time I was running out
of money at an alarming rate. The visit with Ron Sher and his staff gave me more confidence in his organization. I
believed we solved a couple of technical problems and I returned home. I had about four months to get ready for my
first shipments to Sears when I got a telegram from Australia. I can still remember it as if it were yesterday. It said,
“Dear Joe, losing our bloody ass down here. As of today the products will cost $____.” The problem was the new
cost to me would amount to a $50 loss on each machine Sears would buy even if I didn’t have to do any work on
them. Ron wasn’t totally to blame because things were changing rapidly in Australia and he was a victim of
circumstances. However, it was my name on the contract with Sears. In reality, I didn’t have anything to lose
because I was flat broke but I’d be dammed if I would fail and not live up to what I agreed to. Ron agreed to help me
set up production of the Sherline lathe in the USA. I had a Bridgeport mill and an old lathe in my garage and I started
making parts. Sherline Australia would send me the parts I couldn’t manufacture such as the die-castings. They were
very helpful and I will always appreciate how Ron Sher and his staff handled this matter. I found a motor in the
Grainger catalog that I could purchase in production quantities and built a simple speed control. Sherline lathes were
now “Made in the USA”.

      MAKE IT OR BREAK IT TIME
I was on my own and had to do it all myself. The first major change I made was to grind the lathe bed. I found an old
surface grinder for a $1000 and put it to work. The imported machine used an extruded brass bed that wasn’t very
straight. Extrusions are not perfectly straight and have tolerances that allow 0.010²twist per foot. This is unacceptable
for a tool. It would also cause too many assembly problems.

I wasn’t even sure I could grind brass. I built a couple of fixtures to hold the bed and my first attempt was a disaster
because the grinding wheel loaded up so fast I thought I had an impossible task. I added coolant and changed coolant
and still no success. What eventually made it work was a new type grinding wheel that was very porous. This
worked like a charm and we only had to “dress” the wheel a couple times a day. Grinding the bed turned out to be
the most expensive machine operation in building the lathe then and now, but it was necessary. A product has to
perform the work it was intended to do no matter how low the selling price.

Around the same time I found an extrusion company to produce the parts needed. There wasn’t any way to produce
the machine at a reasonable cost. Customers sometime think we could produce a machine with heat treated and
ground steel slides for just a few dollars more. The truth is it could easily cost twenty times more. I believe the
choices we have made gives the customer “the most bang for the buck”.

Building the first machines wasn’t that hard unless you wanted to make a profit. The parts are relatively easy to
make and having machines on the shelves was my only interest. The main effort had to be getting production
machines running if we were going to last beyond our first shipment. CNC machines were not available and it took
many operations to produce some parts. Each operation would increase the chances for errors. Scrap was a word that
took on a new meaning. We had to walk a very narrow line. If we scrapped out every part that wasn’t perfect we
couldn’t ship anything. If we used every part that wasn’t perfect, we would produce junk. My job became very
difficult. I started to learn about the tolerances we could manufacture parts to, compared to that the tolerances the
product needed to work properly. This was a lot more difficult than one would think and many hours were spent
reworking parts. The main problem then and now is we are trying to hold tighter tolerances than the process allows.
Successful companies all work within these constraints. If it were easy everyone would do it.

The buyer from Sears, who later went on to become marketing director for my main competitor Unimat, encouraged
me and was amazingly understanding of my plight. In later years, I enjoyed seeing him at trade shows and never felt
as if I was betrayed. It was just business. The space allowed for my products in the Sears catalogue kept getting
smaller and our sales dropped proportionally. Sears eventually dropped our product line and their new policy was to
sell only the most popular items. Every similar company took the same approach and they all started selling the
same products. This has hurt Sears because successful merchants meet the needs of all their customers, not just most
of them. Just think where Sears could have been if “they hung in there” with there catalog sales and jumped into the
Internet market when it came along.

Sears is actually a very nice company to deal with if you produce a product their customers like. I’m sure you have
heard the same horror stories I heard when people found I was going to sell to Sears. “They will take you over after
they order more parts than you can produce.” This was not the case, and I have nothing but good things to say about
Sears even though they no longer sell our products.

On the other hand, losing Sears as a distributor wasn’t as important to me as you may think because I had several
ways to market the product other than Sears. Sears was always asking for special reports and could be a pain at
times. If you sold 10 or 10,000 you still had to abide by the same rules. One time when I went to Chicago for a
meeting the buyer didn’t have any interest or knowledge in tools. She should have been buying fur coats not power
tools. I always had the feeling that a horn could blow at any time during the day and all the buyers could have moved
to a different office, similar to “musical chairs”, and picked up the conversation without missing a word. What really
impressed me at the Sears Tower was a gold plated radial arm saw in the office. It was the one millionth manufactured.
Think about the warehouse area that it takes to store products used in these incredible amounts.

     GOOD INSTRUCTIONS MAKE THINGS EASY FOR EVERYONE
Being self taught made me appreciate good instructions, for I’m sure I have spent at least a thousand hours trying to
sort out incomplete instructions that came with very expensive machines. I have tried to write instructions that
would be useful and give a novice some insight as to not only how but also why you would want to use an accessory.
Once the customer understands this, their imagination takes over and they may use an accessory in a fashion I never
dreamed of. Sears once complained that my instructions were “too folksy”. I asked them how many customers have
called with a question about that particular instruction and they decided they weren’t so bad after all.

Sherline’s customers are intelligent people, who just don’t happen to know much about machining, so I don’t have
to write everything in a style that an idiot could understand. The more you know about a subject, the more you know
there is always an exception to a rule. This can make for very boring and cumbersome instructions if all these
variations are included. Most manufactures of tools solve the problem of instructions by not giving any except
assembly and safety rules. They do this primarily to cover themselves in case of a lawsuit. The instructions also read
as if a lawyer..., who they probably were, wrote them.

I also know that the longer the instructions, the less likely they will be read. The trick is to try to make long
instructions short enough so that they will be read but long enough to get across all the important information. By
carefully choosing my words I can avoid writing about all these variations and still be accurate. Craig Libuse then
takes my writing and arranges it with some of his marvelous drawings and photographs, which he takes himself in
our own in-house studio. The process has been simplified since we purchased a digital camera. This book for
instance will go to the printer on a single CD that will be used to directly make the printing plates. No more time
consuming typesetting, pasting and stripping. When we are done, we have a book, sales literature or instructions that
we are proud of.

For me the fact that all the work, except printing, has been done “in house” is great. It gives me complete control
over the entire process. I can be my own publisher; however, I lose the marvelous marketing capabilities of large
publishing houses. I don’t have time and I’m not good at going around begging people to publish my book.

I look at instructions the same as tooling to build the product. The better the instructions, the lower the overall costs.
We constantly update our instructions to try and eliminate confusion. All our instructions can be found on our World
Wide Web site and can be downloaded for free for your own personal use. I can’t understand why more companies
don’t use the Internet in this fashion. Most The rules of cutting metal remain the same whether your machine tools
are full size or miniature like Sherline tools. Many amateur machinists, whether customers or not, find the information
we provide there useful. They appreciate this and we gain by their kind words.

Good instructions also have another key function. Customers usually ask questions that can only be answered by the
most important and costly people in the organization. This keeps them from doing the work you had hired them for.
Good instructions allow these key people to do their jobs without constant interruptions with questions that should
have been answered in the instructions in the first place.

      NEVER MISREPRESENT WHAT YOUR PRODUCT WILL DO
Another thing we try never to do is misrepresent the capabilities of our machines. If anyone has ever called Sherline
to ask we answer honestly and they know we never try to sell a machine to anyone when it wouldn’t be appropriate
for their projects. I don’t want to waste time on the phone explaining to an unsatisfied customer why you can’t make
a tool steel shaft three inches in diameter on a three-inch lathe.
     AMAZING RESULTS FROM A SMALL MACHINE
Actually, I am sometimes amazed at some of the projects that are built on Sherline equipment, not only because of
the complexity of the project, but also because of the size. I have seen projects done that really were too big for the
machine, but the job was completed because the builder worked with what he had. Working with what you have is
what it’s all about with hobby projects. Time is not money when working for enjoyment in your home workshop.
Being a hobbyist myself, I’ve been asked many times how I have the patience to spend so many hours working on a
model aircraft that could crash. My answer has always been that it doesn’t take any. If you are doing something you
enjoy it doesn’t take patience. What takes patience is working at a job or boss you don’t like just to keep food on the
table for your family. Non-hobbyists believe it takes patience to do small, precise work only because they don’t
enjoy doing work like that themselves.

