Business Plan 2016

Owned By:

Sean Alderman
3508 N SR 7
Madison, IN 47250
(P): (812) 493-9943
(E): sean.hdm@gmail.com

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Table of Contents

Executive Summary…………………………………………………………………...…3

General Business Description……………………………………………………………4

Products and Services……………………………………………………………………5

Operations and Manufacturing…………………………………………………………..7

Marketing Analysis and Strategy……………………………………………………….10

Management Plan……………………………………………………………………….13

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Executive Summary

Hi Def Machining, LLC is a start-up machining company located in Madison, Indiana. We are
developing this plan in order to obtain financing for our equipment. This will allow us to carry
out our mission of being a leader in new technology and providing the highest quality service to
each customer.

1.1 Business Name & Location

Hi Def Machining, LLC

3508 N SR 7
Madison, IN 47250
Entity Type: Limited Liability Company
NAICS code: 33271

1.2 Scope of the Project

Although Hi Def Machining, LLC is brand new, the expert knowledge brought on by the
partnership of four individuals with over 60 years of machine shop experience will be the key to
the company’s success. Hi Def Machining will provide quality customer service with cutting
edge technology to its customers.

1.3 Industry Trends

Machinists’ post recessionary recovery has been strong and is expected to continue. Industry
revenue is expected to increase at a rate of 3.0% in the next five years, to $52.8 billion. There is
also a growing industry demand in markets such as: automobile manufacturing, commercial
aircraft manufacturing, and metal forging.

1.4 Overview of Financials

Partners of Hi Def Machining will invest a total of $50,000 into the business. The total start-up
utilities down payment is $2,500. Total rent for the building will be $1,200.

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General Business Description

2.1 Mission Statement

Hi Def Machining strives to provide the highest quality service to each customer and focuses on
being a leader in new technology. Continuous improvement and customer satisfaction will be our
top priority.

2.2 Legal Structure

Hi Def Machining is a limited liability company.

2.3 Company Future

This is a new company to the area of Madison, IN. Our company is a partnership of three
individuals who have over 60 years of machining experience working from local machine shops
throughout Madison. We plan to take our experience and knowledge and apply it with new
technology.

Strengths: Our facility size and extensive capabilities will allow us to produce every order
efficiently. Combining advanced technology, low overhead, and a level of expert knowledge in
machining will allow us to provide the highest quality and most competitive service in the area.

Weaknesses: Due to the wide range of capabilities that established machine shops offer, our
start-up business will be limited to specific services.

Outlook: Safety, Quality, and On-Time delivery will be the key process indicators that drive our
continuous improvement of our quality management system. Our customer needs will drive the
growth of the company.

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Products and Services

The products and services Hi Def Machining will offer are, but not limited to:

 Design  Engineering Changes

 Reverse Engineering  Grinding
 Laser Inspection/ Digitize  Heat Treat
 CNC Milling/Turning  Polishing
 CNC EDM  Prototype Tooling
 Die Build  Fixtures
 Die Repair  Gauges
 Die PM  Coatings
 Die Supplies/Punches  Stamping

Milling and Turning are the top two services in this industry at 41.3% and 24.4%, respectively.
Customers will request quotes on products or services that are already designed or in some cases
request design and engineering. After receiving a purchase order, Hi Def Machining will order
materials, program the CNC equipment, and machine the details to match the customer
requirements. A final inspection will be done prior to shipping the product.

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3.1 Product Cost and Margins

Our services will cost approximately $35/hour and we will sell them at a price of $75-100/hour.
The average cost of material will be 20%, freight will cost 5%, and labor will cost 30% of the
sale and taxes. There will be a 10% tax at the time of the final sale.

As an experienced machinist and salesman in this field, Sean Alderman, the owner, has learned
the associated costs and the competition's pricing. It is our goal at HDM to offer the best service
at the best price to our customers. Each variable of our business will be priced at a level that is
less than our competitors. HDM believes that the market in which we serve is driven on pricing,
quality, and delivery. HDM plans to reach a level of consistent sales that maximizes its capacity,
thus driving overhead percentages down. We believe that we can reach our goals by using
penetrating pricing techniques combined with elite services. Each customer requires a different
level of commitment and thus requires a good relationship with their buyers. Our price will beat
our competition in any 3-way quote, which is great practice in most businesses.

