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Not good news

Another iconic brand that sadly has not yet managed to make the transition to the digital world.

A modern business needs to be able to take an online order and fulfil it.  There’s no reason for to not do so with SAAS CRM platforms like Salesforce and MS Dynamics, there are oodles of ready made solutions, and it does not need to be costly.  For anyone looking at buying this company a top notch digital channel should factor into the decision making.  

ME is a high-end product that still relies on a dealership network that continues to shrink year by year.  While its very admirable to support the "Local Train Store", not so much at the exclusion of a digital sales channel - a parallel and aligned on-line channel is critical.  

Other than a product list there is not much on the website [Evidently there are hidden pages!  see posts below.  Sadly, their ads show a home page that does not exist].  There isn’t a home page.  Nothing about the products, the company, its ownership and history, it’s vision, or, most critically, the ability to place and pay for an order.  Not even an address and a phone number.  I could stand a killer website up for this business in less than a day, online fulfilment in another week.  It’s crazy.  I just shake my head.

Not sure where I will get rail if they don’t stay in operation.  Hopefully someone aligned and “semi-dependent” like Central Valley or Fast Tracks acquires them, although here, only Fast Tracks has a proper (actually quite excellent) digital channel.

I’d love to own this company with a group of aligned partners and bring it into modern times and grow it.

Looks like another so-to-be

Looks like another so-to-be Walthers acquisition.

I doubt Walthers needs them

It just diffuses their pre-made track brand.  Nothing would be better for Walther’s sales than ME going away.  At most, Walther’s might buy the tooling if they see any longevity in the handlaid track market.  I had a look at Walthers Code 83 Track recently at the LTS while buying up every bundle of Code 70 ME rail I could find (they had two).  The Walthers track is very nice.  Very fine spike detail.  For many, this would be a very solid approach.  For us fuss budget hand-layers, we are dependent on high quality suppliers like ME, Fast Tracks, Proto:87, Central Valley …

As a customer and business consultant, the only viable takeover candidate that leaps out at me is FastTracks. A fully symbiotic, mutually dependent business, and they appear to be masters of the digital channel, no dilution of revenue and profit with a no-value-added dealership/middleman network, and they appear to know how to make money. 

Fast Tracks

Fast Tracks might not have the backing to acquire them, unless they raise more funds

https://www.dnb.com/business-directory/company-profiles.fast_tracks_hobbyworks_inc.395111f49d5c510cf5bdc7f0bd04a80d.html

How much could Micro Engineering be going for anyway...

Why aren't there any Bitcoin "whales" among model railroaders...it would be nothing to acuqure them, 50-60 BTC. :D

ME website links

http://microengineering.com/about.htm

http://microengineering.com/shop.htm

Thanks for the links…

It’s good that you are prepared to hunt, or had that bookmarked.  But, I’m glad you have them. My guess is their Web abandonment rate is> 80%.

just hit http://www.microengineering.comand see what happens. 

Such things ought to be on a home page, and a mail-in form does not constitute digital fulfilment.

Digital fulfilment means:

• for customer: click, order, pay, receive
• for business: post, receive order, receive payment, pick (may require built to order), pack and ship

I’m quite sad we could lose this company and I’d throw in my time to help them get digital.  Hell, I'd throw in my time to help them with a lot of things.  I have been buying their stuff since I was a teenager.

As to the value one would need to see the books for the last several years, but a good rule of thumb for a small business like this is 1x revenue, plus saleable finished inventory, plus raw material, might include the value of all assets if fully depreciated, or plus value of equipment/assets if fresh.  There may be little value to the current owner in trying to maximize the value of old tooling and other assets if it is already fully depreciated, and just attract a bunch of tax on any value paid over depreciated net book value.  This might also affect the timing of a purchase - less tax over time perhaps.  Some people like to use earnings instead of revenue, or EBITDA,   And then the multiplier is more like 4 - 5 x annual earnings.  

One has to determine how much cash is required to keep a business operating over and above the purchase price - in addition to debt service costs, this requires understanding the manufacturing process.  FastTracks looks to have a relatively “build to order” business with only a few of popular SKUs kept on hand. But then they aren’t turning out flex-track and turnouts. 

There is likely a good reason ME needs lots of staff to meet production schedules.  And yet, I’ve only ever seen one dealer keep much of their stuff in stock, so it may be a very unpredictable revenue model to sustain steady staffing.

Anyone buying it would need to get to know the staff and operations and make sure staffing is optimized prior to purchase.  Good people have options, and one would suspect that their good people may already be looking around - another risk to any potential buyer.  I daresay a lot of those old machines require a certain touch that comes from years of operating them.

.

I also had archive.is store their pages for posterity.

We are long past the point of helping them go digital though. Wish they called out for help back when there was still some time as it wouldn not have taken that much to put them fully online.