      A VISION FOR THE FUTURE OF MINIATURE MACHINING
You can spend quite a bit of time and scale down a set of plans to fit miniature tools and I believe you’ll have a better
model because of it. In the future, I can see plans for hobby projects being sold on a disk that includes a drafting
program. After deciding the size you want to build the project the program will print out a set of dimensioned
drawings in the scale you choose. Actually you could do this today with AutoCad® but no one is yet selling plans in
this format. The problem with this at the present time, you can’t scale off the self items such as screws and the model
would be very difficult to build if you did. It will happen eventually because it is a better way. This will make scaling
things down to smaller sizes easier. Miniature models get treated like jewelry. Their appeal is based in part on their
size alone, and that helps them appeal to people who might have no interest in the subject of the model itself.
Throughout the ages, miniatures have always had a fascination all their own.

     WHEELIN’ AND DEALIN’ FOR PRODUCTION TOOLS
When I originally imported the lathe from Australia, the only accessories that were available for the Model 4000
lathe were three and four-jaw chucks, steady rest, live center and a screw cutting attachment. This represented about
ten percent of what was needed for a complete accessory line. For me to take on producing these machines was a
monumental task without considering the accessories. Fortunately, I just wasn’t smart enough at the time to realize
it.

I knew I would need machine tools to produce the parts I needed and this gave me an excuse to start buying machine
tools. This is the part I loved. I would go to South Santa Fe Street in Los Angeles and look for bargains. One machine
I came across had two opposing spindles that would be perfect to bore the headstock for the bearings. It would
require little modification. There were three of them. The only problem was they wanted $8,000 for each machine.
This was a bargain when you considered that they cost over $20,000 new, but I couldn’t afford even $2,000. I bored
my first run on my Bridgeport and kept a quiet eye on these machines. Machinery sales were terrible at this time and
the price was falling. I made my move right before Christmas when I believed that dealer, like everyone else, would
need money the most. I offered $1,500 for one of them. We negotiated for a while and I ended up paying $1,700.
Every mill or lathe I have sold since then has had its bearing journals bored on that machine. I think I made a pretty
good deal.

      MAKING CHUCKS TURNS INTO QUITE A CHALLENGE
Manufacturing the three-jaw chuck was my biggest problem, as it was not a straightforward machining problem. At
the time you couldn’t just program a CNC machine to cut the spiral scroll, so a special machine had to be designed
and built to do the job. I ended up milling the spiral using a rotary table that was geared to the table feed at the correct
ratio. The rotary table, that I rescued from a pile of junk, was driven by an adjustable speed drive that I found in a
junkyard where I also purchased the limit switches I needed. I ended up spending about spending less than $300 and
three days on the project. It took three and one half minutes to machine the scroll but the actual labor was only the
time to load the part. It turned itself off automatically. I shudder to think what it would cost to do a similar project in
my own shop today.

To cut the teeth on the chuck jaws I used a suggestion from the Sherline shop foreman in Australia. It wasn’t the way
they were generating the teeth at the time, but he told me if he had it to do over again he would try his idea. I bought
my first electronically controlled machine to accomplish this and cut the teeth. It worked great and we still machine
them that way. It took every penny I had to get the chuck into production because I had to also purchase a large
screw machine to make the chuck bodies. We kept trying different methods to improve the accuracy. It took many
secondary operations to improve the three jaw chucks a couple percentage points. Many people are still surprised
that we manufacture our own chucks. After going through the learning curve, I can see why others might not want to
take it on such a project.

      FIRST NEW SHERLINE ACCESSORY—A NEW SCREW CUTTING ATTACHMENT
The first accessory I decided to build was a replacement for the Australian screw cutting attachment. At this time the
thought of producing the entire product line wasn’t even considered and I was just “fooling around”. The Australian
screw cutting attachment was limited and did not have enough gear combinations. I wanted to cut more threads in
right and left hand leads. Most common threads are cut with taps and dies. You don’t cut threads on a lathe unless
you have to. It is a slow and costly. The threads you may have to cut are unique, and taps and dies either can’t be
purchased or are very expensive. To be worthwhile a complete range of threads was needed. The present system
didn’t have enough combinations to be useful. To build this accessory, gears would be needed. Contract gear makers
could cut the gears but the cost would be around two dollars each in relatively high quantity. I had to cut them myself
in order to keep the price low enough to have a customer for this product. A machinery dealer, who didn’t ask for a
commission, found me a dirty old gear hobber with a complete set of gears for less than a thousand dollars. I cleaned
it up and painted it. It worked great and has cut every gear since. (See photo page 3-5-15.) If you are just starting out
and are willing to work, it is amazing how much help is out there if you are not looking just for money.

     AN APPARENT STEP BACKWARD BECOMES A STEP FORWARD
After cutting a set of gears for my attachment I knew I had solved only one of my problems. To cut the expanded
range of threads, you couldn’t disconnect the spindle from the lead screw without losing your place. I wanted to
check out my gear combinations; so I took the motor and speed control off and put a crank handle on the rear of the
spindle. I set up the gears for twenty-eight threads per inch. I planned to make a 1/4-inch diameter, 28 threads per
inch bolt (abbreviated as 1/4-28). I figured that would be a good size because there were hex nuts of that size around
my shop I could use to check the thread. I engaged the lead screw and took my first pass (cut) by cranking the spindle
by hand. I stopped cranking when I got to the head of the bolt, backed out the crosslide, and cranked the spindle
backwards until I was at my starting point. The crosslide was returned to a position that would take the second cut,
and I cranked the spindle and took the second cut. It was as easy as tapping a hole with a hand tap. You could stop
close to a shoulder without worrying about “crashing”. I realized it would be perfect for a novice machinist. This
was going to be a tough item to sell as hand cranking might appear to be a step in the wrong direction, but it really
worked well. I decided to put it into production.

I think it is also worth noting that this is when I decided the style of instructions I would write. The only thing I did
change later was to put my name at the end of these instructions. At that time I didn’t believe my name had any value
and I was trying to establish a value for the “Sherline” brand name. About ten years later I began to realize that
customers took take an interest in what I wrote and I added president and owner to all the instructions I had written
and still do. I enjoy the fact that people are finding what I write worth remembering.

I was now flat ass broke and to survive I had to make a profit from this time forward.

     CARL HAMMONS COMES ABOARD AGAIN AND THE BUSINESS GROWS
Carl, my friend and ex-partner, joined forces with me again in Martin Enterprise. There aren’t too many people who
have been partners twice, but we worked well together. I had acquired a surprising amount of operating machinery
and Carl’s job would be to find contract machining jobs. Carl wouldn’t own any Sherline stock because this corporation
was already formed and Sherline Australia was part owner. Carl called the Hewlett Packard on a day that they were
looking for a new shop to do some contract machining and before we knew it we had 35 of our 55 employees doing
outside contract work. Our main customer became Hewlett Packard.

      MORE WORK MEANS NEW AND BIGGER PROBLEMS
All the new work became a nightmare for me. The problems I had to solve were no longer just my own. We would
be over optimistic bidding jobs and lose our ass doing them. Most of the problems were caused by inexperience in
holding tight tolerances. Customers would be late on payment and I would have to dig into Sherline funds to make
payroll. If a customer had made an error on their drawing and we had already run their part, they would try and find
a way to reject it and not pay us. We were doing over $400,000 a year in contract machining, and I finally gave it all
up at a time I my hand caught in a screw machine that was running HP parts. The reason I was running the machine
was the screw machine setup man was out on another drunk and HP wanted their parts. My hand was squashed but
not broken and while I was sitting in the office recovering the buyer from HP and threatened me. I retaliated by
increasing their prices by 20% and guess how much work I was doing for them the following year. You got it - $0.
This is one case where we both won.

