Ramping Up When You Need Workers

When the work starts to roll in, you need help — but employees are expensive. Here's advice on optimizing the cost of help as you increase production. September 3, 2014

Question (WOODWEB Member) :
For the entire first half of this year I had tumbleweeds blowing through the shop. The only sound was not of sawblades, but crickets. I was in the office working on marketing and sales. With the warmup in the local market, I am now looking at more work than I can handle on my own.

The problem is, during the slow time, I dug a pretty good hole in my finances. Last week, I started the process of setting up payroll and hiring help, but when I got the quote for the CA worker's comp insurance it became very clear that I need more than a molehill of money just to get one guy rolling.

I really prefer being a one-man shop, but these days I can easily spend 100% of my time doing bids, site measurements, layout and management. I already outsource drawer boxes and doors, and I use KCD for shop drawings and cutlisting.

Here are a few options I'm considering:

- Turn down work, pull even longer hours, and slowly claw my way back into the black (which might leave me with tumbleweeds again in the slow season).

- Outsource boxes to CabParts (assembly still required, and my leased edgebander sits idle).

- Pull an SBA loan for working capital.

- Lease an inexpensive NBM CNC (see also: debt).

- Finish my existing contracts, move to Nicaragua and grow bananas.

Forum Responses
(Business and Management Forum)
From contributor D:

Raise your prices 20%. Outsource a couple of jobs to get a fast turnaround on your cash while you are looking for a good employee.

From contributor T:
I know Quickbooks has a Workers Comp option to pay as you go instead of a lump sum. That should solve your cash flow problem. I wouldn't turn down work. The only way to make money is to have employees. If you can't manage at least one, then yes you should move to Nicaragua. Leasing a CNC won't solve your problem. If you can't afford WC for one guy, you likely can't afford a CNC. I've never outsourced cabinet parts, but if you've got an edgebander, a saw, and an employee, it seems rather redundant.

From contributor G:
Of course employees cost money, but have you asked yourself, how much money can one make you?

From contributor Y:
Hire an employee and then get two more if you can find the work. We are a small shop and trying to cover the overhead with only a couple guys is difficult. When we are producing more work and more guys contributing to the overhead we are more profitable. The upswing to being busy is what we struggle with financially.

From contributor L:
Raising prices is not necessarily the way to go. Work instead on lowering your costs. If you are going to hire someone start with a written list of the things you want them to do. This list is easier to produce if you start with a list of all things that need to happen to keep the shop running and/or produce the job. You can use the list to test your hypotheses about productivity. Start with everything written in black and white. Color code the things you want them to do each day in yellow. Have them turn the yellow things orange as they are complete. Where you have a lot of yellow at the end of the day is where your expectations were not realistic. You can now either add someone for where you are deficit or else revise those expectations. The written list will make it easier to integrate, train and manage. Without the list you are going to need to rely on imagination or intuition.

From contributor R:
Have you looked into hiring through a temp agency? Not sure, but I think the temp agency covers the workman’s comp insurance.

From contributor E:
We've had very good luck hiring inexperienced people for part time work. In many ways they are much better than experienced workers. With an inexperienced person you know everything that you will need to teach them. There is no way to know what you will need to un-teach the experienced workers. Face it, woodworking is not exactly rocket science. What you are looking for is a good attitude and willingness. You don't need grumpy and you can't afford overpaid. Bring them in for a couple of days each week. As soon as one gets in the saddle a bit then bring in another one. If you have 40 hours of work for someone then split it amongst two of them. There are a lot of very tangible benefits accrue from not having all your eggs in the same basket. You can always bump the hours up as they acquire skill but in the beginning it will be better to have more options.

From Contributor D:
Start with bringing a school kid in every day for an hour to sweep the floor, take out the garbage and put everything back where it belongs. You’d be surprised at how much time that’ll save you. Look at your day and see what adds value and what doesn't. Unloading material adds no value - let a $10.00 per hour person do it or find a supplier that unloads. Outsource the easy stuff. Do the craftsman stuff yourself. I have several people that I know that will come and work on a contract basis for anywhere from an hour to a week - much better than an employee.

From the original questioner:
Thanks all for the thoughtful replies. At this point, I think I'll have to put in the long hours for the next couple of jobs and outsource the easy stuff. If I can get a leg up after that, then I'll think about having another try at hiring.

From contributor F:
I would agree that you’re going to need to hire someone. I've been at it for about a dozen years now and find I just can't get stuff out the door fast enough by myself. I've tried hiring several times and have not done well at it so far. I think going from a one man to a two man shop is a tough jump, but a necessary one.

From Contributor I:
I use a temp agency for help. It costs a little more. The agency takes care of comp, taxes. This saves a lot of time. It also saves a lot time filling out new hire stuff and keeping records. If you do residential stuff make sure that the agency will let you take the employee into someone’s home. Many agencies will not due to liability. Be careful of paying employees as contractors. This can get you into tax trouble.

From the original questioner:
I've brought a few people in over the years, just on a 1099 basis for a few days. After they spend a day fumbling around the shop, they spend the next few days being marginally productive, and making expensive mistakes. I probably have poor management skills, but it often becomes clear that they are either a safety hazard, incompetent, or for experienced guys, they start acting like they own the joint. Call me a pessimist, but these experiences have given me a strong desire to stay one-man. I think it can be done with a sharp focus on the right work, great time management, careful outsourcing, and efficient workflow on the shop floor.

From contributor Y:
The advantage of employees is dividing the overhead cost. We currently have a 17 man operation and use part time university students when needed. They are generally smart, have go-get-em attitudes and easily trained. Worst thing is running an ad in the newspaper. What you get from that is a total waste of your time. Most universities have a student employment system, no cost for a 30 day ad. There still is the money problem. As you ramp up production you face your up-front costs before you get paid on the jobs. You will need operating money. Commercial work is the worst!

From Contributor W:
After 20 plus years running my own shop with over 50 employees I can tell you from experience outsource everything you can such as doors, drawer boxes and etc. and even some of the finishing. You will never make a decent profit using shop labor or even worse doing it all yourself unless you want to have hobby that loses money.