Hi
I have a small furniture/cabinetry/cnc shop. 1 FTE, 1 PTE and me. Both employees are semi-skilled fabricators/assemblers so I usually find myself in the shop for the majority of the day doing more skilled work, running the cnc and basically just trying to keep 1 step ahead of the employees so that they have work. I have a small shop (1300 SF) and so I usually find that space is a significant constraint, and yet I need to keep multiple projects going on to have work for the employees. The business is profitable, but by no means killing it even. I started it in 2021 so missed out on a lot of that Covid boom, and am really now just this year seeing the fruits of my labor. What I am realizing is that I am not young, and physically I am wearing myself out working 6 days a week and then trying to run the business on evenings/Sundays. I recognize that if I am going to continue this business, I need a skilled employee to replace me. Or more than one. I also have a customer who I have been fabricating parts for on the CNC that is anticipating to grow their business to the point where they have offered to buy my equipment, and bring me on as an employee with profit sharing and the potential to buy in equity at a discounted rate in 3 years. Without too much detail, they have launched the business but I contributed most of the intellectual content (design, CNC knowledge) and so I do have some position of leverage for negotiating There are risks to both of these choices and so am looking for some opinions. For those of you out there who have grown a small shop to a slightly bigger one, what is the employee mix/revenue requirements to where the owner does not have to be in the shop and could expect to net $100k? My hunch is that it is realistically going to be 4-5 FTE and revenue getting close to $1 million a year in larger shop than I am currently in. Am I off base on that assumption? The offer from the customer is initially lower base pay than I would like (I am countering) and they can choose to not offer me equity after 3 years and so that is the risk of committing to them (I am going to propose a severance). That outcome would be close to terminal for my future as I would not be able/willing to launch another business, and really too old for many companies to want to hire (50's). My strength/skillset is design (went to A school) and CNC fabrication. For those of you with large enough companies that have someone who does all of the design/CAD/CAM, how much is that person worth to you? Right now, the idea of growing my business seems arduous/expensive and so I am leaning towards trying to make this work with the customer but trying to weigh the risks. Sorry for the long post and just looking for thoughts/opinions. Thanks

I really don't see that you have any leverage with the offer. They have a successful business going, why offer you anything more than a salary? Probably the only reason they gave you any offer at all is that you have a known value. Quality hiring as you know, is not easy. For you to continue at your current location, you will need to put an addition on the building as well as the hiring. I closed my business after 8 years for pretty much the same reasons as you. But I found a corporate job at a woodworking magazine that included nice benefits, 9-5 hours, and vacation.

Rich

Thanks for the response. In this situation they have a business selling a product that they don't currently have the ability or capacity to make themselves. I am by no means the only person who can solve this problem for them, but I did invest some time on the front end coming up with a system to streamline making a range of customizable products for them. They recognize that they need to have control over the manufacturing process hence wanting to bring me on board. Could they go and buy a cnc and find someone to do what I have done? Absolutely. Could they do it without it having profound impacts on their production schedule. Doubtful. Unless I give them time to do that which isn't really in my best interest. That is the leverage of which I am speaking. Given enough time they could resolve the problem. I am no genius. I haven't created anything that plenty of others couldn't also create given enough time. I am just in a position to use that to my advantage in negotiations. I rent the building I am in so adding onto isn't an option. I have read many of your posts over the years and appreciate the depth of experience and knowledge that you have. Thanks.

I know you want experienced wisdom but it’s very tough with the information you given. We need to know location, what your numbers are, current lead times and so much more.

But with the information you’ve given I’ll take a crack. You either have 2 too many employees or 2000 square foot minimum deficit of shop space to begin with. And my guess is drop the furniture and run away from that as fast as you possibly can. making furniture at the same profit margins per man hour as cabinetry requires you to be an elite marketing, sales and branding company.

But your number one deficit is sales. In 2021-now clearing a 100k is not difficult.

Making things out of wood is fairly easy. The business- sales, managing the clients and business is what will make you truly profitable or just make you old and worn out. And you don’t need the latest at greatest technology. For most it simply means getting MUCH more organized in and out of the shop.

So are you a woodworker or a businessman? That will give you your answer. Be honest and don’t let pride get in your way because what’s at stake is your happiness, health and last couple decades of your working life. Choose wisely.

You are very kind Dave, thank-you!

A lot of things here.
First off, what’s your personality like? Can you work for other people? Me personally, I’m unemployable, not because of my skills or anything like that, I just don’t ever want to have someone tell me when to come to work or how much I need to work. If you’re like me selling and going to work for someone else isn’t an option.
Growing a business takes work and is really hard at the beginning as it takes time, money and effort to find great employees and get them up to speed, usually several months. Once you get over that hump it gets easier as you remove yourself from the actual work being performed and can focus on sales and growth. 1300 is a small space but properly set up might be all you need but I don’t know your business.
I definitely wouldn’t say you have no value to your main client. It sounds like you developed the system and are their sole supplier. You could sell and request a pice of the action from the start. You could also negotiate a long term agreement that keeps you separate but guarantees both parties conditions that are beneficial to each

Growing from where you are now will not be easy. Your revenue per employee is on the low end. $150,000 per FTE is the starting point to prosperity, if you are producing most of the work in house. $200k per employee gives you room to pay them well and take home a decent living yourself. Given your situation, your best bet is to grow through outsourcing as much as you can, and concentrating on sales. But if you are nearing the end of your working life, growing might not be a good option unless you can find a way to get out of the business when you are ready. You're going to need to invest to develop markets and systems to service them. You might well be better off taking a decent salary for the next 10 years, and limiting your stress and investment.

What are your revenues now?

Dave,
I also run a furniture / cabinet / cnc shop with 1 FTE and 1PTE. For comparison, my revenues range from $400k to $500k and income between $125k and $150k. I was in your position at one point doing 70 hr weeks. Now I'm down to 25 hrs or so in the shop, and 5-10 in the office. I'd like to get to $1M, but I think $500k is a solid floor. Anything lower than that, and it's hard to staff it without doing half the work yourself. Or maybe it is, but I haven't figured it out.

My 2 cents is to stick it out a bit longer. I don't see any advantage to selling out. You are a known quantity to your customer and they won't leave so long as you do a good job and price things right. The economy is strong and the way demographics are, I don't see an end to the labor shortage. But each situation is unique. Good luck.

Matthew, what type of furniture and cabinetry work do you do? I have a small shop and was thinking about getting a CNC. I would be interested to hear how you have been able to make it all work. Thanks

Matt, I bought an existing business about 15 years ago. I won't disclose the specifics on the furniture I build, but I have 2 separate small niches that are commercial in nature and amount to about $150k in sales. The rest of my work is 80% light commercial TI and 20% residential. Honestly, without the furniture component, I don't think my business would be viable. I consider myself pretty good at running my business, but I think if I tried to start one from scratch I would have failed. Too many hats to wear.

I think the idea that you are ever too old to be considered as an employee is bunk! Companies always need smart and capable people. All that age means is how long they might have you as an employee... If they don't have to invest in increasing your abilities then you are an asset right from the start. Don't undersell yourself!