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Looking to grow!!7/1/14
I run a small two man shop out of my three car garage that builds mostly cabinets and some custom furniture(which never seems to pay enough). I really need more space and need to hire some guys so I'm not doing everything myself. Any advice on growing and taking that next step?
Let the Jobs buy the tools !!
Take some business classes. If you expand much more, you won't be doing much woodworking. You'll be running a business. Hire a part-time accountant. Know what a business plan is and how to write one. The bank will want to see that if you need to borrow. You will be amazed at what happens to just get a commercial space. Every inspector shows up. You won't believe what even something as simple as the right fire extinguishers cost. Spend lots of time with your insurance man, your banker, your accountant, and YOUR WIFE. She may just be the component that keeps you solvent. Hopefully she has a great job with benefits already.
I agree to taking business classes. also take management classes if you haven't had the work experience yet. I took mine at night at local community college. Helped me with organizing the business side. Now that I have employees, I don't do as much woodworking as I do managing and sales efforts. No regrets though, as I love having the extra time to leave the shop when I want to and knowing that the work will still be done properly. Having not to do the work has also allowed me the time to be creative with solutions to product flow, problems and new products.
Pay off your debt.
Use profit to invest in used equipment not new employees.
If you have't already find a niche.
FYI the economy is due for a recession probably during the second half of this year.
Thanks for the insight guys. I was trying to keep it short and didn't give much history. But I've been self employed for 14 years, only 6 of those in the cabinet/ woodworking business. I use to own a roofing company and ran 4 crews before the recession. Which I decided to get out before all my contractors went belly up. Good move.
I cannot predict a recession, but I can tell you this, Now work with out material deposits. equipment all paid for and low debt structure.
You will be prepared for it..
PS: we are booked solid till mid summer 15
Thanks James. I will be debt free and have 50k saved before I take the next step. Just trying to prepare.
I should look at my previews first as there is no correction option, Mary has warned me about this LOL
"NO" work with out material deposits, and if it is commercial you may have to photo the material in your shop and insure against loss with most big commercial I do this and invoice 30 days, I have a disclaimer in my quote so the GC is not surprised by this. (funny how they never read them) with 30 day money you do not have to cut anything before $$$ are in hand suppliers paid
Yeah, I don't do ANY work until I get a 50% deposit on the job. That covers my material cost and some of my labor while I building in my shop. People shouldn't have a problem with that if they are using a reputable company. They are either going to pay now or later. Not sure how I'm going to do it when I come across a 100k job?
The only thing you are interested in is the bottom line. Growth does not necessarily correlate to increasing the bottom line. Growth for growth's sake is a common (if not inevitable) mistake.
Moving is expensive, whatever you think it will cost double it. You will burn through 50k right quick.
A cnc has additional costs that can add 30%-100% to the cost of the machine. Vacuum, dust collection, increased electrical service, learning curve, software, etc. When you go to the show this machinery will be seductive, make a decision based on logic not emotion.
Consider getting a cnc parts shop to cut your parts and ship them to you. When your bill is large enough to justify a machine that can be your gauge as to when to buy.
James' comment about being booked up until well into 2015, implies that the economy will be good for you. That is NOT the case. I suspect he has developed a niche market based on cnc carvings. But again is not prescient to you.
You have not answered the marketing question? This is infinitely more important than machinery questions. The crystal ball on this are demographics. If you are doing kitchens? I would say that it will go until the boomers reach 60, the main herd of boomers are 58-57. This means the kitchen business will start shrinking in about 3 yr if a lack of confidence doesn't occur first.
From what I read we are due for a recession in the second half of 2014. Predicting the economy is based off of interest rates and bonds it is a well known crystal ball. Think about it the stock market is waay over due for a correction it has been going up for 60 straight months. It is predicted to come down at least 30%. When that happens real estate will likely adjust as well.
You are making a decision that is a game changer for you one way or another. Do NOT go off of your gut on this.
The economy has a business cycle(albeit highly obscured by the Fed) it is important to make your move in the correct part of the cycle. Which is NOT now. I would Look at doing what you are thinking about a year from now if the market indicates it.
There are some that will discount what I say here, I would listen to their logical reasons. If they are opining based off of emotional reasons (like I got burned once by economics) ignore them.
I had similar conversation to this post, with a neighbor in 2008 just before the show. The machinery guys convinced him that all his problems would be solved by a cnc router. He signed a lease for about 150k. He let go of most of his workers, convinced they would no longer be necessary. He was gone in less than 6 months, after being in business for decades. Admittedly he was foolish but I attribute a lot of it to emotional reasoning.
Gee Pat, I'm going to IWF to look @ new routers, is that a mistake? We've got more work than we can get done with just two routers now. Really need to get additional "qualified" help in the shop also. Routers are cheap compared to employees!
I'm just the messenger. There IS going to be a correction. Probably this year.You are on the leading edge i.e. lead not a lag so YMMV?
Are you busy from one customer or one sector?
An employee you can lay off, not so with a machine.
There is always a "correction" and most asuradly one is due. That doesn't mean the sky is falling.
I'm not trying to piss on anyone's parade. I also hate it when people try to rent space in my head, with negative crap. Which is why I haven't watched the local news in decades and shun people who are depressing. That being said 2008 really got me looking at maybe there is something to know about this economics stuff.
Your situation is different than Calvins. He will do what he thinks is best for his situation. On the other hand I would hate to see someone make the same mistakes my neighbor made.
I base my conclusion on reading a number of books and listening to 3 economists.
Brian and Alan Beaulieu who base their thinking on business cycles and trends. Some of their customers are Stiles Machinery and I think the WI.
Mike Shedlock who is an Austrian economist.
Steen Jakobsen is chief economist at Saxo bank.
All 3 predict a recession this year.
Steen uses 25 economic indicators. Mike uses the Austrian axioms to see the trends.
Steen and Mike think the stock market will correct 30%. Although they didn't say the stock market will correct that much this year on the other hand they didn't say it wouldn't either.
The Beaulieu's are predicting a mild recession this year. They are saying in 2017 though watch out it will be bad. They say borrow at low interest rates and invest, maybe it is no coincidence one of their customers is Stiles? I think they are wrong because Yellin has to keep the interest rates low as long as she can. And if Abenomics is any indication a person would not be paying back the loan with cheap money, rather deflation is more likely.
Another Economist Harry Dent says this year will be bad. He bases his thinking strictly on demographics and is wrong as often as he is right.
Anyway I'm not trying to rent space in your head, on the other hand I am saying Look. That idea that "there is always going to be a correction" is BS
IMO the major factors to look at are the interest rates and the bond yield, DEBT, re balancing from decades of mercantilism with Japan and China, and demographics, and the Fed and tapering and inflation.
If Calvin waits a while how much would it hurt him? How much would it hurt him if he can't make his lease payments?
Of course I could be completely wrong at which point I would have to point the finger to these guys and say boy were they stupid.