Running a successful manufacturing business takes more than technical knowledge, cutting-edge equipment, and hard-working employees. It also requires a deep understanding of your financials and a willingness to follow the money trail through all areas of your organization.
When you dig into your spending patterns, you may be surprised by what you find. Dollars are often spent—intentionally or not—in areas that don’t provide real return on investment. And in today’s machine shop, that kind of inefficiency can quickly impact your margins, growth potential, and long-term sustainability.
Why Every Dollar Counts for Small- to Medium-Sized Manufacturers
Let’s face it: no one cares more about your business’s finances than you do. And yet, in many shops, we delegate spending decisions to employees who may be focused on getting the job done, not maximizing every dollar.
That’s not a knock on your team; it’s simply the reality of life on the shop floor. Employees are often focused on delivering a result: getting parts on time, fixing a machine, or ordering what’s needed to meet a tight deadline. In that moment, spending efficiently can become secondary.
Take it from NTMA President Roger Atkins. After growing up in his father’s machine shop and running several manufacturing businesses himself, he’s seen firsthand how easily costs can spiral. And he’ll admit, he was once a culprit. In one instance early in Roger’s career, he ended up overpaying for rivets when he ordered 50 at the cost it normally took to order 500 rivets! This and other lessons taught Roger that unchecked spending—even with good intentions—can add up quickly.
Rethink Budgeting: “Spend Money Like It’s Your Own”
Our biggest piece of advice on how to run a machine shop that’s profitable? Instill the following principle in your team members: “Spend the company’s money like it’s your own.” Encourage employees to ask themselves if they would pay that cost if it were coming out of their own pockets. It’s not about micromanaging every transaction—it’s about education, empowerment, and accountability.
Consider implementing clear policies, such as:
- Purchase order thresholds and approval levels
- Budgeting forecasts (and variance tracking)
- Team training on procurement, including cost-cutting best practices
- Guidance on how to identify discounts, when available
Heed These Hidden Money Pits
In pursuit of manufacturing efficiency, owners and managers often focus on machine uptime, programming improvements, or Lean processes. But how often do you analyze your spending process with the same level of scrutiny?
A few overlooked areas where money may be slipping away include:
- Inventory management: Do you have too much tied up in raw material or parts you’re not currently using?
- Vendor selection: Are you paying more than necessary out of habit or convenience?
- Procurement patterns: Are employees buying items in small quantities that cost more per unit?
- Shipping: Are you missing out on discounts by not consolidating shipments or joining cost-saving programs?
When you take the time to track where the money goes, even small adjustments can lead to big gains on your bottom line.
Remember: A Budget Is Not a Blank Check
One common misconception in companies across all industries is that a budget is there to be spent. In reality, budgets are planning tools, not shopping lists.
Just because you have a certain dollar amount put aside to spend on equipment or tool upgrades does not mean that you need to reach that threshold. Instead, staying under budget offers some flexibility if something changes or goes wrong, like a big new order or machine breakdown.
Lead By Example With Smart Spending
The fact of the matter is that your team will take cues from your leadership. That’s why it’s important for machine shop management to model the financial responsibility they expect from others.
Here at NTMA, we still remember the time that our president Roger stayed at the cheapest motel money could buy on a business trip. We’re not snobs by any means, but this place was barely habitable. By watching our leader make cost-conscious decisions, the rest of us felt encouraged to follow suit.
Now, we certainly aren’t telling you to go to this extreme. But if your employees see you being thoughtful with expenses, they’re more likely to do the same.
Lean Into Your Manufacturing Network to Unlock Savings
As a member of NTMA, your manufacturing business has access to exclusive cost-saving programs. Through partners like PTSolutions, Grainger, and FedEx, you can cut costs on tooling, shipping, and other things you’re already spending money on.
NTMA membership offers you the significant benefit of leveraging group buying power to reduce overhead spending. Be sure to encourage your team to use these benefits; it’s a simple but powerful way to reduce waste and increase margins.
Follow the Money and Take Control
By taking control of your business’s finances and tracing every dollar’s path through your organization, you can uncover opportunities to save, streamline, and improve from the inside out.
Approach your spending like a production process in your shop: refine it, optimize it, and train your people to approach it with care. Because when you’re more intentional about your resources, you’re setting up your company for long-term success.
Join NTMA to connect with our vibrant community and take advantage of our cost-saving perks!