I never did learn how to bid work and I didn’t own the new machine tools it takes to do the work that pays well. I
should be writing a book called “How to lose your ass doing contract machining”. The most interesting thing was
rather than going broke, Sherline started having money left in the checking account, when I stopped doing contract
machining. I guess we weren’t very good at contract work because nobody seemed to miss us. We kept our best
employees and everyone worked in a more relaxed atmosphere. I found out that just getting “shop time” doesn’t
make you any money no matter what the sales may be. We ended up with a lot of specialized machinery to make
unique parts for other companies. I traded all this specialized equipment for a couple of new CNC machines. We
would learn to use these new machines to build Sherline parts.

      A NEW HOME FOR SHERLINE
I started the business in my garage and then moved into an industrial complex. The first unit rented had 2000 square
feet and was quickly filled it up. Each time a neighboring unit would become available I would rent it. Having
enough room for employees to work efficiently was important. The end result was I ended up with five units and had
a considerable rent payment each month. A realtor stopped by one day and offered me an opportunity to buy some
industrial land. It looked pretty good so I offered the price that was asked. I waited for several weeks for an answer.
I then found out that my realtor didn’t have any agreement with the seller. He was trying to get that agreement with
the seller before making my offer. By this time, however, I had convinced myself I needed my own building. The
salesman succeeded in wetting my appetite to own a building and in not believing salesmen at the same time.

      LOOKING FOR SOME LAND TO BUILD ON
I remembered a couple long-time model aircraft friends, Granger and Larry Williams, who had some industrial land
for sale. Their agreement had just ended with a realtor whom had the property listed over two years without a sale.
They agreed to discount the realtor’s commission and offered me the land to me for $36,000. I agreed on the spot.
I would worry how to pay for it later. The best part came later when I was informed that they didn’t want the money
in one lump sum for tax reasons. I didn’t think it could get any better than this but it did. I learned a whole new term
at our next meeting: “subordinate”. What it meant is that they would allow me to build on the property before it was
completely paid for. I still didn’t fully understand the implication but started looking for a contractor. Lusardi
Construction was building most of the industrial buildings in our area so I approached them. They had a design and
build plan that would be perfect for a business like mine. I had a modest building in mind that I thought we could
afford. Lusardi looked over the property and came back with their suggestions. They proposed a building design that
was twice the size we had asked for. It was also three times the amount of money we could come up with for a down
payment.

      GOOD FORTUNE KEEPS SMILING ON US
I was banking with the Bank of America at the time and I knew Bernie Koston, the president of the local branch,
quite well. I had made and paid back several small loans to convince him I was a man of my word and could be
trusted. Bernie and my contractor had a meeting. This is when I found out how important subordination was. The
bank considered the land to be completely paid for because the land had been subordinated. The bank felt the lot was
worth $55,000 even though we only had $9,000 in it. This gave us the $55,000 down payment we needed. We found
out later that we had purchased the last reasonably priced land in the area. Bruce, the representative from Lusardi
Construction, convinced my banker, that it would be foolish to build a small building on such a good lot. Carl and I
took a break from this meeting and we both agreed we were getting in over our heads. We looked over at Bruce and
Bernie making plans for payment schedules for the construction loan. I finally said, “Carl, let’s just keep nodding
our heads until someone says we can’t do it.” Before long, the bulldozers were tearing up our lot and our 18,000
square foot building was started. Carl and I couldn’t believe it, for we still only had $9,000 in the project at that time.
I had worked in the building trades for 13 years after high school and it taught me how to get a job done. Although
I wasn’t a carpenter or an electrician, I hired a carpenter and with his help, built the interior of the building myself to
save money. We were going to need it.

      STRETCHING TO GRAB THE BRASS RING AS OPPORTUNITY PASSES BY
I believe a person goes through life and has opportunities pass by. The opportunities are there but you have to
“stretch” to grab them. Most of the population let these opportunities pass on by and then complain about the
opportunities that got away. Getting our building started and finished was a perfect example of “stretching”. When
opportunity knocks, answer the door...don’t just sit in your chair and yell, “Who’s there?” Opportunity drops by now
and then, but it doesn’t wait around long.

      BUSINESS IS GREAT!
I had two major mail order companies selling our machines within a year of starting, Sears and Brookstone. Both
were good customers and paid their bills within 30 days. A major point I’d like to emphasize at this time is that when
your dealing with large selling organizations they will always be more interested in their customers than your well
being. They are being ethical to their customers when doing this and not being unfair to you. Don’t expect them to
cover your mistake and risk their good name. Don’t expect them to not go to another supplier who offers better
quality at the same price or the same quality at lower prices. It is possible to make a great deal of money dealing only
with a single organization like Sears but you have to remember where their loyalty lies.

Sherline had about 25 employees at this time and we were cruising. I had three 2000 square ft shops next to one
another. Darrel my shop foreman was doing a good job and every now and then I began to feel a twinge of success.

      CNC EQUIPMENT BRINGS US TO A NEW LEVEL OF QUALITY
When we bought our first CNC lathe it eliminated many operations and improved the quality of the parts at the same
time. I couldn’t believe the accuracy that could be attained with these machines. It was love at first cut. I immediately
started looking for a NC mill with a tool changer and ended up purchasing a CNC mill. The difference between NC
(numerical control) and CNC (computer numerical control) is that to edit the program on a NC machine you had to
change the paper tape that controlled the electronics. On CNC machines you could edit the program that was contained
within the computer. The tool path was generated directly from the software as the machine cut.

As an example, consider cutting an angle on a CNC milling machine. The machine must move both the X-axis and
Y-axis in unison to generate an angle. A CNC machine would calculate the amount of movement as it was cutting
and could cut at over 100 inches a minute. This fact would change the way metal parts would be made in the future,
for no longer would you have to use special cutters and operations to make complex parts. You could cut a complex
shape at the same speed as you cut a straight line. In most cases you could generate shapes with standard cutting
tools using just a few lines of code. This allowed me to design parts the way I really wanted them. You no longer had
to work within the old constraints of what was possible.

      BALL LEAD SCREWS MAKE PRECISION CNC CUTTING POSSIBLE
The lead screws used on these machines should be mentioned. They are the interface between the computers and the
mechanics. The problem of backlash was solved with “ball lead screws”. These screws have recalculating balls that
roll in a groove ground into a shaft at a pitch of two tenths of an inch. The pitch on these screws has increased over
the years to achieve speeds over 1000 inches (25 meters) per minute. At a pitch of .200²(5mm), a lead screw would
have to turn at 5000 RPM to accomplish this speed which is why ball lead screws go as high as one inch in pitch.
Even more amazing was the fact that they improved the accuracy as they increased the pitch. You can make a .0001 ²
(.025mm) correction on a good CNC lathe. Think about that. A slide will accelerate to a speed of over 1000 inches
a minute in less than a second, move a short distance and decelerate, stop and still be accurate to one ten thousandth
of an inch. The ball screws must be very precise because a lead screw would be useless if it had any backlash (the
amount you have to rotate a lead screw before the slide moves). Ball lead screws are very difficult to make which
makes them quite expensive, several thousand dollars for each axis. The people who solved the lead screw problem
should be commended as much as the electronic geniuses who came up with the computer controls. At Sherline, we
have machines that have been running over ten years and still don’t have any noticeable backlash.


      MACHINES SOMETIMES PAY FOR THEMSELVES IN ONE PART RUN
In many cases, I could buy an old machine, fix it up, make my parts and have it cost me less money than I would
have spent on a single production run of parts from an outside source. I also had control of when they were run. At
Sherline, we make all our own parts in house. I only contract out plating, painting and a few screw machine products.
Even these I could make if I had to. This has given us an independence that few companies with a complex product
line have.

