As many others, I'm doing a lot of research on turning my hobby into a full-time career of making furniture/cabinetry (following my dream). I've read this forum for 3-4 years now, read books on starting a business and actually put a draft business plan together about 3 years ago. My kids are young and my wife was nervous about me breaking away from a fairly decent paying job (60K/yr. then, 70K now). She's a nurse still working part-time and making a really good hourly rate. We had a heart-to-heart (and review of our expenses, only a small mortgage and one car payment plus utilities) several weeks ago about my interest in changing careers and she's supportive. Due to the way we were raised, we don't live extravagantly but comfortably, we don't worry about money.
For being in our mid-30's we have a very substantial amount saved for retirement and our children's college. I told her I will dust off the business plan and look into a realistic salary that I could expect after the "start up" years to get my products and name out there. She would go back to work full-time and I would focus on the business (part-time, but as close to full-time as needed) and do more of what's needed at home (laundry, running kids to school, etc). I clearly understand the additional stress/work that's involved with starting the business and running a house, although my current job has plenty of stress and long days/weeks involved so it's, in my mind, an equivalent trade.
I have a Bachelor's degree in Business Management; a Master's in Employee and Labor Relations and have 12 years woodworking experience on a hobby level. I'd work out of my 720 square foot garage shop to start and I would pay cash for everything that I could. I already have most of the tools that I need thanks to bonus/profit sharing checks. I know I still have things to learn with woodworking and I'm sure there's more business "stuff" I need to learn. I'm very confident that I can run a business and can produce very good, quality products. I'm very organized and accurate.
The only thing holding my back is fear. Fear that I won't make at least 60K or more a year after the business is established so my wife can convert back to part-time at her work. I don't think she would be (or me for that matter) be very happy if our standard of living permanently dropped. So, based on your experience, is it possible to make, in the Midwest area (Cincinnati specifically), this type of salary once the business is established? Again, I would make furniture and cabinetry. My preference would be not to make only kitchen cabinetry which sounds like a lot of folks on this forum do.
(Business and Management Forum)
From contributor A:
Like most people in your situation (70k a year with bonus, benefits, your boss paying half of your ss/med, 401k plan, etc.) you are totally naive about the realities of owning your own business. Most of us would love to be making 60k after 3 plus years and forget about all the other benefits. Did I forget to mention that the average medical insurance is now 10k for a family? 720 square feet is enough space to build one piece of furniture at a time. The steady work has always been in residential cabinets (kitchens/baths/entertainment centers).
Your education credentials support you current pay scale, however a business degree has very little to with making money in your own business. The two pieces of info you need in order to make it are how much does it cost you to build and for how much can you sell it. Pricing is not covered in any business class because it is business specific.
I cannot imagine a hobby type having the correct equipment needed to be competitive. I am still buying what I consider to be the necessary equipment in my 5th year. I would guess that 10 years of hobby is the equivalent of 1 year working for someone else (not much experience).
Most guys spend 3-5 years working as an employee making low wages. Then spend another 3 years working their tails off and putting every nickel back in the business. If you still have the stomach, will, and the work you will make decent money in the 4 and 5th years. After that hopefully you will have an established business that will with a little luck pay you 60k per year. In business money is made and lost with your employees. Very few can make a decent living on their own. It also gets pretty old dealing with the money going up and down every month.
I also disagree that pricing is not taught in business class and that having a degree has little to do with making money in a business. In the bachelor's program I completed, pricing was covered in finance/accounting classes as well as sales and marketing classes. The components/factors needed to determine the price was covered. Having a degree in business provides a foundational/fundamental understanding of how to run a business. If it didn't, there would be no purpose of the degree program. Of course, each business is unique and will require different approaches than what is specifically taught in the program.
I agree that you need to know your costs, as well as the market and set the selling price so the business can make a profit, and the owner a salary.
Having said that I think if one has the will almost anything is possible. I started as a hobby and just got too many jobs to not go full time. I'm in my second shop (outgrew the first) now and I've invested in machinery as I needed it and just go day by day. My business is growing as is my reputation and hopefully in a couple years I will be past the 60k hump.