3.2 Pricing Strategies

Regardless of the price set, we know what the market is willing to pay and we know the
difference in range from a small garage shop, to a full-scale tool shop. Our goals will be driven
off of profit margins at the level of our best competitors. We will strive to be an elite service in
the industry with building great relationships from it. With over 60 years’ experience poured into
the company, we have a significant competitive advantage over our competition.

HDM's pricing objective is set to maximize margins by improving our skills and capabilities. We
do not feel that it is fair to charge our customers more due to our inabilities to meet our marginal
goals. Most materials will be made from steel, plastic, aluminum, and various other ferrous
and nonferrous materials. Most labor will be done by experienced machinists defined by the
required steps routed by the production manager.

3.4 Shipping Issues

As an added benefit, HDM will utilize the shipment technique that puts our salesman in front of
our customers upon finishing each job. We will treat our shipment of products as a quality of
service enhancement that utilizes two positions at once, sales and delivery. HDM will utilize
product shipments as a strategy to increase sales by hand delivering each product by the
appropriate account sales contact.

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Operations and Manufacturing

Hi Def Machining plans to rent and utilize a commercial building located at 3508 N SR 7 in
Madison, IN. This building has a total square footage of 3700 sitting on 6.76 total acres. This
location will be perfect for HDM to carry out its services. *The end of this document includes
images of the location.

HDM plans to risk location exposure at the expense of saving customers money in return. It is in
HDM's best interest to be located as desirable as possible without influencing a high overhead
cost. In most cases our customers will not visit HDM's facility; however HDM will visit our
customers, so location is not a requirement. Parking will be free and available at all times. Public
transportation will have access to the facility. The business model used includes: taxes, laws,
utilities, and zone incorporating the state and local government's involvement related to
expenses. HDM would only benefit if an unplanned qualifying site reduces variables of cost
associated with location. Days/hours of operation include: Monday through Saturday 6am-2am.
HDM’s facility will offer a full parking lot for employees. We will also provide shipping and
receiving departments, which will include: access for semis, access for storing goods, and
loading items.

4.1 Labor Requirements

As a startup company, all owners will be in charge of various duties. However, as the company
grows, the following job titles will be held accountable for their roles.

 General Manager: Focuses on the company as a whole and decides on capital expenses,
goals, strategies, and major issues. The GM will also coordinate the accounting/payroll
duties.
 Sales Manager: Focuses on the customers and manages the relationship between the
customer and production.
 Production Manager: Focuses on safety, quality, and on-time delivery in that order.
Responsibilities also include: supervising, scheduling, efficiency, and accountability.
 Machinist: Each machinist will utilize their skills to provide the services needed to meet
our customer's request.

We will start out with one shift and work overtime as needed to meet our customer's deadlines.
At a future date, based on company performance, we will add one or two night shifts to take
advantage of our open capacity. Shifts will typically average 8-12 hours a day. Machinists are
very educated and talented individuals, which is why most decisions will be decided by those
who are affected. HDM will remain small enough in the workforce to decide on most issues as a
group if needed or by the individuals. Most services are performed by HDM's full-time
employees. However, services outside of our capabilities will be subcontracted to qualifying
vendors. To be the most competitive in our market, HDM will hire and train the best talent in the
area. It is also a goal of HDMs to provide the best employment for machinists in the area. HDM
will strategize to improve the talents of the Machinists and acquire likeminded individuals that
work together to meet a common goal.

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Features: HDM's workflow is designed to flow product and services as efficient as possible with
an expectation on measuring results only.

Benefits: HDM's workflow will benefit the customer by eliminating non-value added work.

4.2 Manufacturing Plan

Equipment: Saw, lathe, wire machine, heat treat, grinder, trucking equipment, software, faro
arm, crane, and a fork lift. Equipment: See attached equipment list.

Materials: HDM will require materials at time of services only. Suppliers in the tristate area will
provide 99% of the materials needed to service our market. In almost all cases, materials will be
shipped to HDM's location. Payment terms will vary at first with suppliers, and then typically set
to a net30 or net45.

