I am very grateful to still be in business after ten years, but when is it time to make money?
When I started this as a hobby, I was paying top dollar for materials and making less than minimum wage. One day I decide to buy a 100 BF of wood instead of what I needed to save 10%. Then they told me if I bought a unit I could save another 15%. Soon I was buying by the unit. Next thing you know someone came along and told me I could get it from them at half that price and have it delivered if I bought from them. So I built a place to store more material and next thing you know I was buying multiple units at a time because I had the space and it would last a year. Because I got good price on lumber I had more money left at the end of each job. Next thing you know I was buying finish in bulk. With that savings I had more money to buy tools. That allow me to work faster. Soon I was going thru a years worth of product in a few months, so, I bought more in bulk. Then the shop got too small again and I am building more space. I thought that Amex would say, “That is it,” but they keep raising my credit limit and I keep buying bigger and bigger. I want to change directions, hire help, and make some production items instead of one-offs for word of mouth customers. My SCORE counselor tells me, “Just keep doing what you are doing and keep raising your price.” He says people are paying for me and not my product. I see everyone with toys that I cannot buy (I can’t find $5k for a quad but I just spent $9k on finishing products) and I am sitting here in the office while a cruise I paid for is about to leave port because a customer was willing to pay more than the cruise cost to have their kitchen refinished tomorrow. Besides my wife being unhappy, I really feel I am making bad choices. I love what I do and do not know if I could do anything else, but I do not see an end to this cycle. If you have been thru what I am going thru and come out somewhere, I would love to hear where you came out. I am really concerned the end is selling the equipment for 10 cents on the dollar and the real estate and moving into assisted living. Where does the cycle end? Do I wait until the customers stop knocking on the door, then try my own designs? Do I write a book? Where is the goal line?
From contributor Pa
I think your SCORE advisor makes a very salient point. I'm currently reading a book called "Creating Competitive Advantage" that would probably discourage you from disconnecting from what got you to where you are. (assuming that is a good thing?)
Not sure your goal should be having inventory.
One of the many advantages of living in a free market are that it allows YOU to decide what the end game is. You stated what that you are following your purpose ("love what you do"). But you did not say what your goals were. Maybe you have already achieved them? OTOH the customer does not care if you make money or not so the goal has to be something the customer will pay you for.
IMO you should look at your goals, especially regarding finance, and put a time line on it.
From contributor La
My life has been my work. Not enough time spent on other things. I've now got $ to do most anything I want but money isn't much of a reward.
As for carrying inventory, it has a cost that has to be traded against total real savings. Most things here are now ordered by the job. We use enough of many items to buy case or unit quantities and use them in less than a month. If it looks like it will take longer to use we just get what is needed currently. We try to let our suppliers know ahead when we have a large job taking materials they may not stock very deep.
From contributor ri
There are two constants that nearly everybody wishes for when the are doing custom woodworking. 1) If I only had a business manager/partner that could run the business side. 2) If I could only do limited production runs I could really make some money. I've talked about, done one of those, and read about those wishes for 40 years. I slugged it out for 8 years, until I got an offer to work for Woodworker's Journal Magazine. I went the partner route after about 6 years into my custom woodworking business. It was a disaster, and cost me a ton to buy the jerk out of my business. Both money in the buyout, and then to fix the screw-ups his wife made while doing the accounting with the state. Of course, I'll never recommend the partner dream to anyone after that. For dream number two; I have a good friend that does some limited runs. He sells through Artful Home, and does ACC shows. I can't see the advantage of short production runs either. He often gets requests for inches wider or longer on his tables, or he's short of certain wood species of parts for the stools he makes. I've listened to him complain when an order comes in because all he has is a pile of parts and the custom work he is working on is getting close to delivery date. So he works latter into the night to get the catalog order assembled. The moral to my long story? Ain't no sunshine on either of those dreams. But I grew up a farm boy, and only know hard work. Never knew anything about money except to make just enough to provide for my family. I did it for more than 40 years, got one kid through college, and now watch a pension check come every month. I had a corporate job for 15 years before I started that business, and had the good sense to go back to it after the magazine job stopped. So spent a total of 30 years on the corporate job, and I'll be damned, but all those horrible meetings, horrible bosses, and all that stress is paying off a little. Oh yeah, when I closed my shop after 8 years, I did get pennies on the dollar for the big machinery. That's just the way it happens most of the time. So if you are staying in the black, keep at it until you find something better. Probably one of the best things my Dad taught me on the farm, besides not being afraid of hard work, was don't be afraid to make a decision to change. So what if you start over at something else. Just have something lined up to change to, before you burn the bridge. Good luck Matt, who knows, you might get that dream job next week! Oh wait, that's 3 dreams every custom woodworker has.
From contributor mi
There is no magic year when everything really pays off. After 25 plus years, I watch it get better, sometimes a little worse in regards to income. I can accept the down turns, when it is factors outside of my control, like the economy. When things get worse because of my poor management, bad decisions, or anything else that I am not doing correctly, then that is another matter altogether. Basically if I am growing and improving our business, I can take a lot of things in stride when they come along.
