Casting kit buisness?

[Alyn Foundry]

Morning Jason.

I had asked for the one with the “ definite “ hole in it with a view to repair. But as Alan moved in to face off the inlet/exhaust portion it literally exploded. If you look closely at the picture you can see bright shiny metal, caused by core gas. Luckily we had a third casting to play with and so far it seems to be a sound one.

  Graham.

[Mcgyver]

I appreciate the insight this thread gives,  its certainly not the heyday of model engineering so I see challenges in making a business out of it

To value these patterns: the patterns are worth very little, what you are buying is "good will" for the original business and the rights to market the models. This is assuming the seller owns the marketing rights.

Assuming you get enough with it to call it a business, the value of any business is the total present value of future free cash flows.  That's what the junior investment bank weenies are doing to 1:00 a.m., running discounted cash flow analyses.  Of course its arguably a steaming pile is it depends on crystal ball assumptions.....but its the best we've got...and does drive home the point: it's only worth the PV of FCFs'.  What do the think the future cash from those patterns is going to be?

Unless vendors view it as a hobby and they are the 'caretakers' of these drawings and patterns (i.e. the mission is to find the next person able to carry the torch vs unrealistic cash expectations) a lot will be lost.  Isn't the line of Coles models pretty gone for example?  There were some great models in their catalogue.

[littlelocos]

Folks,
My apologies for coming in late.  As someone currently in the ME casting business, this is ALL some very good discussion.

Joy and I have purchased some previously-available engine projects, most-notably the 1/3-scale Parsell & Weed originally offered in the early 1990s by Woody Sins.  My understanding is that he sold about 75 sets before shelving the project and before releasing the vertical version.  To make the project viable, I completely redrew the engine in 3D, redesigning various parts and "refining" the design overall.  I also converted from multiple, different parts on each matchplate to more production-style plates, with multiples of the same parts on the plate with gating and risering already done.  It took more than a year of evenings and weekends to bring it to market.  None of the original drawings or matchplates purchased are currently used.  Several years later, we released the vertical version, followed by the air-cooled versions using my own design for the finned cylinder.  We've done the same thing with the McGuckin Flame Licker as well as with Paul Jacobs' 1/2-scale Essex Caloric.  I currently have about a dozen other designs from Paul Jacobs that we plan to go through the same process with.  I am a mechanical engineer who studied mechanisms, machine design, and manufacturing in college and have studied/worked with Model Engineering as well as foundry work for about 35 years -- mostly as a hobby.

That said, foundries willing to make less than a few hundred castings per order are almost non-existant -- as are foundries still working with jolt-squeeze matchplates like the ones being offered.  The foundry we work with in Hanover, PA can do this, but are crazy-busy with work, nearly year round.  They like my patterns and fit my work in when they can.  It also helps that they have me busy making patterns for them and their customers.  (Joy calls this my side-side hustle, LLME being the side-hustle)  The patternmaking is what has kept the little business going over the last several years.

I spoke with Coles Power Models about 4 or 5 years ago.  The whole onion was for sale, patterns, stock, rights, etc., but would have required a trip to Texas to inventory what was there (as they would not do it), moving everything back to MD, and coming up with a 6-figure check.  We passed due to a lot of the reasons talked about here, but the clinchers were that we would likely have to do the entire process outlined above on each project purchased in order to bring them back to market.  Many of those were designed in the early-mid 1900s to standards that were great at the time, but no longer acceptable.

The other thing to think about is that many of the projects being offered have already "peaked" with their initial sales and are now in the long-haul of being stocked, but not regularly being shipped.  We've found that the first several years after releasing a project, sales are great, then they taper off.  The engines we've "brought back" haven't been on the market for 20+ years, so they are meeting a new generation of hobbiests as new projects, and sometimes are remembered by those who have been in the hobby for a long time.  The engine projects being discussed in this thread are just now leaving the market.  Even so, I'd love to be the caretaker for the projects, if for no other reason than to keep them going.  It would be nice to see them at the auction at Cabin Fever.  If they were there, I'd probably be one of the bidders.