Supply and Receiving: Due to the nature of the service, suppliers are available to all territories.
Most of the supplies needed to service our customers will involve tooling machining related
items. The average cost of tooling is usually about 3% of revenue. The production manager will
decide when and how much to restock in inventory based on usage and projections. The GM will
approve all purchases over $500.00 until changed. HDM's purchasing process will include a
minimum of 3 quotes per order and continuously measure the performance of each supplier. In
many cases, prices for tooling will be negotiated annually and a contract to retain pricing is
upheld. Suppliers may offer price differences based on order quantity and timing. It is in HDM's
best interest to order supplies in abundance if applicable to reduce costs. Credit terms' are
typically net30 to net45 from most suppliers. HDM anticipates suppliers to request payment in
full at the beginning to mitigate their risks. Credit costs are not applicable to HDM at this time.
Suppliers are chosen off of quality, delivery, and pricing. HDM will utilize a KANBAN system
to track inventory.

Production Method: HDM will use the quoted method of service to produce the product, unless
otherwise suggested during the process by the production manager. HDM has already started
producing products to a few of their customers; however production by HDM begins upon the
arrival of the equipment and installations. During the process, a percentage of services performed
will result in non-conforming products. Corrective actions will enforce the control of the
immediate problem and also provide a tool in solving the problem long-term. The production
manager is responsible for quality control. The manager may elect to do it all personally or
designate an employee. Inspection will be the final step in every job we do. Quality is a key
process goal and starts at the highest level and will be communicated to all employees. HDM
will track and monitor customer comments through questionnaires, emails, phone calls, surveys,
and one-on-one conversations. HDM will also provide an electronic record of every final
inspection to the customer/buyer at the time of inspections. HDM will lead the competition with
their inspection process. To control quality and product conformity, monitoring and measuring
equipment will be validated at pre-determined intervals for accuracy and the product will be
measured at each step of the process. A final inspection utilizing a laser faro arm will ensure the
product meets customer requirements. Records will be supplied to the customer after inspection

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as an added benefit to increase customer satisfaction. The product’s lifespan will vary based on
the application.

4.3 Technology Plan

HDM will use computers for almost every position within the company. To
provide flexibility and increased access to information, HDM will mostly utilize portable
computers instead of desktop computers. HDM plans to be a full scale cloud network, allowing
access to data on the go. The cloud network will also take care of our server and backup needs as
well. Each department will have a printer as needed.

HDM plans to consolidate software were applicable. HDM plans to use 1 service for CAD and
CAM, which is typically 2 or more different software’s. HDM also plans to use 1 software for
accounting, purchasing, quoting, invoicing, and payroll. Communications will be used through
google services and g-mail. Cell phones will replace the typical need for a telephone system.
Faxes will be managed through an email account. Mobile phone service will be provided as a
benefit to the management staff of HDM. Internet access is also included in HBM's monthly
expenses.

4.4 Insurance and Risk Management

HDM will have property, liability, auto, and worker's compensation insurance during the first 2
years. As business grows, it is likely that HDM will provide a health insurance plan to their
employees and family.

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Marketing Analysis and Strategy

The tool and die market has been inclining each year after 2008 and 2009. It is likely that the
auto industry will make a lot of changes to their vehicles over the next 5 years. The life cycle of
the service HDM supports will be around until the United States stops manufacturing all
together. The projections of the industry are right in line with any auto or appliance company's
projections. Due to the fact that HDM is mostly a service and not a product, it eliminates the risk
of losing business due to the products life cycle. Automobile manufacturer demand has increased
during the past five years, which has bolstered demand for machine shop services. This sector is
20.9% of the major market segmentation for the industry. Demand from car and automobile
manufacturing is expected to increase in 2015.

During the next five years to 2020, the Machine Shop Services industry is expected to build on
its recent growth due to the continued expansion of most of its major downstream markets. With
the exception of defense spending, indicators of downstream demand are forecast to improve
over the next five years. As a result, industry revenue is expected to grow at an annualized rate of
3.0% to $52.8 billion during the next five years to 2020.

5.1 Description of Total Market

HDM's customers range from large manufacturers to small facilities that compliment the work
we do. Most buyers will issue a purchase order and pay with checking accounts. It varies the
abundance or regularity of a customers purchase. Some of HDM's customers, base their
purchases off of yearly sales projections and volumes. HDM's customer list will change over
time, as contacts move from position to position or job to job.

