Effectively screening new projects

One benefit of a slow economy is the “weeding out” of weaker competitors, increasing business at stronger machine shops. While new business is welcome, increased RFQs require more time to review and may soak up valuable resources—particularly if the quote itself turns out to be a waste of time. Having a system in place to minimize wasted effort is essential and something I’m still tweaking.

With many U.S. companies seeking domestic manufacturing sources, an abundance of potential work is being thrown our way. Many prospects offer tantalizing stories of market potential that could make a shop owner or manager wealthy—at least after the prototypes are done. It goes something like this: “Once our customer approves the test parts, order yourself that new BMW because whoever has the wisdom to partner with us will generate millions.” Sounds wonderful, but once you sign that nondisclosure agreement and receive the drawings, it’s common to discover that your original assessment didn’t include days of drawing corrections, reengineering, phone calls, e-mails and personal visits.

All shops need employees spending time on revenue-generating tasks, but if you can’t promptly screen, quote and respond to RFQs, new business won’t be part of your desired growth pattern. One way to effectively filter valid opportunities from ones that will just waste your time is to require an up-front payment to cover prototyping costs, even if the customer doesn’t think the part is a prototype. If the project pans out and turns into a dream contract, fine, you can credit back some or all of those original prototyping fees. But, if it’s another one-time project that never gains lift-off status, then you’ve at least recaptured some or all of the engineering, development and quoting time. 

To get tasks off their desks, many customers send the minimum amount of information they can get away with. If the caliber of drawings and designs are poor, engineering and quoting can easily become a major drain on resources. Carefully scrutinize a new client’s drawings and requirements before accepting their lofty explanations. Remember that providing unclear or unreasonable specifications is common even with larger, more sophisticated companies. 

On the upside, you could reap repeat business from many of these projects simply because your service includes an unstated level of QC on their drawings and designs. If your team catches potential errors or overzealous engineering criteria, a long-term relationship could result. But make sure you get paid to provide this valuable service. 

Even if you believe your client’s assurance that all the information they’ve provided is accurate, you’re likely to find uncertainty and confusion hidden amongst the rosy scenarios. Dig deeper to verify you’re not taking on an unprofitable project. If the repeat potential is validated, perhaps it’s worth taking such a job and working with the prospect through the manufacturing process. But, if you know up-front that it’s going to require an inordinate amount of time and distract you from more profitable activities, just say no. Your assessments won’t always be 100 percent correct, but minimizing costly misjudgments can help your bottom line. 

In addition to filtering out suspect RFQs, you may also want to consider quoting “with conditions” to cover potential unknowns. You should also get a credit report on new clients to ensure their time-consuming quotes will be financially worthwhile.

In 2011, our shop swerved into a couple of draining and costly projects because we thought there would be long-term potential. However, we eventually discovered that pushing back other jobs to pursue those projects wasn’t worth it. We learned from our mistakes and hope to benefit from our improved approach in 2012.