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I don't have any experience with a metal fab shop, but there are a few questions you should probably ask yourself and consider before going forward. What you propose has less to do with metal fabrication and more to do with having a sound business plan. So here's my take.
Do either of you have cash on hand or in reserve or other sources of cash/credit/financial backing to use as an alternative to risking your 401k and as backup in case things don't get off to a flying start?
Have you sat down and crunched numbers to see what it would reasonably take to lease a place? equip the shop? advertise? set-up accounts for materials? Then break even $$$$ and how long down the road that will be, then ultimately turn a profit? And do both of you have enough tucked away to live and meet your current expenses until that happens? Have you set a time frame at which you if you aren't making money, you get out and are you both on board with that time frame?
Are either of you doing this type of work on the side now? Just because someone else's shop is busy doesn't mean there is a glut of work out there. It could be an indication that they have solid business connections (built up over time) or have contracts in place or a combination of both. Would that shop be willing to feed you overflow work? Do you have business connections or the ablility to land contracts at the moment or will you rely on people to "walk through the door"? The latter is a pretty sketchy way to get started. The higher your start up costs are the important it is to have work (and therefore $$$$$) coming in ASAP.
The best thing I could recommend is to sit down and put together a business plan. Figure out real costs, not guessing and dreaming, but real costs like: rent (do you have specific electrical requirements? or truck access and loading docks), upfitting a shop (electrical, mechanical, material handling, etc.), utilities, advertising, legal/accounting, setting up accounts to buy material. Then approach a financial adviser, a tax consultant or an accountant and pay them to help you polish the business plan. At that point you may or may not like what you hear. But you may also have a something in writing that you could go to a bank with and get a line of credit (your 401k could be the collateral or you house could be??) to help get the thing rolling?
Believe it or not, the machinery isn't what you should be concerned about at all. Its can you pull the work into your shop on a steady basis and get paid for it in a reasonable time frame? Will you get paid in 15 days or 30 days on completed jobs or are you in a 60 day or longer cycle to get paid on jobs?
I'd do everything I could to try it on the side first, see if the work is really out there and can you make money doing it. It always looks easy when someone else is making money, often because you don't know all that is going on behind the curtain.
Good luck and be careful. Take the time to crunch the numbers, the numbers will tell the story.
Chris
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1999 Formula 6spd (The driver)
1997 2500 Ext. Cab Dodge 4x4 CTD 5spd (The Earth Mover)
1970 Nova 5spd (The toy)
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