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5.3 Demographic Profile

HDM will serve the geographical area from Michigan to Tennessee, which captures the majority
of the market clients. Climate conditions will have very little impact on HDM's market.
Consumer information and trends: the consumer is usually a company and not an individual. So
the trends of age, sex, and other demographics do not apply.

5.2 Customer Type and Geographic Location

HDM's most desirable customer would be in the stamping business. These customers have the
need to build dies, repair dies, sharpen dies, modify, and buy new details. I anticipate capturing
less than .5% of the market. The market is very big and HDM will not make much impact as a
whole market percentage. HDM will attract customers who are looking for the best sourcing
option for their machining needs. The market of tool and die is very closely related to the plastic
injection mold market as well. HDM plans to expand into the plastic injection mold market in the
future.

5.4 Business Information and Trends

Similar type businesses range from 5-125 employees, most of which are in the private, small
business class sector. Revenues, years in business, employees, square footage, and ownership
varies from business to business. There is a trend between the number of years in business and
the size of the companies. The older the company, the bigger the company tends to be. Most
customers are fulfilled and seem to be conservative and concerned with quality, delivery, and
pricing.

5.5 Competitive Analysis

Again, HDM provides a service, thus minimizes the risk associated with competitor products.
The competition is rarely the same from customer to customer. Competition varies with each
customer based off of their closest suppliers. Most competitors are very steady and increasing
going in to 2016. HDM's service differs by the knowledge and experience at the head of the
company. HDM is a partnership, which gives more support to the customers. HDM will utilize
leading edge technology that puts them at the forefront with their competitors. Business will be
won from our competition by providing the best quality, delivery, and pricing.

5.6 Marketing Plan

HDM will strategize and focus on the customers we feel give us the best opportunities. The sales
team will focus on new business each day and continue to push the envelope. A large network of
customers is all part of the experience HDM gets from its management team. We will certainly
plan to include: brochures, emails, websites, networking, and social media to assist with
marketing.

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5.7 Distribution Channels

The distribution process will consist of HDM's salesman meeting and gathering information
from the buyer. Information may come as an email, phone call, fax, or one-on-one conversation
between the two. This is very common throughout the industry relating to our services. The costs
associated with distribution are: the salary of the salesman, travel expenses, and customer
entertainment.

5.8 Social Media

Most customers looking for our services do not utilize social media to make their decisions,
although HDM will have a website for company information.

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Management Plan

Collectively the owners will decide the strategies moving forward. Sean Alderman will make the
final decisions. The key managers are also owners and are responsible for their individual roles
with the company. Each owner has been a leader or manager in the industry prior to HDM. The
most important skill is the ability to learn from others. Each partner feeds off of the others talents
and continues to push the envelope in order to succeed. The combined years of experience equal
60+ years in the trade. Each manager is able to direct and motivate employees as needed. Each
partner has a great level of confidence with the inspiration of dreaming bigger. The partners will
be compensated for the work done and for the profits the company makes.

 General Manager: Sean Alderman

 Productions Manager: Andrew Webster
 Machinist: Chance Cole

6.1 Professional Service Providers

 Attorney: Mark Wynn—Madison, Indiana

 Bankers: MainSource—Madison, Indiana
 Accountants: Sherman, Barber, and Mullikan—Madison, Indiana
 Insurance:
 ISBDC Advisor: Julie Rigrish---New Albany, Indiana
 Outside Consultants: Kyle and Cheryl Lyon

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 Appendix (Start-up Costs)

Equipment List (with down payment cost):

Item Down Payment

Mill $5,700.00
Lathe $4.200.00
Tool Holders $1,000.00
Perishable Tooling $1,000.00
Heat Treat Oven $1,000.00
Air Compressor $500.00
Manual Grinder $500.00
Fork Truck $500.00
Bead Blaster $250.00
Computers $200.00
Drill Press $100.00
Vices $100.00
Oil and Coolant $100.00
2-4-6 Blocks $15.00
Air Hoses $10.00
T-Slot Clamps $10.00
Grinding Vice $10.00

**See attached equipment sheet for smaller pieces of equipment needed, with no down
payment costs.

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Location Images

3508 N SR 7
Madison, IN 47250

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