Hopefully the above gives a little look under our little tent as to what it takes to run our little circus and bring our little projects to market.

FWIW,
Todd.
LLME
Hagerstown, MD

[Jasonb]

Thanks for the insight, funny enough not the only producer of casting kits that does some pattern work for the foundry that they use. Obviously helps to get uour job to the top of the waiting list.

[Mcgyver]

great post Todd, thanks for the insight.

[littlelocos]

Thanks for the insight, funny enough not the only producer of casting kits that does some pattern work for the foundry that they use. Obviously helps to get uour job to the top of the waiting list.

Jasonb,
Yes, working WITH the foundry is a very good arrangement.  The foundry we work with takes on all sorts of small jobs where the customber has an idea, but no patterns.  We work with them to produce a final design and pattern to match.  In doing this, I learn A LOT about patternmaking, foundrywork, and the foundry business.  Since this isn't my day job, I am able to produce the patterns a lot cheaper than the bigger pattern shops.  Also, the better the final product looks and the better the pattern runs, the more the customer sells, etc.  It's a Win-Win-Win for everyone involved.

Todd.

[littlelocos]

great post Todd, thanks for the insight.

Thanks!  I'm happy to discuss the ins and outs of our micro-business.  We've been at it for 22 years and have no plans on stopping.  I also hope to retire from the day-job in a few years and start working full time on LLME.  That will definitely help to bring new projects to market.

I don't look at others in the model engineering business as competitors as the market is much too small not to try to help each other (and our customers) out. 

Enjoy!
Todd

 

[propforward]

I’m dredging this up again purely for interests sake. I see on ebay that the patterns and inventory for the Woodpecker engine is still up for sale - now showing a prive of $8000 - which seems more reasonable. I ran a few numbers and thought that might be viable for a hobby sideline, but would need more definite numbers from a foundry to be sure.

Even at this price - it’s not going to be a big money maker. Still done for the love of the hobby. Anyway - in case this lower price piques someones interest I thought I’d resurrect it. It sounds like entire line is still for sale. For me I would have to be getting the whole lot for $8000 to consider it. I’d need to know more about the foundry run costs, process yield, quality failure rate, customer returns info on castings before assessing whether the inventory should be included in that or whether that might add more value. In short - I’ve glossed over it purely from a musing about it perspective. Bought a couple of casting sets while I was at it though.

Ebay link to Woodpecker patterns:

https://www.ebay.com/itm/296675549359?mkcid=16&mkevt=1&mkrid=711-127632-2357-0&ssspo=F0PLoQxpQ0m&sssrc=4429486&ssuid=8hpyeToqQRO&var=&widget_ver=artemis&media=COPY

[Jasonb]

If he is saying those remaining castings are worth 25K retail then that is stretching it somewhat. Even with the patterns it is hard to put a worth on them.

They do look in better condition than some of the other patterns he had for sale but bear in mind his match boards may not suit all foundries so could require some work. Could not see the drawings there but the redrawing is mentioned so hopefully included?

Even then the Woodpecker was not one of the more popular engines so you may only get a few sales a year, what would a casting set go for maybe $500 You might be lucky with 100% markup on castings so that is $250 to you from which all other costs need to come out of that so may only pocket $125 per engine. divide that into $8000 and work out the return.

[propforward]

There is not $25K of inventory there. I paid that no attention whatsoever.

I thought the change of price was interesting - maybe slightly more understanding of reality.

He’s had these engines available for a long time but many don’t even know about them. So I think some sales could be drummed up with a bit of tenacious and well considered marketing (not just advertising or so the marketing guys at work tell me).

But no one is going to make their fortune doing it. Fun exercise to work through the numbers is about all it is for me. Margin (not markup) on the whole thing would have to be significant to warrant the effort. I wouldn’t touch it at all without the margin on the castings being 100%. Margin on other aspects could be less. Gross margin per engine set - don’t know. Would have to think about that.