Does anyone have experience rolling up machine shops? Curious to hear about feasibility / challenges and risks.
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Strengths:
- Moderate barrier to entry
- Opportunities for improved automations
Weaknesses:
- Heavy WC needs
- Significant cyclicality
-High CapEx
-Overseas competition
- Requires skilled labor force
A few questions to ask:
- How new is your equipment
- What is the customer concentration
- How often are machines upgraded/maintained?
- How have you hired skilled machinists?
- Have you taken advantage of technology/automation improvements?
- How has your customer base changed over the past 5 years? (Thinking about trend towards overseas)
- What are your AR terms?
- How is inventory managed? Is any obsolete?
- Are gross margins at least 35%?