The lose of ME could cause

The lose of ME could cause huge issues in the hobby.  They are one of a very limited scour e if track/rail.  And what their is is pretty expensive.

Without them the options are getting pretty slim.  Add in that Fast Track is in big trouble as the vast majority of their stuff is set up for ME rail.  I have several jigs that must have ME rail…

The problem with ME and most business of similar size is that they often do not earn enough profit to Pay the new owners and to simultaneously pay off the old owners (or whomever fronts the money).

This is pretty bad.

-Doug M

Welcome to the bane of most small niche businesses

Yep, welcome to the bane of small niche businesses.

There's a saying among those of us in a hobby business ... "if you want to make a small fortune in the model railroading hobby, start with a large fortune."

You guys nailed it - It’s just like farming!

Start by winning a lottery, and then farm until it’s all gone.  

No one does this to get rich.  You just can’t.

Fast tracks and ME rail?

Does ME actually make rail or do they just contract it out to a metal manufacturer?  Since Fast tracks is a tooling company at heart I don't know if they'd be interested in selling flex track and such, they might make more profit on the tooling than on consumer track? .....DaveB

Primary ME products needed are rail and spikes

The primary ME products Fast Tracks depends upon are rail - non-weathered in various weights and then maybe spikes and following that perhaps weathered rail.  The plastic kits, the flextrack and the prefabricated turnouts don't really mesh with the handlaid track market; they enhance and extend those products for consumers, but they aren't essential for the users of Fast Tracks jigs.

What would seem to be the key takeaway for Fast Tracks is who is actually drawing the rail for Micro Engineering - and if necessary buying those tools. 

Janet N.

I’ve read that ME draws their own rail.

Found this in an MR forum dating from 2013: 

“A few years ago, ME's dies for one of the rail sizes (I think it was code 55, but not positive) gave out, and no new rail of that size was being produced.  Apparently, pulling nickel silver wears dies faster than either brass or soft steel.  It took well over a year for the new dies to get made, and rail production to resume.  For a while, there was concern that there wasn't a big enough market for code 55 rail to bother making the new dies.”

ME products

From an N scale perspective, ME has always had product availability issues. For a long time their turnouts were unavailable or very limited, and the geometry of available track was… well, just pathetic. They were/are the sole source for some items like bridge track (with close spaced ties), and had concrete tie flex track in their catalog, but it was always out of stock… I have never seen it in person, even on someone else’s layout or module. If you want concrete ties, Kato Unitrack is the only game in town.

It’s a shame, but from an availability perspective, ME has been gone for some time…

Ok so this is the 21st

Ok so this is the 21st century.

How would you approach this given today as your starting point.

I think the obvious is to get a good online site and sell mostly through that.  Keep the hobby shop network but expect it to go away.

Concentrate on the core business of Rail and Track.  I think that Walthers screwed over ME a few years ago when they introduced a series of bridges that in many ways duplicated ME line.

Other issues are that the turnouts are probably a LOT more complicated to make and thus require more human effort.  Add in that there are a few competitors in the turnout market one at least that has a much bigger selection of options and this probably doesn’t help.  (I am speaking of HO).  
 

As for FT having higher profit per employee…. They are making things that are much less labor intensive.  Putting a hunk of metal in a CNC is simpler and faster then drawing metal rail then making the plastic ties then forming them into flex track.  And that is not even talking about the turnouts.  Then FT sells them at a higher price point to boot.  So ME will never be as profitable.

And yeah Joe I am fully away of the issue.  I used to ski at a small place that was built in the 50s. By a WW2 vet.  He ran it doe decades with his kids and some local folk working for him.  Then he got to old to keep doing it and his kids had gotten into other professions so no one to inherit the business.  So he sold it and the new owners made it iirc 3 seasons.   The business made enough for the original owner to pay himself and his expenses and staff and make a small profit but not enough to pay to buy itself.   If you have a business with 1m in equipment and a gross of 4m a year  and you pay yourself 100K and the business earns 100k profit you can’t sell the business for 10x gross or even for the value of the equipment.  You have to sell it based on actual profit.  So no one can afford to buy said business as it is a bad investment,   And this assumes the business is making a true profit and not just paying the owner for his work.  I had a friend that was very very well to do. All from running his own business for 30+ years.  But just because he and his wife made a very comfortable living for decades does not mean the business was worth anything and it folded when he retired.

Sadly most Hobby business are in this area.  With no one to take over they look to sell but they don’t make enough to allow someone to get investors/creditor and pay them off.  
And in the case of ME I believe the are located in The state of Missouri or some such?  So for most folks they would have the added expense of moving the equipment,  finding a building and training employees.  Thus decreasing the money available to pay off the investors/creditors.

