Don’t Miss Out On Powder Coating Profits
Are you looking for a business opportunity that will provide financial rewards without a huge out-of-pocket risk?
Are you already operating a fab shop or doing metalwork at your facility? Maybe you’re running a collision repair business or have a custom car, truck, ATV, or motorcycle shop where adding services could capture new business.
Perhaps you’re an entrepreneur looking to start a new business from scratch.
If any of these describe you, launching a new powder coating operation might be a smart business move. Powder coating shops are thriving across the United States and Canada. In many areas, the demand greatly exceeds the capacity of local shops that perform powder coating work for outside customers. If you already have a business where coating could add value, performing powder coating in-house can increase your profits and reduce the headaches associated with sending parts out for coating.
Since 2005, Reliant Finishing Systems has helped over 1,000 small businesses launch professional powder coating operations. The most successful of these companies all have something in common–they invested in Reliant finishing equipment that was appropriately sized for the results they wanted, they make sure their equipment stays clean and well maintained, they use high quality powders and expendables, and they do what it takes to recruit and retain talented, thoughtful employees.
With a little knowledge and the right equipment, it’s easy to start a new powder coating shop that can succeed for years to come. By providing professional quality coating services that meet the needs of a variety of industries, powder coating facility owners can take advantage of a growing market and create a profitable and sustainable business.
Why Is Powder Coating A Smart Choice?
Starting a powder coating business or adding in-house powder coating capabilities can be a lucrative and exciting venture for any businessperson. Powder coating is a steadily growing market that offers a wide range of sales opportunities across many different industries. As new regulations compel businesses to reduce harmful emissions, environmentally friendly technologies like powder coating are replacing older technologies like wet painting.
From fishing lures and alloy wheels to industrial machinery and agricultural equipment, there is no shortage of products that can benefit from a powder coated finish. There’s also no shortage of demand for coating services, especially in the aerospace and industrial powder coating markets.
As a new business enterprise, a powder coating start-up can offer significant growth potential to a motivated businessperson. As an add-on service for an existing business, powder coating generates increased business traffic as local customers learn of its availability. Although many professional powder coating businesses are still relatively new, it is easy to build a roadmap to success by observing the recent successes and failures of other shop owners.
Why Doesn’t Every Shop Succeed?
The powder coating process has been around for decades, particularly in the industrial market segment, but it was unknown by the average person until only a few years ago. Much of its recent popularity is linked to the countless “reality” shows where custom auto, truck, and cycle builders powder coat everything from valve covers to custom wheels to race car frames as part of their work.
Unfortunately, some of the start-up businesses created in response to this relatively recent interest in powder coating failed due to a lack of basic business knowledge and because they made poor choices about how to outfit their new businesses. Below are four common pitfalls that need to be avoided on your path to powder coating success.
Pitfall #1: Not Having A Comprehensive Plan For Success
Starting a powder coating business or adding a powder coating operation to your current business will be a significant investment, so it’s essential to understand your local market, anticipate customer demand, and then purchase the equipment you’ll need to operate your business profitably. Here are some key considerations as you develop a plan for business success:
Market & Demand: You need to clearly identify the sales opportunities that exist in your area, including the types of businesses and organizations that can propel your business forward if you provide powder coating services to them. You need to have a thorough understanding of the sizes and shapes of common parts these customers may want to have coated. You also need to understand how to do business with the companies and government entities that will be supporting you.
Competition: Learn everything you can about the competing powder coating shops in your area–lead times, what they charge, their strengths, their weaknesses, etc. If you think your area includes everything within an hour drive, do homework on every coating business within a three-hour drive. We constantly see powder coating customers haul parts an extra hour or two to get the service and pricing they want. Once you have a clear picture of your competition, you can develop a plan to differentiate yourself from them via service offerings, pricing, work quality, lead times, or whatever meshes with your business model and gives you a selling advantage.
To maximize your profits, it may be best to choose a balance between doing mainstream work (including walk-ins) and performing more lucrative niche services. Niche business happens when you target specific local industries or customers that need very specific powder coating services, but local providers aren’t meeting their needs. Examples of niche business opportunities would include coating large parts or parts with unusual dimensions, like 42’ long trailer rails or 10’ round agricultural mower bodies. Niche powder coating business opportunities might also involve coating parts that require multiple coats of powder to reach high mil thicknesses, coating parts that have complex masking requirements, or coating parts that must be fast-tracked and returned to service within a matter of hours. By offering niche services your competitors can’t or won’t, you help assure your profitability and future business success.
Space: You’ll need enough space to accommodate your powder coating equipment, provide efficient workflow, protect the safety of your employees, and comply with regulations. What many people fail to grasp is the amount of space required for the “inactive” phases of powder coating.