      CORPORATE “LOGIC” IS SOMETIMES HARD TO EXPLAIN
I can never understand the logic large corporations use today where they avoid making their own parts. They come
up with “just in time” suppliers that must anticipate that corporation’s future needs. Instead of having craftsman,
they have purchasing agents. Instead of machines, they have computers to control the flow of these products from
outside vendors. Without considering costs, I believe we would have more people working for us if we contracted
out the parts we use. If we run out of a part, we can put it into production that day if needed. A purchasing agent may
spend three days trying to find a new supplier who could deliver the part in three weeks. Many times I can produce
this part with less labor than the agent would spend finding a new supplier. I believe the corporations have chosen
this path because it gives managers a method of shifting the blame when ideas fail. Of course, when quantities get
into the hundreds of thousands it could be more economical to farm the work out. The type of person I’m trying to
advise isn’t the large corporation who buys in these quantities, but an individual starting out without enough money.
My product couldn’t be competitive if parts were purchased from outside suppliers. The costs involved would
eliminate our product line because there is a limit to what customers will pay.

     HOW OUR COMPANY MAKES MONEY
I always try to make money by having automatic machines run. I come up with products that can be run on the
machines we have. It gives me control of the costs to produce these parts. I have the choice whether to use shop time
or just an employee’s direct wages to make a part. This is very important, because I have to produce a product at a
price a customer will pay. Odd as it might sound; prices can actually be raised easier than they can be lowered.
Lowering prices with out coming out with a new and better model will irritate customers who paid the higher price
and dealers that already have this product on their shelves. I usually put off arriving at a final price until I have
produced a small production run of parts.

I always start by deciding on a selling price for a new product. I take away the discounts you must give in order to
sell it to a dealer. This leaves the amount you have available for designing, manufacturing, advertising and selling
this product. From this you can figure the amount you have to spend on manufacturing. I never add my design cost
and tooling to the final selling price of a new Sherline product. I plan for these products to be sold for a very long
time. With this being the case, this cost becomes insignificant to an individual sale if you amortize this cost. You
don’t have to make money on every product as long as you can make money on the complete product line. You have
to know your customers to accomplish this. It would be difficult to be a success at a new business if you have to hire
people to give you this information. In other words, “If you want to lose your ass, get involved financially in
something you know little about.”

      BUILD TO SUCCEED, NOT TO “NOT FAIL”
When I became committed to building the Sherline tool line, I never considered the possibility of failure. That
helped me make a very important decision as to how many parts to build. If you build too many, you may run out of
money and your creditors will put you out of business. Banks only want to lend money to companies that don’t need
it. On the other hand, if you don’t make enough parts, you’ll lose your customers by not being able to deliver what
you promised. What I did was not make a batch of say, two hundred lathes. The logic I used was that after I sold the
two hundred machines I would be in exactly the same situation...out of machines. I was somewhat broke, so I built
a thousand or so of the parts that didn’t have any expensive material and down to a hundred of the parts that were
high in labor or materials. This kept me from running out of everything on the same day.
      ACCESSORY LINE DEVELOPED TO AUGMENT MACHINES’ CAPABILITIES
After putting the Sherline lathe into production in the United States my ambition was to come up with accessories
that would allow my customers to make very complex parts on their “kitchen table.” One of the problems of making
machines of this size is you can’t buy accessories from other manufacturers to fit this machine. Manufacturers of
full size machines have the advantage of not having to build all the attachments for them when coming out with a
new product. We didn’t and I’ve always looked at this as a plus. The market is simply too small for someone to
produce an accessory that will just fit one machine leaving the market for Sherlines left to me. The average vise we
use in our plant costs more than any machine I sell, so you can see why no one else is interested in building
accessories that sell for less than $100 to a very limited market. I started out by producing the most popular accessories
and have made new accessories available every year. I keep thinking I have finally finished when I get a telephone
call from a customer with a particular problem. This in turn gives me an idea for another accessory. Not all are big
sellers but they give a certain group of customers the ability to build that very complex part on their “kitchen tables”.
It has finally worked out because now the accessories actually represent a high percentage of our sales.

One of the problems I have is dealing with is the ideas that come in from customers. If I look at it and tell them it is
something I’m planning to manufacture I’m sure they will be very skeptical. Ideas can be easy to come up with on
a product such as this. All I have to do is look in a catalog and make what they make for full size machines. The real
problem is coming up with a way of manufacturing them at a cost that we believe the customer will pay. I have made
arrangements to pay royalties on a few occasions to people that have put a special effort in their idea. I don’t copy
other people’s products but some things are so basic that there is only one way to build them. These items will
always look the same.

      NECESSITY IS THE MOTHER OF PRODUCTION
I started buying old machine tools that I believed I needed for production. I became an expert at taking a worn out
machine, fixing it, and putting it back to work. I have a natural love for machinery similar to that of a farmer who
loves his land. It is hard to describe, but it is very rewarding to set up a machine to make parts automatically. I’m
sure a farmer gets the same feeling when watching his crop being harvested. I remember an injection molder running
at Kraft Systems that had a 45-second cycle time to make a plastic part. The worst profit we could make was five
dollars per shot, and the machine would run all day unattended. It was like having an oil well in your back yard. I
have never been nearly as successful as that machine, but I keep on trying.

Today we have to put our efforts in new and modern equipment. Old CNC machines can be like a fleet old trucks.
They can become more of a problem than an asset. Machine tools are the great equalizer in a world economy.
Machine tools cost the same to operate worldwide and when the cost of the machine becomes greater than the cost
of labor, low cost labor doesn’t have such an effect and gives me an opportunity to compete.

      IT’S MORE LOVE THAN MONEY
Don’t get me wrong. I don’t invest in my new ideas just to make money. I’ve always found that the people that work
only for money don’t seem to have much. To me, it is more like a sporting event where my machines are my players
and I’m the coach. Of course I have employees and they are very important to the company, but in today’s market
there are few products that could be manufactured with manual machines. Computer controlled machines have
allowed a low volume producer like me to exist because they allow one machine to do many tasks. In a sense, you
are teaching the machine how to make the parts and teaching the employees how to set up and program the machine.
A good employee today is no longer a tireless worker with quick hands, but a very intelligent person who knows
how to make a CNC machine work harder. CNC machines are marvelous machines that never complain, and every
day they are doing jobs once considered impossible. I love them.

The score of this game is tallied in the sales figures, and I’m gratified when someone buys our product. The difference
between a salesperson and me is that I’m happy because someone thought my idea and product was good enough to
spend their money on, while a salesperson is happy because they closed a deal. The skill of “closing a deal” was one
I never excelled at, so my satisfaction comes from the acceptance of our products.
      WHAT’S THE WORST THAT COULD HAPPEN?
Before starting on a new venture, I arrive at an estimate of the percentage I have for success. This number is really
just an educated guess, but it does give me some insight into the odds. I always know I may fail before I start a new
project, and if I do fail I can put it behind me. Not knowing what is going to happen tomorrow makes life exciting,
and I’m very happy I have a choice.

When I first started marketing Sherline tools I was held back because of the customers’ reluctance to buy a product
that was relatively new on the market. I would get questions that would express a potential customer’s distrust of my
company’s success. At that time the machines cost less than three hundred dollars, and yet the same customers were
buying imported cars for thousands which had no more track record and less guarantee than my machine had. The
money spent on hobby tools has to be justified to the customer, and even after manufacturing this product line for
more than twenty-five years we still encounter customers who are reluctant. On the other hand we have the nicest
customers anyone could ever ask for, because hobbyists are a great group of honest, hard working, intelligent
people. I have attended trade shows by myself and when nature called I would walk away from my booth and leave
it unattended. I can’t ever remember something being stolen. I don’t think I would try that with any other group.

     WORKING WITH SKILLED EMPLOYEES
Machining is a slow process because parts are made one at a time. The interesting thing is, a skilled machinist may
take almost as long to make the same part as a novice. Shortcuts usually end in failure. Unlike some other trades,
mistakes cannot be covered up. There are no erasers, whiteout or “putting-on tools” for machinists.

I’ve never met a good craftsman that wants to do a job over, even when they get paid for it. It’s against their nature.
I also never met a good craftsman who didn’t have to do a job over because of his own mistakes. This is a good time
to stay away from them because they are mad at themselves. The fact is you can’t work with this many types of tools,
dimensions, and materials without making an occasional error. The trick is not to make errors when it counts. A
good toolmaker will work with an entirely different attitude when they are making an inexpensive fixture than they
will when they work on a part that has thousands of dollars worth of material and labor in it.