One more thing to take into account is the physical toll of the job. Working late nights in an office environment is not equivalent to late hours in the shop, especially for the one man shops. Unloading 20-30 sheets of ply off the delivery truck then moving it around the shop as its cut into parts and unloading a couple hundred board feet of rough lumber, milling and stacking. Just make sure your wife knows when you get done at 8:00pm. You won't be doing much but nursing your back. House work and taking care of the kids is just not realistic. If you want to do part time keep your day job and work the weekends. I would guess most of us are working 50+ hours a week to make it.
What you want to do is possible and occasionally even rewarding; just don't set yourself up for disappointment expecting to make much money in the first five years. If you can pull it off then you'll have something to pat yourself on the back about. And don't take our sometimes negative sounding advice too personally. I'd be glad to welcome you to the community, I just want to ensure you don't look back and say "I wish someone told me it was going to be like this!"
And the comments about physical effort are also very sanguine. I spent the first year waking up every morning with all my joints locked solid from the previous days work. Some days I had to push my fingertips against the table top to straighten them out in the morning. And I used to spend 12 hours a day hobby woodworking at the weekend before I went pro.
It can be done and I would never go back from where I am now, but it is not easy on any level and it would become doubly difficult if you had to deal with disappointment, yours and others, over the financial rewards.
Your first crossroad will come quickly when you will need to decide to borrow money from the bank or from savings to buy materials or a tool (read that a real machine) or pay your first employee on Friday and there is no cash flow for 4 more weeks. Based on you past attitudes and successes with saving, I doubt your wife will be really excited about you "borrowing" from savings or that you are no longer able to contribute to savings.
Oh, and it’s good that you will be working at home. Just don't plan on getting any work done when the kids are out of school or sick or etc. Hope the washer is quite since you will be doing it at midnight.
I too have a degree, have a 595 on the GMAT and did work on an MBA before I thought I knew enough to run a business. Every time I think I have it figured out, I find out that I don't have a clue.
It is important to have an income goal and a time frame, and, yes, anything is possible. But in this business, it's not probable. Refer to the recent post on "Is it time to Retire".
You certainly sound like a very fine man and I wish you well, I truly do, but, keep the hobby in the garage and go to work in a cabinet shop for 3-5 years, work all the overtime you can, take home a pay check and then offer to buy it. You should be able to make a really good deal on the place, probably only $.25 on the dollar.
First you must pay yourself for all things that you actually do from construction to the office work and everything in between. Second you must pay yourself a salary as the CEO of your company. Third source of revenue is your profits from ownership. Have you written your personal and business goal list yet? Make sure to put "Be happy" as your number 1 priority. That was my biggest mistake from the get go. You know enough about business to make sure to account for what you want to make when you bid. Sounds like you need to get some more real life shop experience.
You can do everything and anything before you start but I still see one major hurdle for you. That is with your lack of experience you will have an extremely thought time calculating bids with no historical data. Obviously it will get more accurate as time moves along, but this could be a major problem for you.
There have been some real rough patches over the last 6 years, and sometimes I am making $150 per hour for my time and sometimes I am making $2 per hour. My marriage is still strong, in fact, my wife no longer works outside the home, but part time in the shop with me, and my teenage son also works in the shop part time. For us it has been a great experience and we wouldn't have it any other way. We live fairly comfortable most of the time, we work hard together.
Yes it is possible, but it is hard work, and make no mistake, there will be hard times. Keep reading and researching, and make sure your wife knows that things may get pretty tough at times. For my family, since we are all in it together and have a very strong faith, the hard times have drawn us closer together, and made us appreciate the good times that much more.
Here are three ways to achieve the pay scale you are after.
1) If you're a 1-man show, produce a rare and highly desirable product or line of products, and market yourself as an artist, such that you can charge prices for your work that are disproportionate to your time and money inputs. There are a few people out there doing this - Sam Maloof is an example. If you can charge $20,000 for a rocking chair, then your financial goals may be realized. The good thing about this method is that you could get it started while still working your other job. Look at Paul Gehlsen's 'Baroque Gallery' in the 'Project Gallery' forum, to see an example of one woodworker's side project.
2) Grow your business extremely rapidly, or capitalize heavily and structure your business plan such that you can achieve a fairly large size, to take advantages of volume and economy of scale. I would say 5 employees minimum. This requires that you are not really doing any day-to-day woodworking. But if your annual gross is, say, $1 million, then your salary as a percentage of gross is reasonable.