You aren’t just coating and curing the parts! First, the parts are staged and hung from racks or loaded onto a conveyor. Then the parts are prepped. This is often done by washing with chemistry designed to make the surface more receptive to powder coating. In some situations, blasting may also be required. This can be done separately from the rest of the coating operation, but in the most efficient layouts, blasting and washing/chemical pretreatment are done as part of a multi-step process where the parts move from station to station, either on rolling racks or by conveyor. The more pretreatment steps you need to accommodate the various parts you’ll be working with, the more space you’ll need. After the parts are prepped, they may need to be force dried to prevent flash rust. The dried parts are then staged for coating. Once coated, the parts are moved to the curing oven and processed. Once the powder has cured, the parts must cool down before being handled. Once the parts are safe to touch, they’re removed from the coating area.
As you can see, the parts have several steps throughout the powder coating process where they are not being actively processed or handled. During these steps, the parts will require staging room or they will end up in the way. Your best bet is to consult with one or more established coating systems providers, like Reliant Finishing Systems, and have them provide a layout drawing that integrates technical details about their coating equipment with a scaled drawing of your building. This can help you visualize how much room the equipment requires. It also helps you consider factors like the turning radius of your parts rack while you are fine tuning the location and specifications of the equipment you are about to order.
Budget: It’s important to set a realistic budget and consider all associated acquisition costs such as gas plumbing, exhaust ventilation, electrical service, and installation labor expenses. Professional quality powder coating equipment can be expensive, but it’s worth it. Don’t risk your business success by buying used equipment or hobby-grade appliances sold by online sites that prey on eager industry newcomers. Buy the largest, best quality powder coating equipment you can afford and make sure you have room to operate it efficiently.
You also need to have an ample budget for your shop labor. Just like you can’t expect a cheap hobbyist powder coating gun to match the performance of a brand name powder gun from Wagner, Gema, or Nordson, you can’t expect unskilled or semi-skilled workers to instantly turn out professional grade results with the equipment you buy. Powder coating requires technical expertise, so it’s important to hire and retain well-trained and experienced employees to operate the equipment efficiently and profitably.
Plan For Quality: Nothing can make or break your reputation faster than turning out shoddy work. Prevent this by planning ahead! Budget for skilled employees, professional quality powder coating equipment, and brand name powder coatings and prep materials. This will help assure that your finished products are of the highest quality.
Successful powder coating shops know how important it is to provide premium quality work. When talking with companies that outsource their powder coating, the number one factor they cite when choosing a coating supplier is almost never price. In some cases, turnaround time or the ability to coat large parts may be the deciding factor. In almost all other cases, coaters are chosen because of the quality of their coating workmanship and the level of their customer support.
It’s important to deliver the best products you can and have quality control measures in place to guarantee customer satisfaction. This isn’t just true with business-to-business coating jobs. Click here to learn about a young entrepreneur who used quality workmanship to build a booming international powder coating business with a customer base filled with pro athletes, celebrities, and business executives.
By forming a thoughtful plan for success, you can make better decisions about the finances, location, personnel, and equipment you will need to successfully launch your new powder coating business or add powder coating services to your current operation.
Pitfall #2: Buying A Coating System That Is Too Small
No customer ever comes back to us saying they wish their equipment was smaller. Fortunately, our booths and ovens are modular in design, so it’s possible to increase the size of the appliances if needed. We sell numerous expansion kits each year to customers who come to realize they should have bought larger booths and ovens, as well as companies that started small and have grown to where they can now afford larger appliances than when they first started.
Many of the unsuccessful coating shops opened in the last few years were started by enthusiasts who were focused on only certain types of powder coating projects. These were typically guys who were into welding, fab work, hot rodding cars, and enjoying the outdoors. They were fans of reality shows that glamorized that lifestyle and featured impressive examples of that kind of work. As a result of their hyper-focus, these new shop owners failed to think big.
On the surface, their decisions didn’t seem unwise. They could buy a small 8’ x 8’ x 15’ oven from a small company they found online for less than half the price of a 10’ x 10’ x 30’ oven from an established well-known manufacturer like Reliant. They could easily coat rims, truck frames, and machine parts with the smaller oven, so that’s what they bought.
Unfortunately, we have heard the same sad story countless times: A big customer from a nearby area has several loads of parts that need to be coated for a special project, but they are too big to fit in the budget-priced oven the new business owner chose. So, the customer ends up trucking his parts a couple hundred miles down the road to the shop with an industrial-duty 10’ x 10’ x 30’ oven and the new coating shop loses thousands of dollars of revenue. After enough of these missed opportunities, the new business is on the ropes.
Pitfall #3: Not Having A Plan For Capturing Profitable New Business
There’s another issue that can hamper your success if you don’t account for it before you start your powder coating operation. Unless you are in a busy metropolitan area, there are only so many steel truck wheels, alloy rims, cycle frames, lawn chairs, car parts, and small job shop parts in need of coating on any given day. Without a long-term bulk coating contract or an influx of large or complex parts, it is entirely likely that your shop will have the ability to coat all the small jobs you’ve sold in only a couple days a week. If your coating equipment is sitting idle, it isn’t making you money.
A lack of business understanding caused a small number of powder coating start-ups to fold in the last five years because their equipment wasn’t operating enough hours each week. If the owners had done a better job of attracting larger jobs (such as refinishing agricultural equipment for local farmers) or selling bulk coating projects with high piece counts (like powder coating 2,400 sets of lunchroom table legs for a county school board contract), they might still be in business.