Another thing I enjoy is determining how a particular part will be run through the shop. Designing new products has
become easier for me now because of wide assortment of tools we own—about a million dollars worth. Ten years
ago, I could set up and operate every machine I owned, but that time has passed. I don’t operate my own machines
now because they are too complex to casually start pushing buttons. I have to rely on my employees, and I get a lot
of enjoyment out of watching employee’s progress, as they become accomplished craftsmen in their chosen trade.
However, I still don’t believe anyone in the shop knows more about making good parts than I do. I may not know
what button to push any more but I’m still the best at solving problems in the shop.

Most of this knowledge I’ve gathered has been learned the hard way because money was too tight to hire experts. At
Sherline we make all of are own parts and only “contract out” the plating, heat-treating, and powder coating. In the
past, we have also done a lot of contract machining and I’ve learned the problems one can get into by finding errors
in “inspection”. It’s just too late. Parts must be inspected as they are built, not after. Errors that are found after the
parts are made mean you start over. Design errors found after the parts are made will always result in scrap. The only
difference is who pays for the scrap.

      THE CREDIT FOR A GOOD PART GOES TO THE CRAFTSMAN
The good craftsmen know when they have made an exceptional part and get much satisfaction from it. They also
have the ability to produce good work on machines that should be in a junkyard; it just takes them longer. I have a
great respect for good craftsmen because they have to work without excuses or erasers. I try to keep reminding you
of this fact in this book because it‘s the craftsman not the machine that builds the beautiful things we see daily in this
world. Modern machines have given this talented group of people a way to produce more and better work, but it will
always be their “touch” that makes those parts beautiful. In my eyes, they just don’t seem to get enough respect.
      STEPS IN THE DESIGN OF A NEW PRODUCT
I enjoy having customers call and tell me about a business they started by being able to build prototypes with
Sherline machines. You should never commit yourself to a design until you have at least built a crude mock-up that
you could hold in your hand. Looking at it from every possible angle will be very helpful to you. Usually you will
start making changes in your design before your prototype is even completed. This is how my partner, Carl, and I
designed new products. I usually would make a rough sketch of an attachment that will help solve a customer’s
problem. We then make a simple drawing that contains all the fixed dimensions that must be adhered to. A ball
bearing would be an example of this. Then Carl would make a quick set of drawings. From this we build a mock-up
to get an idea how it will look. The next step is to consider manufacturing methods and try to work with the
equipment you have. This is where you can go astray. A product has to have a certain look and that look shouldn’t
be sacrificed to make it easy to manufacture. Don’t make it look like the design was picked because it was easy too
manufacture, even if it was.

There are now 3-D computer programs that can do this on the screen amazingly well. We have one, but we still build
a prototype as well, the old fashion way...one part at a time. For $300,000 you can even buy a machine that will
make a plastic part directly from your CAD designs. When large companies spend this much money for a machine
that is only good to develop a shape you can look at, it should give you some idea of the value of what can be gained
from seeing an actual prototype.

Again, don’t design a product that is just easy to build. It has to look good enough for a potential customer to buy it.
Some products need a compact, modern look and others require a massive look, but these designs should always be
pleasing to the eye. Don’t use the first idea that “pops” into your head. I very seldom (if ever) come up with an
original idea after nine A.M. because I am a “morning person”. I don’t have any problems running the business in
the afternoon, but new ideas come to me long before I get to work. It is wise to analyze yourself so you know when
is the best time for you to plan for the future.

After we have decided on a suitable design, detailed drawings are prepared in a computer aided drafting program
called AutoCad®. We may have to change the design again as we make the first production run of parts, and we run
these parts in a sequence that allows for change whenever possible.

      BATTLING POORLY WRITTEN MANUALS TO LEARN AUTOCAD® MYSELF
With the passing of my dear friend and partner Carl, I was forced to learn a computer-drafting program. Up until
then, Carl had done all my detailed drawings and there wasn’t anyone else in the organization that had the time to
take on this task. I couldn’t go to school because we needed our drawings done now, not several months from now
when a class would graduate. I was reluctant to hire someone because it wasn’t a full time position. I decided it
would be easier for me to learn computer drafting than to teach a new employee our product line. Carl and I worked
together for so long I new I couldn’t replace him, and it helped me to ease the pain of his death by diving into this
new endeavor. I started working at home to eliminate the constant interruptions at work. The difference between a
word processing program and a drafting program is that a letter can be written with a word processing program
without knowing the slightest bit about the program. This isn’t the case with drafting programs. At first I had trouble
just putting a line on the screen. I went out and bought a couple of the popular books on the subject. When I finally
drew a box and wanted to dimension it, I looked up that subject in the index and found the first information about
dimensions was on page 700. I knew then that I was in trouble, but I had an “ace in the hole”: Friends.

      STUDYING AT THE “UNIVERSITY OF FRIENDS”
My friend Jerry Nelson had started teaching himself computer drafting several months before and was “over the
hump” on learning this program. I called him and he taught me enough over the phone in 15 minutes to do my first
drawing. I couldn’t get this much usable information from the books after studying them for the previous week. The
books I was reading were typical of the technical manuals I’ve had to deal with for the better part of my life. It isn’t
that the subject is so difficult, it is the method that the information is fed to you. You never know whether you are
getting the main course or a snack. The main purpose of an engineered drawing is to convey dimensions to the
person who is going to build or use the part. To give you 700 pages of BS before getting into the meat of the matter
is another example of a failed attempt to teach a subject. As the instructions I write keep getting longer and more
complex I use these as examples to remind myself how not to do it.

     OPENING THE FLOODGATES OF DESIGN
The first task I took on to learn the program was to lay out and design a set of bevel gears that could be cut on a
Sherline mill using a rotary table mounted on an angle plate. (See page 3-5-14.) By drawing the cross sectional view
accurately, the angles needed to cut this gear could be taken directly off the drawing without using a trig table or a
calculator. I was beginning to see the light.

I’m getting pretty good at using the program now and it has put a lot of the fun back in designing for me. Looking
over Carl’s shoulder at an assembly designed by computer was of no help for me, and I would need a standard full
size or larger layout to design with. I’ve since found that doing the design totally myself has become the perfect way
for me to work. I love the program. I’ve always designed things I’ve built in the past. This drafting program has
made me more productive than ever. Since learning the program, I have added many accessories and put many new
products into production.

The perfect program for a good designer but a slob of a draftsman

I’m fascinated with the program because it does a drawing without errors when used properly. The program eliminates
much of the boredom of adding and subtracting numbers as you go. Accuracy isn’t attained by the precision of your
lines but rather by the accuracy of the information the program is given. Angles are not derived from a protractor and
using divider points but from calculations by a computer to as many decimal places as needed. I learned drafting in
high school back in the fifty’s. My problem was I was a “slob” when it came to drafting a pretty drawing. My
numbers and views would be correct, but my lettering and lines weren’t neat enough. Things have changed now with
the aid of this program and my lettering is just as good as the best. I can no longer spill gobs of ink on an almost
completed drawing and have to start over. I can change my mind as much as I want without irritating anyone. I’m a
happy man.

     AFTER SPENDING OVER A MILLION DOLLARS, WHAT HAVE I LEARNED?
I would like to give you some views I have come up with after spending well over a million dollars on machinery.
I’m addressing this mainly to the portion of our customers who will end up moving up in size to standard machine
tools. The first machine I would buy would be a Bridgeport vertical mill. These machines haven’t changed for years
because they are just right the way they are. More successful businesses have been started with this marvelous
machine than any other. You can build prototypes, tooling and production parts with this machine. There are imported
copies of the Bridgeport, but they don’t seem to have the quality of the original. Although this book is written about
home shop machining, I’m also trying to give you some insight into producing metal products. If you happen to
come up with a great idea, you may want to build these parts yourself and start a business.

      YOU’LL NEED AN “OK” LATHE BUT A REALLY GOOD MILL
A mill is usually more important than a lathe, therefore, it has to be in better condition. You can still make good parts
on a lathe that may have made parts for the First World War. A little filing and polishing and you have a good part.
On the other hand, trying to work with a mill that has worn out slides creates a different problem. The forces that are
generated as end mills cut can come from any direction. A lathe generates most cutting forces straight down toward
the bed. You can always bring a diameter to size with a file on a lathe with worn out ways, but to file a bored hole to
its correct position is next to impossible. The things you do on a mill have to be done right the first time. If you plan
on stepping up to full size machinery, the cost, particularly the cost of accessories, will rise dramatically. Another
thing you will find is that these machines aren’t as much fun to operate.

