Powder Coating as a Business Opportunity

Are you looking for a business opportunity that will provide financial rewards without a huge out-of-pocket risk? Maybe you’re ready to start a powder coating shop.

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 exactly what you’re looking for.

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.

With a little knowledge, the right business plan, the right equipment and qualified people, it’s possible to start a new powder coating business that can succeed for years to come…as long as you avoid the four common pitfalls discussed in this article.

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.

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. 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, try 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; there are multiple steps to do before and after coating and curing:
1. the parts are staged and hung from racks or loaded onto a conveyor.
2.  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.
3. After being prepped, the parts may need to be force dried to prevent flash rust.
4. The dried parts are then staged for coating then powder coated.
5. Now the parts are then moved to the curing oven and cured.
6. Once the powder has cured, the parts must cool down before being handled.
7. Once cool enough to touch, the parts are 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 some kind of staging room or they will end up in the way.

Make a layout drawing to scale.

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. 

Pitfall #2: Buying A Coating System That Is Too Small

Think big! No customer ever comes back to us saying they wish their equipment was smaller.

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. They could easily coat rims, truck frames, and machine parts with the smaller oven, so that’s what they bought.

Unfortunately, because they failed to consider growth, the new shop will lose out on some bigger, very profitable jobs they could have gotten had they purchased larger equipment in the beginning. After enough of these missed opportunities, the new business is on the ropes. Don’t let this happen to you.

Pitfall #3: Not Having A Plan For Capturing Profitable New Business

Lack of enough work – SALES – is 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 a limited number of 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 be able to  coat all the small jobs you’ve sold in only a couple days a week, leaving you, your employees, and your equipment sitting idle the rest of the week.

If your coating equipment is sitting idle, it isn’t making you money.

A lack of business understanding causes a small number of powder coating start-ups to fail every year because their equipment wasn’t operating enough hours each week; they simply didn’t have enough sales. 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. Get to know all the businesses in your area that might benefit from powder coating certain parts or assemblies.  Even businesses that coat in-house sometimes use outside coating vendors to handle excess work or address specialty coating needs. Also, companies that are currently doing wet painting in an industrial setting might eventually make great clients for powder coating. Be sure they all know you exist and are available to them.

Your business plan should include a course of action to get contracts in place before you open your new facility. This helps mitigate the risks of starting a new business and the customers who guarantee a certain volume of work get the advantage of discounted pricing.

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 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, i.e., the “real” businessman owner vs the hobbiest:
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 questionable owner who doesn’t appear to take his business seriously; he 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…perhaps even costing him his entire company.

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.

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.

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.

Unless an adequate budget is set aside for sales and support personnel, a company’s success is going to be limited.

Conclusion

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.

Article reprinted by permission: Reliant Finishing Systems
Reliant Finishing Systems manufactures spray booths, curing ovens, and other types of powder coating and industrial painting equipment. Our in-house coating experts and technical specialists support our products for life.