It is critical that you investigate every potential customer in your area. Think outside the box. Touch base with any business that might benefit from powder coating certain parts or assemblies. Even businesses that coat in-house sometimes use outside coating vendors to handle excess coating work or address specialty coating needs. Along the same lines, companies that are currently doing wet painting in an industrial setting also sometimes make great clients for powder coating because of the benefits it offers over conventional painted finishes.
Many coaters work to get contracts in place before they open a new facility. This helps mitigate the risk of starting a new business, and the customers who guarantee a certain volume of work get the advantage of discounted pricing. Be sure to have a plan in place that will help assure your initial sales success rather than finding yourself having to scramble to find new sales opportunities.
Pitfall #4: Being Too Cheap For Your Own Good
One of the main things that separates successful powder coating shops from those that have either failed to grow or have gone out of business is the different level of business devotion shown by the owners and managers. In particular, the difference between the people who take intelligent risks and run their businesses like their lives depended on it and those who operate their businesses like they’re hobbies. This isn’t always tied to how hard people work, but rather how they deal with the opportunities in front of them and how they utilize their company’s resources.
Let’s look at what separates the two types of operations. A primary indicator is how the owner(s) go about spending their company’s money. The successful shop owner performs his own research and checks out numerous references before he buys a quality powder coating system from a reputable manufacturer. He makes sure it includes blasting and/or chemical pretreatment equipment so his coaters can get good powder adhesion. He also buys name brand powder, makes sure his guns are properly adjusted, hires skilled operators, and keeps his finishing equipment well maintained.
At the other end of the spectrum, you have the owner who asks around in a chat group or calls a couple “get rich with powder coating” websites and lets a fast-talking salesperson convince him to buy one of the small, inexpensive equipment packages they offer. He doesn’t really take metal prep seriously and decides to hold off on getting a pretreatment system. Instead, his employees use a bug sprayer to apply a one-step cleaner. Once the part dries, his company uses unreliable hobby guns to apply cheap mail order powder. Rather than hire experienced coaters, he either does the work himself as he has time or hires unskilled labor–often family members. Since they don’t have adequate skill, they turn the powder gun(s) wide open and spray powder everywhere. This approach wastes an extraordinary amount of powder and causes quality issues when dealing with Faraday cage areas. It also clogs the booth’s filters prematurely and increases the costs of maintenance and clean-up.
Both business owners may be working equally as hard, but the outcomes they are getting are very different. The savvy owner/investor spends his money wisely, while the unwise owner takes shortcuts on the front end that wind up costing him in the long run.
Hours of operation also help predict a powder coating business’ success. The most successful powder coating businesses have regular daytime hours Monday through Friday, and some are open on weekends. Some coating operations also run more than one shift. In contrast, the less successful businesses are open sporadically, usually depending on how much work they’ve sold.
This creates a self-fulfilling failure situation. At a time where people are used to getting nearly instant responses from businesses via phone and online messaging, not being readily available during normal business hours can be the kiss of death. If the shop is open only when work is being performed, operating hours will shorten whenever the workload declines. If the sales counter is being manned by the same people who do the work, the situation is even worse because when new sales are taking place, no work is getting done in the shop. This cycle goes on until the business cannot sustain itself. Because the owner was not willing to invest in the manpower needed to keep the business office open for weeks or months without new income, the business can only succeed minimally or fail outright.
This self-hampering business approach is linked to another indicator of potential coating shop success: the company’s sales philosophy. Successful shops value their salespeople and recognize that the most valuable thing they can do for their company is sell, sell, sell. Shops that fail to thrive rarely have gifted, well-compensated salespeople who are totally focused on selling. Instead, they’re often order-takers who don’t really know how to sell. Making the situation worse, they’re also usually workers who have to wear numerous other hats.
You can’t have explosive growth if you have the same people advertising the work, pricing the work, selling the work, doing the work, handling the banking and bookkeeping, delivering the work, handling customer service before/during/after the sale, and advertising, pricing, and selling the next job.
There is no work to be done and no profit to be made without first making a sale. Unless an adequate budget is set aside for sales and support personnel, a company’s success is going to be limited.
Is It Really That Simple?
This article is filled with examples based on case studies of businesses we’ve encountered over the past several years. Some were customers and others were companies who only wanted our advice. Happily, Reliant Finishing Systems has provided dozens of our customers with multiple systems over the years to help accommodate their growth.
If you’re considering starting a new powder coating business, bringing coating in-house at your facility, or adding powder coating services to attract new customers, you’re making a smart business move if you plan for success and operate accordingly. Look to the successes of others for guidance on how to get your coating operation off to a great start while avoiding the bad behaviors that led other companies to failure.
We Can Help!
Contact one of our highly-trained system specialists at (256) 355-9000 to have them help design the system that is just right for your needs. We also provide a wide range of help to troubleshoot or update your existing system to help it run more efficiently and profitably. Call us and find out what we can do for your business.