Before buying any full size machinery, I would give it a lot of thought, because the cost and space this type of
equipment takes is substantial. Even if you can afford the extra money and have the space, they will not bring you
happiness unless you have a definite need for these full size machines.

     BUYING USED MACHINES AT AN AUCTION
I have purchased machinery from every source available, but I like auctions the best. It is a game that is played for
high stakes, and high dollar machines are often sold in less time than a fifty-dollar vise. It takes two people that
really want a particular machine to get the price it is actually worth. If you have many bidders, the price may go way
beyond what would be considered a good buy. At that time the auction may turn into a bidding contest that leaves
common sense behind. Know your limit before you start bidding and know what the machine is really worth. Of
course, I didn’t always follow this rule and ended up buying a few “turkeys”, but that was part of the fun. Buying
used machines from a dealer has some advantages, and many times it can be more economical than an auction. In
addition, you can usually get a money back guarantee. You can’t even get that on a new machine. Putting large
machines in place is costly for both parties, so you have to be sure of your decisions.

      CHOOSING BETWEEN MECHANICAL AND CNC MACHINES
If you are trying to build a product and you need to produce a particular part, you may have a choice between a
computer control and a mechanical machine. CNC machines have been more reliable than mechanical machines for
me. There are more employees available today who are trained to operate these machines. If you bought an old CNC
machine without documentation you may have bought a piece of junk unless there is someone in your area that can
fix it. You must know if you can get it fixed before you buy it. A technician a thousand miles away will not be of
much help if it is going to cost you $2000 in travel expenses to fix a $100 problem.

I look at CNC machines differently than mechanical machines. They are more like automobiles and have a limited
life. If you can afford it, buy a new CNC machine. Often they will be able to make a better part in half the time it
takes a machine that is seven years old, and time is money.

       PRODUCTION MACHINIST VS. TOOLMAKER
Another point that should be discussed is the notion that a production machinist doesn’t have to be as skilled as a
toolmaker. These were my thoughts until I went from building plastic molds to setting up production equipment. I
didn’t have a clue as to how little I knew about the process of cutting metal. When building tooling, I would put a
little cutting oil on the work and control speed and feed by the amount of smoke I was generating. You have to know
more than that to cut metal in a production environment. Feeds and speeds are controlled by gears, cams, and
computers that don’t allow for errors. If you are drilling one hole in a piece of tooling it doesn’t make much
difference whether it takes one minute or two, but if you have 10,000 holes to drill that difference will cost 10,000
more minutes, which is an extra 167 hours of machine time. When you consider that most CNC machines cost over
$60 an hour (a dollar a minute) to operate, that extra minute you wasted drilling a hole comes out to $10,000 lost.

      CUTTING SPEED VS. TOOL WEAR AND DEFLECTION
In order to drill this hole in the most efficient manner you need to know the correct feed and RPM, but it’s still not
that simple. At one feed rate you can drill a thousand holes before the drill will get dull and start drilling oversize. A
faster feed rate may save 15 seconds per hole but the drill will have to be changed every 200 parts. I’m sure you are
thinking, “what’s so hard about that?” It isn’t until you consider the other machining operations that are also being
done to this part at the same time, each with its own set of problems, then you can see how complicated it can get.

For example, end mills deflect or bend according to the load, diameter, and sharpness of these cutters. A long end
mill can deflect over ten percent of its diameter at the cutting end. This is always changing; therefore programs must
be created that allow cutters to get dull while still keeping the part in tolerance. We very seldom write a program that
will make a good part efficiently on the first try. It usually takes three or four tries until we are satisfied.

Production equipment runs parts inside the machine. The part is deluged with coolant so it is hard to see what is
going on, yet you have to know. If you stuck your head in there to see what was going on you might lose it. Setting
up CNC machines today is like test flying a new aircraft each time you check out a new program. You will never
appreciate how far these machines will go to try and please you until you put in an offset that is off by one decimal
place (a number entered into a CNC machines to offset the actual diameter and tool length), and you get to watch
your machine try to mill your $1000 vise off the table! When I first started programming NC machines (machines
that were controlled by a 1-inch wide paper tape with holes punched in it) I would write programs that would rapid
feed up to within 1/10²of the part and then start feeding at a programmed rate. We soon learned that if the machine
failed, you wouldn’t have time to push the “stop” button before it crashed even if the rapid feed was shut down two
inches from the part. With nothing to lose but time, we switched to bringing the tool as close in as possible.
      PUSH THE BUTTON AND HOLD YOUR BREATH
We now bring tools to within 1/100² (2.5mm) of the part at a feed rate of over 1000 inches (25 meters) a minute.
When you consider that on a lathe these cutting tools may also be aimed at a three-jaw chuck turning at 3000 RPM,
it takes a lot of faith to watch it happen without flinching. This is how modern machine tools operate. Spindle gears
have been replaced by elaborate electronic drives that will work in unison with a computer to keep constant surface
cutting speeds on a lathe even as the diameter changes. Complicated gearboxes have been replaced by a servo drive
system that works in unison with the spindle to cut threads or tap holes at spindle speeds considered impossible a
few years ago. Manufacturers can take a CNC machine and turn it into a very sophisticated device to build their
product out of metal in one day. That process could have taken years to accomplish 25 years ago.

     EITHER STAY PROFICIENT OR TRAIN SOMEBODY TO TAKE YOUR PLACE
I could set up every machine I owned in 1987, but I had to give it up because I no longer had the time to stay
proficient at it. A similar analogy would be a pilot who doesn’t fly very often and crashes. In this case, I could have
crashed a perfectly good and very expensive machine. Before pushing the cycle start button; you have to know
exactly what will happen after the “cycle start” button is pushed. A casual button-pusher can do thousands of dollars
in damage to a machine by pushing first and thinking later.

     WHAT TO AVOID IN NEW PRODUCTS
About the only advice I could give you when it comes to manufacturing a new product is to stay away from
a new idea that is an accessory for someone else’s product. They are too hard to sell. When I was in the job
shop business we had a customer whom was going to make an accessory for gun ammunition loading
equipment. This wasn’t his normal product line, but an employee who worked for him convinced him that
it had value on the market. At the time I had ten screw machines and their parts were good screw machine
jobs. The only problem with screw machines is they need a run of more than a thousand parts to be
worthwhile. I tried to convince them to only have us make a few parts on a manual lathe, as CNC machines
were not in use at that time. Then, if they got as many orders as they expected we could jump in with
automatic equipment and make the parts. They believed their problems would be supplying the orders but
those orders never came. The employee who came up with the idea quit because he wanted a bigger share
of the profit on those same orders that never came in. Several thousand dollars worth of good parts filled
the trash can and, although we were paid for the job, I wish they had taken my advice.

Don’t think I’m attempting to keep someone from making accessories for Sherline machines with a statement like
that. It just that you don’t know what the future plans of any company are. They may change the design of their
product and your accessory will not fit newer models. They could discontinue the item altogether. If your accessory
is a good idea the manufacturer may “knock it off” or copy it. Your efforts would be better spent on a product over
which you have total control.

