Bennett's Machine Shop

Bennett's Machine Shop Inc.

Introduction

In 1975, Pat Bennett made a life changing decision. His entrepreneurial spirit drove him to leave a stable career and convert his part-time engine reconditioning business into a full-time endeavor. He moved from a shack next to his trailer home to a small hut that he rented for one month. After renting the hut he moved to a stall in a service station. With neither a business name nor a business license, Pat had little control over parts and profit. When the opportunity came to rent a larger space from a garage owner Pat took it. Here his business continued to grow and there was a need for him to hire a helper. Although he was in the business of engine reconditioning, he hired a premed student. Finally in 1977, Pat's business got a name. He incorporated it as Bennett's Machine Shop, Inc. During that same time he moved the business to a rented building that only he occupied.

From 1977-1979 sales and profits expanded for the business. Because of this Pat saw the need to borrow $80,000 from a bank and purchase a two acre lot. On the lot he built a 4000 square foot building. As the space increased so did the profits. In 1981 he bought 11 pieces of property and added 6000 square feet to his facility. He borrowed another $80,000 to do this. With the increase in space Pat was able to expand his service base to doing over the fender work, engine installations, and repairs. With business going so well, Pat was able to splurge. By 1985 he had a house, a condominium, and 23 cars. During the time of splurging, Pat made the decision to open a new location. The new location was for engine installation only. This endeavor lasted only 14 months. In February 1987 he expanded his business to doing contract work for Boeing.

All of Bennett's services were of a technical nature. Each required the ability to work with tools, and specific machines. Most of the individuals that Pat employed were not hired because they possessed the knowledge, skills, and abilities to do the job. Pat was very hands off when it came to his employees. They worked odd schedules, and many times did what they wanted. Pat was only interested in the bottom line. There wasn't a problem as long as there was money in his pocket.

With the desire for more money in his pocket, Pat borrowed most of the money for his machines and equipment instead reinvesting the money. Most of the loans that he borrowed were not in the company's name but in his and his wife's names. By 1987 Pat was downsizing and seeing red.

SWOT

Strengths

Bennett's Machine Shop Inc. does not have much strength, but they are aware that having service/product diversity is essential and this has given them a competitive advantage in their industry. This notion was apparent when Pat Bennett first expanded his services from engine rebuilding to installations, and then again by undertaking the tool sharpening and modifications contract with Boeing. In addition to recognizing the value of his services and market share, Pat Bennett is also aware of the necessity to perform market research and invest in advertising.

Weaknesses

Bennett's lack of strength is offset by several weaknesses. Although many businesses begin with just one person having an idea for a service or good just as Pat Bennett did, it is not a given that they will succeed. Many businesses fail for the absence of a clear plan of action.

It can be inferred that Pat Bennett possesses the technical skills to perform the job, but does not have a functional business plan in place to operate the business. In addition to other elements, having a plan would have required developing a mission, establishing goals, conducting research for the services provided, researching financing options, and having a clear marketing plan. There is not any evidence that Pat did any research before beginning his business. Because of this poor planning, his organization's structure is weak and his organization's culture is dysfunctional.

Bennett's weak organizational structure has lead to poor materials management. There appears to be an absence of direction and control of inventory and tools. The facility has piles of used engines scattered inside and out. Pat also allows customers to drop off engines around his property giving it the appearance of a salvage yard instead of a machine shop. There is also inadequate space to store parts and tools. Work areas are cluttered creating difficulty when trying to find the tools to perform the job. Had Pat planned when he purchased 11 pieces of property, he may have been able to build a more efficient facility that could accommodate large engines and parts.

The weak structure also exists because of inefficient hiring, training, and retention practices. Pat is under the assumption that the organization would work efficiently by hiring unskilled employees and training them informally for a day or two. He also does not have clear work schedules in place and presumes that the employees are satisfied with the limited benefits he offers; this has contributed to the dysfunction.

He has a shop manager that was not aware that the shop was dirty and lacking parts until he was there on his day off to conduct personal business. There is also the absence of a systematic plan of operations. Just giving an employee a "few pointers" is an example of this. These issues have an affect on the employees' abilities to do there job and ultimately has a negative affect on the value creation process.

The previously stated issues are factors in Bennett's inability to adapt to change. This reality led to the closing of his new shop after 14 months and the mismanagement of the Boeing contract. Proper negotiations with Boeing may have led to a situation where Pat Bennett had more control.

Bennett's has poor financial management. Almost every asset that Pat owns is financed by debt. He did not plan nor seek the advice of a professional when he began his business; he assumed that debt financing was the route to pursue. He did not place any value on having a competent firm to manage his finances. Pat also likes to spend money excessively on high quality of life items. He has an "I'm happy as long as I'm making a profit" attitude. Strictly bottom line focused, but unaware of what the steps are to a perpetually positive bottom line, in essence minimum business sense.

Another weakness is the excessive expenditure on advertising. Although it is a strength that Pat knows advertising is a necessity, he failed to perform a cost benefit analysis before