Now obviously I don’t know ME situation and they may be making millions…. But I suspect they fall into this category of profitable but not so profitable that they are a good investment.  Simply because most hobby businesses aren’t.  And while the following is just my opinion.. I would suspect that FT and MRH both fall into that as well.  Heck as far as i can tell Mikes Train House pretty much fell into that area.

So perhaps we need to think outside the box.  Lets put a Crowd Funding page together and buy it out that way.  Use bundles of track as incentives (but obviously at an above msrp price) and that way ME can go forward with a new younger owner and not be burdened buy debt.  The new owner can hopefully run it for 20-30 years and the hobby keeps it main source of rail.  And as a stretch goal you add in mew molds for new products.  I would suggest  plastic ties to match the FT turnouts…  

Frankly if I could afford it I would buy ME and look into the idea of creating FT compatible turnout tie strips and then if I did any further turnouts I would investigate if it is possible to basically build a turnout to match FT but as a high end premium prebuilt.   And while I wouldn’t mind a change in profession, unless it was crowd sourced I am now where close to being able to buy them.     So I tell you what…  get a crowd source to pay for it and i will take it move it yo Michigan and run it…   

Well I have to go figure out how much track and rail I need to finish my layout and see if I can afford to buy it all now..

-Doug 

Fast tracks and Flex track

Most of the people building fast tracks turnouts are not hand laying the tangent track - they use commercial flex track.

To have railhead heights line up automatically, you need a source for flex made from the same rail as you're making the turnouts.

If ME rail goes away, fast tracks is going to have to rework thousands of jigs or find a way to produce rail with the exact same profile, and flex track to go with it. The rework would be a major effort, not because they'd have to make large changes, but because they'd have to make so many very tiny changes. It's a huge threat to fast tracks' value as a company.

Regarding ME rail

This entire discussion reprises a portion of what was discussed last year about how ME creates their rail.  The ultimate answer was:  they buy it in 3 foot lengths (for the smaller sizes) from a manufacturer in Europe.  Check the last page of postings:

https://model-railroad-hobbyist.com/node/41208#comment-454660
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This would seem to reduce the exposure Fast Tracks has to relying on ME's continued existence, but I'm going to be sad to see ME go.

Janet N.

Rail Suppliers

They are probably buying a lot of their rail from a rolling mill (such as the one in France mentioned before). It would be cheaper, as the cost of the tooling would be shared among several customers.

Peco posted a video recently. They have robots making their flex track. They do a lot of their tool and die work in house, but they've had 75 years to get to this point. 

I've heard that FastTracks subcontracts some of their production needs out to small machine shops. Cuts their need for a large capital investment while giving them flexibility in the process.

There are a lot of fans of ME

There are a lot of fans of ME track, especially the flex track.  The like how it hold shape although for me, I prefer the springier flex and find ME track a pain to shape into nice flowing track.  As it happens, nice gentleman who switched from HO to N provided me with several bundles of code 70 ME track as well as a bridge track, which I plan to put to good use in my yard on a layout I am building.  I thought about trying the ME turnouts but never did buy any.  Now the future of ME is uncertain unless someone buys the tooling and puts ME back into productions.  Other companies such as NWSL have managed to get revived under new owners.  You never know.

Too Big to Handle

One wonders if popularity and inability to manage it was one reason they have decided to sale.  
 

Earlier this last year, I ordered several Micro Engineering code-83 turnouts with 8 out of the 20 + ordered having issues.  A couple were pretty bad to include way too much glue used during the manufacturing process. These issue were not isolated to just me.

Micro Engineering customer service was spot on fixing the issues and reimbursing me the cost for shipping.  They stated in their email response that they were overwhelmed with orders for their yard ladder system so Quality Control was overwhelmed and some issues where overlooked on other products before going out the door.
 

After a second smaller order had similar issues, I decided to go with PECO turnouts.  
 

Joe

Other track

I have to admit that I have never used any track but Rail Craft/Micro Engineering track. I plan to start building a new layout in a month or two and have been planning on using Micro Engineering flex track and switches. Reading this thread, I will have to use another brand track and switches. 

I want realistic track like Micro Engineering and Walthers and Atlas track is not realistic enough for my likes. I need code-70 and nothing larger. I understand that Peco offers code-70 that their switches are very reliable. But, Peco is pricey.

Are there any other brands of track available in code-70 that has both flex track and switches?

Your thoughts and comments are most welcome.

Jim Six

@James

PECO has HO Code 70 track on their website, but it would appear that the turnouts may be code 75.

They sell plain Code 70 rail as well, but I’ve no idea if it is close enough dimensionally to fit in Fast Tracks jigs and tools, or lay in CVT tie strip.

Peco and ME a good fit

I use ME Code 83 track on my mainline and Peco turnouts.   The ME rail and the Peco rail have the same rail profile and match perfectly.