One thing I have learned to do, is I will every year, regardless of the bottom line, consider my other options. Meaning I ask the question, "is there something else I can do that is overall better for me and my family, especially financially"? I have gone so far as to several times apply for jobs in other areas of work, even seriously consider starting a totally different business. At this point, I stick with my woodworking career. Making that choice, again and again helps keep those negative nagging thoughts away, and gives me the confidence to believe I am working the best job I can. Plus, it rearms me to have the right answers when the wife starts asking those questions too. The day I can't convince her may be the day to change.
From contributor Ri
Over 10 years, you spent your "profit" on material inventory, tools, and real estate, without keeping some for you. Of those items, you may receive more than you paid for the real estate, although the cost of ownership in the mean time will probably mean you will receive less in the end. You are now a slave to all those "assets" you own.
Your perspective on the cruise is the perfect example of the issue. The excess of that job's revenue over the cruise cost is not profit. Labor, materials, overhead, and profit contribution, as well as the cruise value, as well as the cost of preparations to go on the cruise, and the cost of the replacement cruise are the costs of the refinishing job you took on. Only if you receive more than all these costs combined can you say the job was worth not going on the cruise. And that is only the financial value.
Your accountant will tell you to pay yourself first. The easiest way to do than is to create a situation where you can pay yourself on the first of the month, as well as contribute a certain amount to a profit fund. Then work like the devil to pay everyone else and make sure you have enough left over to do it again the next month. Ideally, at some point in the future you can then increase those amounts.
You need to realize that someday you may not be able to physically perform the work, or a life event will change your ability to do so. It may be temporary, or it could become permanent.
A pile of cash gives you many more options than depreciating assets.
From contributor Pu
I agree with Rich about the cruise. I don't see how anyone could pay me enough money to compensate for the financial side of the cruise, not to mention the wife side (which is invaluable).
What are your priorities? Family should be #1. There is no way any customer would pay me enough to cancel a family vacation. If they really want me to do the job, they will wait till I come back. I sincerely doubt that your customer would cancel her vacation to have you to come do her job.
Learn the power of "NO". It is very scary at the start but after a while it becomes empowering.
Way too much inventory on hand. Raise pricing to customers to make more profit on jobs as you buy inventory to the job. If customers really want YOUR services, they will pay for it.
From contributor D
After close to 40 years in the business we went on our first cruise this earlier this year.
I would have bought your tickets from you at a discounted price , we are ready to go anytime again .
You can work any day
The days at sea not port are the most relaxing times .You owe it to yourself.
From contributor Bi
Trying to make a living working alone is flawed in my opinion. You need to multiply your effort. I would never consider working alone it is a recipe for what you are experiencing. You need to work on your engineering and process so employees can produce your product.
If you want to work in the shop all day you have a paid hobby that makes you a slave.
I worked the hardest I ever worked in my life for the first 3 years and did not draw any money. I added inventory, equipment and people just like you. It is called boot strapping. Then we reached critical mass and our income exceeded the financial needs of the company.
We continued to grow and stayed away from debt as much as we could. Now we have a process for everything. I can leave for a week or two and not get one phone call. Our employees know what to do given any situation.
If you are going to keep on your current path raise prices until sales slow.
Not trying to be harsh, I just don't have time to pitty pat the subject.
Read the E myth.
Read the Goal.
From contributor Da
"Where is the goal line?"
I will repeat what has already been said: Only you can draw that line.
That said, I'm not really sure I understand your situation. From the first few sentences I infer that you are buying trailer loads of lumber and drums of finish and therefore must have at least a dozen employees. But then it sounds like you are a one-man shop if you're the one that has to cancel a cruise to do a rush job...?
Since I didn't set your goal I can't tell you that canceling the cruise was a mistake. But I would never, never, never advise anyone to do that in your situation as I understand it. As mentioned, there is a cost beyond the financial part that is hard to measure and IMO almost impossible to overcome. I'm guessing you haven't had a "real" vacation in 10 years. There's a reason vacation was invented, you know. With very few exceptions, most people need time away from the stress of everyday life to reset from all the garbage the accumulates. You will not make up for the loss of that vacation with dollars.
If you are a one man shop, it sounds to me like you've put way to much money into inventory and space to keep it. If you're not, then I guess I'd need to have more info about your situation to provide any additional advice.
Take a hard look at your life and set a goal. Preferably with your wife involved even if she's not involved in the business. Remember, the business is supposed to support you and your goal(s), not the other way around.
From contributor Me
Hey! Feeling a little shy about pipping up on this one... But I think it's important. I've been that wife. It sucks... But proud to report that we worked through it.
The actions that illicite big reactions are usually just noise around a bigger issue. Forgotton birthdays, business phone calls on a date, etc can get a knee jerk wtf but really what we found was that he was running full tilt, exhausted, not thinking straight, thus not even performing optimally on his endeavor.
He's since figured out temperance-- that taking the time to feed your own self makes you a happier person, thus a clearer thinker. Thus a better money maker too. Running really fast is not the same as being productive. And the best minds fall into that trap-- it's pretty human and often a reflexion of badly wanting to get it all together.