      THE DUBIOUS VALUE OF A PATENT
What if someone does decide to steal your design? Even if you have a patent, you will find you probably can’t afford
to defend it in court if the company stealing your design can afford more lawyers than you can. Carl and I hold the
basic patent on computerized timekeeping. We applied for it long before IBM had a PC on the market. Today there
are millions of dollars spent on products that should fall under the control of our patent. We spent several thousand
dollars and a tremendous amounts of effort to get that patent and in a sense it that effort was wasted. Patent attorneys
don’t inform you how hard it is to protect a patent because they make their living getting the patent for you. The
standard defense against your patent is to try and prove that your idea was common knowledge. Most people don’t
realize that a patent on a new process or product can be impossible to enforce if it has been suggested in print
anywhere in the world. You could end up wasting a lot of time and money to have a patent certificate to decorate
your wall. It is wise to have a thorough patent search done to keep from producing a product that already has an
enforceable patent on it. Of course, I’m not an attorney and I’m talking in generalities to make you aware of the
problems with patents, but I do have a couple of patents that never made any money for anyone except the patent
attorney. Again, remember that the patent attorney makes money by getting you a patent and may be the last one to
inform you that your patent may be worthless and impossible to enforce.
      RADICAL DESIGNS SOMETIMES REQUIRE A LOT OF EXPLAINING
A new product has to look like a potential customer expects it to look. For example, suppose someone came up with
a motor the size of a worn-out pencil that had enough power to drive our lathe. If I saw the advantage of a motor
designed like this and was the first to use it on a production item, the first trade show that this new motor was shown
at would be a disaster. All attention would be focused on the tiny size of the motor. We would spend all our time
trying to convince customers it could do the job and probably never sell one machine. Take a look back at the
phenomenal growth of the electronics industry. This is an example of products where the customers don’t care about
what is in the “box”; they only care about what it does. This is unusual. Try to sell a pickup truck with a ten-pound
engine. If the Wright brothers first attempt at inventing an airplane had been a 707 jet would you have wanted to be
the first paying passenger?

       A TOTALLY NEW PRODUCT REQUIRES A LOT OF SALESMANSHIP
It is also difficult to try and sell a new product unless it can be compared with a product now on the market. If the
reason for the product has to be explained you’ll need a very dedicated sales force. Customers will not read or listen
to long sales pitches. Before starting on a new venture, play with the financial numbers and convince yourself it is
worth the effort. To make $50,000 on a product that has a potential profit of $0.10 each requires sales of 500,000
parts. This is fine if you get orders in the 100,000 range, but you will not survive if you are going to sell twenty-five
at a time. The numbers just aren’t there. If you are just starting out, you will need to have some big-ticket items to
sell to pay the bills.

     PRICING YOUR PRODUCT
A real problem in designing and manufacturing products is the value a customer may give a part compared to the
cost of manufacturing. A plastic part has little value to most customers because they are used to trashing complex
disposable plastic products every day. Parts that have been manufactured by the millions have the tooling cost cut
by a proportional amount, and the cost for each part becomes negligible. When a plastic part is used in a low volume
product, however, the tooling cost for each part produced will normally exceed the material cost. Material cost can
also be higher than one would imagine. In 1997, the steel used to produce Sherline tools cost from $.45 to $4.00 a
pound, aluminum costs were about $2.00 a pound, and the plastic used for the speed control case cost around $2.00
a pound. These are prices paid for materials purchased in production quantities.

I’m sure you have seen the same 40-piece socket wrench sets for $4.00 that I’ve seen on the shelves of auto parts
stores. I couldn’t get the chrome-plating put on that set for $4.00 in high quantities in California. I really don’t
understand how or why they do it, but the fact that they do effects how a potential customer will evaluate the value
of other tools. I do hope our customers realize that some of the accessories we manufacture are sold in very low
quantities; less than 100 per year, and can’t be compared with products that are manufactured by the millions.

A customer will see a value in large parts, but little value in a small part. This small part may require machining
operations from each side and can cost many dollars to produce, but a customer often doesn’t have the expertise to
see this. Small parts may take longer to load in a machine than a large part because they are delicate and can be
difficult to line up. A cutoff saw takes the same time to cut a one-inch long piece off as it does a ten-inch long piece.
Customers perceive value from their everyday experiences, and that is something you must deal with if you ever
plan to produce a product. One customer may find our equipment a bargain when compared to a $5,000 jeweler’s
lathe, but another may consider it a rip-off compared to that $4.00 socket set.

     AN AMERICAN COMPANY’S PLACE IN THE WORLD MARKET
American manufacturers are at a disadvantage when it comes to selling throughout the rest of the world. The U.S.
market is the largest market in the world, and we now have a great distribution method to get products to the
consumer with very little markup. Take the $4.00 socket set for example. It probably is sold directly to a discount
chain of stores who only mark it up 25% and sell it directly to the consumer. The discount chain stores have such a
large buying power it allows them to deal directly with manufacturers throughout the world. Products are shipped
directly to their warehouses with no middleman markups. This is a great deal for consumers, but it makes for tough
competition for an American manufacturer.
This distribution system isn’t available to an American manufacturer wishing to sell a product outside the United
States. Outside the U.S., a broker may import a product and sell it to a distributor who sells it to retail stores, and
finally it is sold to the consumer. The problem is that everyone wants to make 40% when they handle it. A U.S.
product gets marked up so many times that it is no longer a good buy, but it isn’t the fault of the manufacturer.
Import duty also can add to the cost of the product. I have had complaints from Japan for example, where someone
thinks our $1500 lathe should be more accurate for the price. I can only tell them that it is very accurate for a $410
lathe, but I have no control over all the markups between here and there that turned it into a $1500 lathe. Unfortunately,
middlemen contribute to increasing the price with no corresponding increase in the quality of the product.

To make matters worse, U.S. manufacturers must compete with companies that sell products here that don’t have to
deal with the higher safety and environmental standards set by OSHA and the EPA. I’m not suggesting we should do
away with these agencies, for I believe they are needed to protect our workers and citizens. I’m only reminding you
of some of the problems that face U.S. manufacturers.

      ADVERTISING...DO YOU NEED AN AGENCY OR SHOULD YOU DO YOUR OWN ADS?
I may have spent more time than I should have on manufacturing our products because it is the part of a business that
is the most interesting to me. However, there is a lot more to being successful than just manufacturing a product.
You have to sell it. This becomes a major problem as soon as you can build more than you can sell. Small ads in
popular magazines may cost thousands of dollars. Magazines give a 15% discount to advertising agencies. Remember
that advertising agencies are in business to make money doing your ads and their advice will usually reflect this.
They make their money by placing as many ads as possible and pocketing the 15% discount as well as charging you
for production time and costs. Most likely you already know your own product and your market better than they do.
A graphic artist can produce advertisements to your specifications and costs less than an agency. If you or your hired
artist produce your own ad, don’t hesitate to ask the magazine for the 15% discount as an “in-house agency” when
you supply your ad “camera ready”. They almost always agree. Don’t get involved with a long advertising contract
until it has been proven to be the best way for your particular product.

     GETTING THE MOST FOR YOUR ADVERTISING DOLLAR
I have found that the first time you advertise in a new magazine you get the most results, and repeated ads in the
same magazine begin to lose their value. Once all the subscribers have seen your ad, they have pretty much decided
to buy or not to buy. Repeated ads are only reaching new subscribers or onetime readers. Keeping a visual presence
in an important magazine, however, will assure your present and future customers that you are for real. Tricky adds
for new products are usually losers. A good picture and an honest description are what people want and need to make
a buying decision. You can probably recall a lot of really “great” ads about which you can remember every detail
except what they were actually selling. People look at the pictures first, and then they read the headline next, the
photo captions and finally the body copy last if they have time. Paragraph sub-headlines breaking up the blocks of
copy make an ad easier to read...kind of like Craig has done in this book. If your product is colorful, a color ad may
help, but you might consider buying more and larger black and white ads for the same amount of money to reach
more people. Don’t pay for the color unless it is buying you something.

      SOME ADVERTISING BUYS ARE BETTER THAN OTHERS ARE
Don’t start thinking that because a magazine has a circulation of 200,000 readers you will get 2,000 inquiries if only
1% of the readers respond. Unless your ad is tremendously effective, your product is unique and desirable or you are
giving something away, a response rate of .1% or less can be the result on a new product. Also, a request for
information doesn’t always lead to sale. There are many new companies that didn’t make it because they squandered
their money up front on expensive ads. We have spent thousands of dollars on an ad in an R/C car magazine that only
brought us a few responses. On the other hand, a small 4² by 5² ad that costs us about $170 a month in a tabloid
called Shotgun News consistently returns good response and is probably the best return for the money we have.
Neither result is what we anticipated. The problem Sherline has with advertising is that only a few people are
interested in our product in any particular group. There isn’t any single place to advertise that will go to more than
5% of our potential customers. We have to spread our advertising around and let present and future customers know
we are still “alive”. I always envied products that can be sold by advertising in just one magazine. Take scuba diving
for instance. I’m sure there is one magazine that goes to 60% of this market. Selling a product like that can make
your life a lot easier.