3) You formulate some revolutionary business plan or process that allows you to produce product at a rate significantly faster than any other skilled woodworker. I would guess the vast majority of woodworkers earning $60K/yr+ are not doing much woodworking, but do a lot of business management. I would also say that fear is good, it will keep you on your toes.
From contributor H:
Contributor B’s post said what I was thinking. This is a hard business, having said that I am 6 years in and will make over $60,000 this year. Making and getting paid are not the same, but that is a different story. I spend most of my time on the phone or on the computer or working on my machines or teaching my guts how to do things. Notice, I didn't say woodworking. I really only spend about 5-10 hours a week in the shop and the rest is spent running my business. I have 10 employees and we gross about $15,000-$20,000 a week in a 6400 square foot shop. It is my experience that a one man show cannot do enough work to generate $60,000 in a year, I tried it and I could not.
You said that you had all the stuff to make cabinets but I really doubt it. For example, do you have a line boring machine, hinge press, edgebander, panel saw, wide belt sander, spray booth? These are some of the things that you will need. If you do have these things my guess is that they are not production quality tools.
As for business school teaching you how to bid of what to charge, hah! They will teach you the components that go into pricing but unless you have good sound information on what you putting into those formulas they are meaningless. You will also need a way to get jobs drawn and cut listed. Even if you use a free program it will still take a lot of time to learn how to use, time that you won't be building cabinets.
I don't intend to work out of my garage/shop permanently. Only to keep start up costs down while getting the business established. When the time comes, I'm open to finding a bigger location as well as hiring employees.
I know I have a more to learn about this industry. That's why I've been reading this forum for the last 3-4 years and reading Woodshop News for over 2 years. If there are other publications that you'd suggest, I'm interested. I've read E-myth. I've been Six Sigma trained (greenbelt) and lead a project. I understand Lean principles. My last company went through it 5 years ago and my current company is doing it right now. I've read many other business-related and woodworking-related books. I enjoy reading and putting ideas into practice to solve problems.
I know manufacturing. My last job for 11 years and my current job are in manufacturing companies. Although I am in HR, I've positioned myself to be very involved in what's going on in the manufacturing operations. I just don't administrate the HR stuff. There are a couple of people that report to me that have those responsibilities. I get involved in the business from all angles, executives, engineering, leadership, production, support roles, the reason I like HR. I just don't see or deal with one side/part of the business.
My wife has read these responses and is still supportive. She's ok with and understands that I won't make much in the first "x" years. That's why she would go back to work full time until I get established, even if it takes 5 years or more.
I know it's going to be physically hard. I'm prepared for it and enjoy it. I've worked out regularly for the last 18 years and will need to figure out how I keep that in my day when I switch careers. I do all my own home remodeling/repairs, car repairs, built my workshop myself by putting a 16x20 extension onto my detached garage, concrete, framing roofing, siding, electric, water, etc. I’ve also remodeled my kitchen. I've spend long, long days working on our family tree farm growing up. I know there's a difference between working physically hard for 4-5 days in a row then going back to my "sit-down" job and recuperating versus working physically hard for 6 days, take one day off to "rest" then hit it again for another 6.
My equipment, although top of the line, is certainly not going to last throughout my career in woodworking. It's enough to get me started and I'll add what I need to at the time it makes sense.
To Harry's point, I am proud of my degrees. I'm proud I've been successful and earn a more than decent salary. I am not thrilled with my career choice any longer, and I’m rather bored at times. It's not horrible but ok. I've stuck with it after my business plan was drafted because my wife was nervous about me changing careers and it hasn't gotten much more exciting, even after changing companies. HR stuff is HR stuff no matter where you go. Woodworking and running a business, in my mind, will provide a balance between doing work with my hands (which I did a lot growing up and still do as much as I can) and doing the office-type stuff like I've been doing in HR. I have skills to do both. I don't have all the answers, I know that. That's why I read as much as I can. And read the posts on this forum.
I appreciate learning from all of you who have been through it. Your advice hasn't fallen on deaf ears. Too much knowledge and information can be crippling and prevent action. I think that's where I've been. Sometimes a leap of faith is good, an educated one. I think I've prepared myself fairly well. There's more I need to learn but I don't think I will unless I start taking action. Not having a lot of experience bidding jobs is definitely one of my downfalls. There have been a lot of threads on this topic on this forum as well as others. I also own and have read a couple of books about how to price woodworking items.