Ps-- the book The Goal touches on this.
Good luck! Hope you didn't mind my interlude on marriage :)
From contributor D
David , right on .
From contributor Ma
Thank you all for your responses. I guess I was in a bad mood the other day and questioning my choices. Sorry for venting here. I was not saying I was going hungry just that I didn’t have the toys other people have.
Yes, I consider myself a one man shop. I have helpers that pick-up and deliver but it is just me for the most part in the shop.
Yes, I am buying wood by the truck load but they are straight trucks not Simi loads. I only buy a unit when I do not have enough of that species to cover a job. I do not buy just to buy.
No, I do not buy finish by the barrel. Just a few pallets at a time and a pallet contains many different products. Color is about $50 per quart so it doesn’t take long to get the total price up there. 70% of my work is restoration so I need many different products on hand. Lacquer is the only item I use a lot of, if 25 gallons a month is even considered a lot. A 25 pound bag of shellac will usually last me a year but when I buy it, I am buying 100 pounds because I go thru all four kinds at about the same rate. I just chose those two products because I thought most woodworkers could relate. I needed the space not for those two products but because I am buying all products that way now. Ordering product takes time and I do not want to spend all day on the computer. If the computer say I need 1 1/2”, #6 screws I could order them and pay the shipping or I can order all the hardware that is getting low and get free shipping. I am already on their web site so it is just a few more clicks.
The restoration is the part of the business that my adviser thinks an employee would learn to do and then become my competitor. The national average is $80 per hour and I charge $265. When others come into the area and try to compete with me they do not have the knowledge to get a foot hold but someone I trained would have the knowledge. I thought about someone to do the estimating but you need to have as much knowledge to do that part as to do the work. The discussion of choices, and why to make them, is what sells the job and makes the customer happy with the final product. If someone in the future tells them they should have had the item repaired differently the customer can explain why they chose to have it repaired that way. The knowledgeable customer is what makes it hard for the would-be competitor to come into my neighborhood and tell people they could do it better for cheaper. I know I could have others do the woodwork part but that is the fun part. I just do not want to give up the “paid hobby” part. That could change if the Republicans take the White House and the middle class tries to make a come back. That could change my business to 70% new builds and 30% restoration. I do not have the 100% close rate on new builds. Estimating without a sale would greatly reduce my income. I remember how it was when people thought life would only get better. A new woodworking business was starting up every month. Customers would get ideas from many different people then have the start-up build it for the cost of materials and a new jigsaw. So I am working real hard until the election. (Take the money when you can, I believe)
As for vacations, it has been three years since my last one. I spent a month fishing in Alaska. The year before we spent 5 weeks traveling around Europe. So, I know how to take them. I do work 7 days a week but I take a week off at Thanksgiving and a week at Christmas for family.
As for missing the wife's birthday, that happened twice. Once when I worked for someone else. Once after I started working for myself because I believed her when she said she did not want to do anything for her birthday. Now it is a scheduled all day event on my calendar. She tells me she does not want to do anything. I tell her I need to do paperwork. I sit at home doing paperwork until she asks, “You want to go …?” Then I say, “Sure, This can wait, It’s your birthday.” It has worked very well and I do get some work done.
As for missing the cruise, this will make some of you mad, I did not make enough profit on the job to cover the cost of the cruise. I did it because the customer spends over 100k per year on my services and has sent me a lot of other good customers. I did it more because they are good customers than to compensate financially for the missed vacation.
From contributor Me
Well you survived to post about the cruise cancellation so you can't be too bad in the doghouse ;)
So may I ask--why not explain to the client that you are away, but outsource the job/get it all set up for them, even check up on it as soon as you get back? If you've given them years of good work/service, don't think a single gig would be enough for the other company to woo the client over, no?
Just wondering :)
From contributor Ma
Thank you Mel. I did not even think about outsourcing it. It all happened so fast. I bid the job three months ago and did not hear that they decided to buy the property. When they closed on the house they had the realtor drop the keys off at my shop. I was told they wanted to have it done before this weekend. I called to tell them they could not drop that project on me at the last minute. They said they would give me an extra $2500. I said an extra $5,000. They said, “OK do it.” When I got off the phone is when I realized I had plans that a long day would not fix. I could have called back but I just kicked myself for opening my mouth before thinking. Like everyone has been saying, troubles caused by running on autopilot.
From contributor Me
oh I so get it! Plus it stems from a pretty nice character trait of wanting to do it all and make everyone happy and rock it... Then you're tired, it didn't work out as good as you wanted, you accidently pissed off a loved on in process... And there you are, thinking "dang, what happened?"
Lol... We often joke that the road to hll is paved with good intentions :) he still gets caught into the autopilot madness but now we sit down and brainstorm about ways to manipulate the variables of a situation, so the job gets done, he gets a bit of downtime, and client is happy.
Isn't always easy to find on a first try but there's usually always a way in the end.
Think you got the right idea tho-- just perhaps need a good recharge before a new sprint :)
From contributor JS
Yep.
From contributor Ke
It seems to me that if you are making $265/hour and working 7 days a week, your business is highly profitable. Maybe you have really high overhead?
