Real-World Manufacturing Lessons From a Failing Business

Watch out for these all-too-common ownership traps

Image by Grok

I’ve been doing some consulting to find small manufacturers that might be a good bet for my small investment firm client. One business currently for sale that I looked at turned out to be an object lesson in some typical ownership land mines.

It was a small machine shop outfit with a couple of locations. It had negative earnings last year and had been declining for several years.

I dug into what was going on, and learned this:

• The founder/owner had run the business until about five years ago, then turned it over to his two kids

• Neither of the kids could actually run the business, so the dad had been backing them up

• The business had been surviving on contracts with one of the big automakers all its life

• Its “diversification” strategy was to make subcomponents for suppliers of that same automaker

• The longstanding contracts with the big company had dried up, and the whole business was running at 10% of capacity

• Nobody but the owner had any sales expertise, and his was limited

• There was no actual recovery activity happening—just a plan on paper

This is an actual true story. I stress that because it’s so full of the common pitfalls for SME manufacturing owners it woud be comical, were it not so real-life tragic.