      SOME OF THE BEST SOURCES OF ADVERTISING ARE FREE
When you are just starting out, extra money for advertising is hard to come by. Long printing lead times mean it may
be two to three months before even a very successful ad begins to pay off in sales. Most magazines have a “new
products” section where they will publish a photo of your product along with a short description. There is no charge
for this service and it often produces very good results. You will have to send out a lot of press releases and photos
to get a few printed, but the cost is minimal. A magazine will include items that they believe will be of interest to
their readers. If you are trying to get a magazine to print a press release, keep it short, send a good picture, and
enclose a note why you believe their readers would be interested in this new product. If a new product release gets
good results from a magazine that printed the press release, respond with a paid ad. Be loyal to the ones who have
helped you. Don’t forget it is worth it to make sure you have a really good press release photo. If you can’t take a
good photo yourself, get a professional to do it. Send 5 by 7 or 8 by 10 glossy photos. Most magazines are put
together electronically now. Find out if they would prefer a scanned version of the photo and send it to them on
diskette in the file format they request. The easier you make it, the better the chance they will use it.

      MAGAZINE ARTICLES ARE EVEN BETTER THAN FREE ADVERTISING
Another source that is often overlooked is the magazine article. Magazines make their money by selling ads and
subscriptions. The amount of money they can ask for their ad space is based on how many magazines they sell, and
people buy magazines for the articles, not the ads. Every month they have to keep coming up with good articles and
this isn’t easy. If you can write an article about how your product solves a problem their readers might have, chances
are pretty good you can get it published. They may even pay you for the privilege! You can’t be too blatantly
commercial, but you can show your product in use in the photos, and in most cases knowing the name of your
product is valuable information to the reader so the magazine won’t object to it. When we submit an article, we do
as much of their work as possible to maximize our chances of getting it published. We write the body copy, the
headlines, the subheads, provide the photos and write the photo captions. Most of the articles we have had published
have gone into the magazine almost exactly as we sent them in. Other than the work, they cost us nothing, and we
end up getting out a lot of good information about our product that we could never have afforded any other way.

      GETTING OTHERS TO WRITE ARTICLES ON YOUR PRODUCT
Sometimes you will hear from people who ask to get your product free or at a very good price so that they can write
an article on it. Sometimes these are just scams to get free product, but not always. Check out the person’s credentials
and ask to see some of the other articles they have had published. If they can do a good job of it and have a decent
shot at getting it published, it will accomplish three things for you. One, you don’t have to write the article yourself.
Two, the magazine might feel better about publishing an article that wasn’t supplied by the manufacturer of the
product, and three, the credibility of a “third party” endorsement is more believable than your own horn-tooting. The
only down side is that you have little or no editorial control, although you can ask to read the article for correctness
before it is published just to make sure no wrong information gets out there. Be wary, but don’t slam any doors
before you know what’s behind them.

      TAKING ADVANTAGE OF THE INTERNET
Our web site has been a very good investment for both the customers and Sherline dealers. What inspired me to put
the effort into having Craig make a very complete site was I believe it is the way of the future and I didn’t want to be
left behind. What I really like about it is you don’t have to live with mistakes because you just had 25,000 copies of
something printed. Information is easily corrected or updated—instantly. I felt that if we did a really good job we
wouldn’t have to change it and it could be useful for years, just like the good tooling I keep referring to. I believe we
have created a useful site by including plenty of good information such as instructions for our machines and accessories
for our customers and potential customers to examine. We also reach a readership that is worldwide. This can be
impossible with standard advertising methods. We have picked up a number of new distributors in other countries
because of our Web page. We have also made an increased number of direct sales overseas because fax and e-mail
communications make it easy for anyone looking at a web page to order. Time of day, long distance phone calls and
the language barrier are much less of a problem. The web site was put together over a period of about four months
and has been constantly expanded and improved. The most interesting thing is how inexpensive it is. It costs only
$500 to $700 a year for a very large site. Compare that with a two by three inch ad that costs $1,000 and is history
once the next issue comes out. I believe only the surface of the Internet has been scratched and it will keep growing
for many years. It represents the leading edge of the “information revolution” that is to our era what the industrial
revolution was to our grandparents and great grand parents.

      YOU CAN’T BEAT WORD-OF-MOUTH
The best advertising comes from simply treating your existing customers fairly. When you start thinking you are
much smarter than they are you are headed for failure. After all, they probably wouldn’t be calling you if the product
and instructions were working like they should. Take the time to listen to their complaints and try to solve the
problem. It isn’t hard to be a hero in today’s business world where BS is king. Just treat customers the way you want
a business to treat you and many problems will disappear. A recommendation from a satisfied customer carries far
more weight to a potential buyer than what could be said in an advertisement. By the same token, a bad word from
an unhappy customer can cost you sales. They say a happy customer tells ten other people, but an unhappy customer
tells a hundred. Some of our most devoted and loyal customers are not the ones who have never had a problem, but
rather ones who have had a problem and had it taken care of promptly and politely. Unfortunately, in today’s
business climate good service is becoming more of a rarity, and it is a relatively easy place to stand out from the rest.

      BUSINESS DECISIONS AND PLANNING
I haven’t had too much luck in finding experts to solve problems. Having an accountant tell you how to spend
money is a foolish request. Their answer will always be to have better accounting methods and better accounting
computers. These people are scorekeepers and shouldn’t be used as coaches. If you are running the business you
started, you are the coach and you should remember that. Don’t let a fancy suit and tie humble you. I will not do
business with people who need attorneys to do their thinking. If they don’t trust you, don’t trust them. People have
a tendency to judge others by comparing them to themselves.

When it comes time to make great business plans, I don’t have much of a plan. It’s good to have long term goals, but
your plans must remain flexible. I have watched the computer industry giants fail while they were pondering plans
to eliminate start-up companies. These start-up companies, who these great business leaders had never even heard
of, went ahead and made these business giants’ computers obsolete before they were even introduced. I have long
ago realized things never go as planned, and if you spend too much time planning the future of your new company;
you may not be around long enough to carry out your plan. I’m not saying that you shouldn’t have a plan, I’m saying
you need to be flexible to survive. Many of the big businesses today started off doing something entirely different
than where they eventually found success.

      TODAY’S PROBLEMS ARE MORE IMPORTANT THAN TOMORROW’S
Always take care of today’s business first. These are problems you can solve and customers will be happy. The
market place is too complex for long term planning. You should spend as much time as it takes to keep your product
quality high. Profit has to be secondary for long term success. When you are starting out, the main thing you have to
sell is, hopefully, a good product that is needed and your good word. If you deliver on what you promised you are
going in the right direction. I have always kept a list of things other companies have done to me that could be
considered irritating. I make sure we don’t make the same mistakes. For example, you won’t talk to an answering
machine when you telephone Sherline Products. Sometimes people seem amazed when they call us and an actual
person answers the phone. Long voice mail menus are almost universally hated, yet most big companies use them
anyway. This is a perfect example of a company that thinks their own time is more important than that of their
customers, and that is not the message I want to send to people trying to call my company.

     DON’T FORGET TO HAVE FUN
The information I have provided in this book comes from all sorts of places. Sometimes you learn something
when everything goes right. Most of the really valuable things I have learned, however, came along with a
certain amount of either physical or financial pain. If I have saved you some of that pain and provided some
entertainment in the process, this book has been a success. The main point I want to leave you with is to not
to put so much importance on the destination that you forget to enjoy the journey. I have always found that
I am happier and more enthusiastic when starting a new project than I am right after I have finished one.
Before I am done with anything, I find I am usually thinking about what I want to do next. I hope also that
you have been inspired by the examples of other people’s work shown throughout these pages. Strive to
take your work beyond the level of a laborer or even a craftsman. Work with your hands and your brain but
also with your heart. When you are done, your project will be more than just a bunch of nicely machined
parts. It will be a work of art.


                                      “Art is not a thing, it is a way.”
                                             —Elbert Hubbard

								
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