I was in a similar situation, corporate world for 20 years, ran a multi-million dollar business and etc. Point is, there are a bunch of guys in this business who can really build nice 'boxes', but there are fewer who understand business. I have seen more shops go under, not because they didn't do good work, but because they did not understand profit and loss, overhead, customer/clients, etc.
So you have a distinct advantage over most. That being said, you will not earn 75,000/yr, nor will you want to. Earn 30,000/yr that you report as W-2 income, and then you receive stockholder payables- (read cash) for the remainder of your income. Incorporate, talk to your CPA. Pre-tax dollars are a wonderful thing- ten bucks through payroll is net 5, 10 bucks through stockholder payables is 10 bucks. Also, several yrs down the line, your vehicle can be paid for through your corp., the expenses are many, and they are paid in pre-tax dollars. Back to the bad news- I earned 0 for the first 3 years, my wife supported us, she had a good job. Now she has a so-so job, she works for me, doing payroll, payables, receivables, secretary, cleans the office, and is now my boss.
The most difficult thing for you will be to estimate the hours it will take you to complete a project. If you've not done the work, or worked in a company doing similar work, you'll really have no clue. That skill only comes from experience. You can't read a book, take a class, or read posts here. And, like I said, it won't matter what the others say anyway. The only thing that will matter is how long it takes you or your employees.
Estimating materials is fairly easy. Figuring your labor rate, overhead, etc. should be easy with your skills. But, estimating labor will be a real difficulty, I think. That said, how else are you going to learn those skills? Start your shop, go slow, and learn as you go. If you don't know, guess high. If the customer doesn't want to pay what you ask, you can suggest you do it on "time and materials" (which is fair to you both). Just make sure you factor in all costs of doing business when determining your shop rate.
One last suggestion is to do something to separate yourself. Don't copy everyone else, because you are then just down to the cost factor. Be creative in what you make (and that can be the product or the service). I hope you prosper in your new venture, and don't accept the advice that tells you there's no way to make the money you're currently making. If you accept that, you may never. But, if you expect to make more, and charge for it, then you have a chance.
Do determine to be happy and keep that paramount. Many of us that are shop kings run to the shop when life outside the shop (spouse, kids, money, etc.) get rough, and don't stick around to tend to the tough stuff in life. Not good.
Do find a niche and exploit it. Along the way accept some of the boredom it may bring by growing the company so you don't have to do the boring stuff. Once you are out there on your own, you will quickly realize it is all up to you, and it will never let up. In fact, with any success at all, the solitary endeavor will only get stronger.
I have worked wood professionally for over 30 years, been on my own for the last 16 years. Nine years in my 1000s/f shop, 45' out the back door of a house in the country. I made burled tables, quilted maple beds, sold things at galleries, got photographed and interviewed and starved. The dog spent his days with me, the kids visited after school, and I was the local expert for every wannabe and hobbyist in a 50 mile radius.
The last 7 years have been in a 5,000 s/f shop with 4 employees doing the best residential arch. woodwork we can - a real business. We are now the top shop. I make well over 70k a year, with all the benefits. The guys in the shop make well over 40k, with all their benefits paid. I don't work nights, they don't work nights
But I did learn bookkeeping, have a sane and solid accountant, listen intently to shop and customer problems and solve them quickly.
What I have now - compared to the backyard - is security. I had a heart attack at 55, a couple of years ago - family curse. Totally out of the blue, but these things do happen. The health insurance paid, the shop stayed busy, and I had time to recover and not worry about the future. If I had been in the backyard, I would have had to give it all up and find a real job. So now we are building a business that will have real value, and we will be able to sell it to augment retirement. We have a great reputation and all is well. Most of these goals I did not have well in hand when I first hung that shingle, but they have evolved over time to where the only complaint I have is that I didn't wise up earlier.
Comment from contributor M:
Why not find a relatively (for a cabinet shop) high paying office position in an established, medium sized cabinet shop for a few years? It seems that the only thing you are lacking is experience, and with your education and work history you can have someone else pay you (less then you make now) as you gain this experience, rather than paying for it yourself with a few start-up years of no profit.