How to Play 'The Circle Game'

Bad economies are inevitable. Here's how woodworking businesses can prepare. 1998.

by Anthony Noel

Times are good now, but are you ready for when they change?

And the seasons,
they go 'round and 'round.
And the painted ponies
Go up and down.

We're captive
on the carousel of time.
We can't return,
we can only look
behind from where we came.
And go 'round and
'round and 'round

in the circle game.

- Joni Mitchell, 'The Circle Game,' copyright Joni Mitchell 1966-69, Siquomb Publishing, BMI.

If you remember this wonderful ode-to-youth-and-its-all-too-hasty-disappearance (or even if you don't), you are no doubt wondering what it has to do with the business of woodworking. You may be surprised to learn that the answer is 'quite a lot.'

Just as the seasons come, go and return, the same is true of wildly prosperous times such as those we are now enjoying. Many shop owners too young to remember 'The Circle Game' song can nonetheless recall the terrible times the industry endured in the mid to late '80s, which lingered in parts of the country to the early part of the '90s. At times, they seemed unending. But end they did.

I hate to be the one to break it to you, but the high we've been on since the mid '90s will end, too. When is anybody's guess. But basic economic theory (and more notably, history) assures it. Add to that the cyclical nature of the global economy (by this, I mean the tendency for foreign markets to be down while ours is up and vice-versa), and you have still another indicator that no economy, no matter how vibrant, is impervious to the eventual erosion of property.

Would you have guessed six or eight years ago, when bookcases couldn't keep enough titles about Japanese management techniques on their shelves, that Japan would be facing the economic struggle it is today? Don't be naively nearsighted enough to believe that our economy, and more specifically, your company, will always enjoy the prosperity it does now.

Though economic ups-and-downs are a certainty, there are steps you can take to help in surviving the bad times. Fortunately, these steps are more easily taken from the relative security of prosperous times than when enacted as a last resort. Plan now, and you will be well positioned to ride out the roughest economic waters.

Even the gloomiest, doomiest predictions I've been hearing say that we can expect the present cycle of prosperity in the woodworking industry to last another two or three years. It may end sooner. It could stretch longer. Either way, I'm not advocating desperate acts in these tranquil times. Careful, measured long-term planning is the ticket. An important facet of this process is taking a hard look at your product and clientele and your ability to adapt both to whatever might come down the pike.

Product. Remember that a custom woodworking business that relies too heavily on one specific product and/or service is courting maybe not disaster, but trouble. While it is great to have a 'bread-and-butter' offering (or two or three), consider the word 'custom.' Are the services your shop offers and the skills of your workforce diverse enough to garner work of sufficient breadth to carry you if demand for your primary product declines?

Remember, we are talking about custom shops here. Limited-run product operations are whole different animals, but they still know the value of diversification. Those which sell pieces to end-users or wholesalers usually have a full line (or several) offering something to appeal to a variety of tastes and many budgets. Meanwhile, certain job shops and component manufacturers - which produce things other businesses need to complete their work economically - also tend to have broad enough offerings to negate the slim margins that a more narrow offering would assure.

While there are companies that offer just one or two products and produce them so well (i.e., efficiently) that they can survive almost any economic weather, these are the exception to the rule. Consider yourself among their small numbers only if something you introduce is 1) simple to make with a low overhead, 2) utterly indispensible, and 3) affordable for almost anyone. Which brings us to...

Clientele. Let's face it. Custom woodworking shops generally don't make things that are affordable for almost everyone. They fill a special need for very high-quality and usually very expensive items. So when the owner of a custom shop studies his client base, what he should be looking for is diversity of clientele.

If you only do custom work for doctor's offices, for example, what happens if the health care field in your area is suddenly victimized by a round of downsizing? Remember, a lot of hospitals these days are owned by huge chains. You should count on feeling the ripple effect of any cutback. Even doctors not tied to an affected hospital may scale back, because those affiliated with the chain-owned institution will need to prospect for additional customers. The new customers those displaced doctors will be competing for are the same ones your unaffiliated doctor may be serving.

(Note: I gave up calling people who get medical services 'patients' a long time ago. Don't get me started on this country's healthcare industry.)

The point here is not to unduly alarm you, but rather to get you thinking in new, more diverse directions. The more thinking you do along those line (and acting on your thoughts), the better positioned you will be to withstand any economic downturn.

What would be some potential solutions to the doctor's offices example I gave above? Beyond the obvious diversification of your client base to include other professionals like accountants, lawyers, engineering and architectural firms (the latter two being great places for referrals to an even bigger pool of customers), you might think about specifically what you now make for doctors and what you might add.

If, for instance, you are doing a lot of high-end reception desks and elegant offices for individual doctors, look around at their labs and exam rooms (knock before entering!). Are these areas ready for new cabinetry and/or counters? If you think such work is 'below' you or you are unsure of your ability to do good plastic laminate work, think again. Money is money - whether earned for what you love to do or what it is prudent to do, remember: it all spends the same!

Get hooked up with a reliable laminate cabinet manufacturer, do the countertops yourself (or sub them out, too!) and you have just successfully diversified into another area. Not only that, you have given your doctor one less reason to call another 'specialist' when he needs a different kind of custom work than what you 'normally' do.

Employees. Here's another area which many shop owners overlook in good times, only to have it come back and bite them later. One key element that feeds the economic circle game in woodworking is the tendency for employees to quit and start their own shops when they feel they can do better on their own. They have learned how to do good work - with paid training from you - and they venture out for greener (and I'm not talkin' hay) pastures. Some will succeed, some will fail - but all of them will charge a lot less than you do in the beginning. And some will not hesitate to tell your clients that they will beat your best price.

You can take some solace in knowing that these employees (uh, former employees) will suffer through many of the same lessons you did (like exactly how many hours it takes to run one's own company; how tough it is to find reliable suppliers; how high humidity affects the finishing process; and on and on). But that is small comfort as they take jobs you know it takes 'x' amount of dollars to produce, for an unheard of 'y' price.

What can you do? Some thoughts on that and other ideas for winning 'The Circle Game' in the next article.

Anthony Noel writes, consults, and teaches woodworking and journalism, along with doing an occasional custom job in his shop in Macungie, PA.

Have a business related question? Visit WOODWEB's Business Forum. The Business Forum is co-sponsored by ISWonline and is moderated by Anthony Noel. All business topics are welcome, from sales and marketing to dealing with difficult customers.

This article is reprinted by permission of Custom Woodworking Business Magazine.