Start-Up Advice for Businesses
It's the same old story: A skilled craftsman (and new solo businessman) just figured out he's been making three dollars an hour. Guys who have been there and done that chime in with advice and encouragement. December 14, 2005
Question
I am pretty frustrated. I've been acquiring machinery, knowledge, skills, and experience for the better part of 15 years. I'm 32, a proud shop owner for the past 6 months, and last month - I just found - I earned $3.55 an hour for 70 and 80 hour work weeks!
Should I start looking for a seasoned partner or should I just hang in there?
- I can't afford the insurance to hire, so it's just me and my wife.
- The shop is too big for me, but too small for employees.
- I can't even start working until 2 or 3 in the afternoon, since I'm so tied up dealing with all this crap that keeps me from actually working.
- My machinery isn't nearly as capable as I thought. I'm burning up motors left and right, since I'm full-on producing without anyone there to stop me from pushing these tools over the edge to meet demands.
- I'm a shop carpenter, not a business man.
- I've found myself floating approximately 1000 dollar in deficit. I'm a grand in the hole, but I keep skating it along from one project to the next, and can't seem to get out from under it, without negotiating my bills, which are now consistently two weeks late.
This started at the get-go. It hasn't gotten worse, but sure isn't getting better, and with last month's earnings, I'm getting worried! Are the first several months supposed to be this rough?
Forum Responses
(Architectural Woodworking Forum)
From contributor D:
Most people will tell you that any company that first starts off is not going to make any real profit for the first 3 - 5 years, considering all the equipment you have to buy, the shop to pay for, and all the hand tools.
I started my shop in a two car garage for the first 6 months just to save enough money to get the shop built. I had very few machines to work with in that garage. But after spending $30,000 to build the shop and another $10,000 adding more machines to the production line, I'm still just skating by the no-profit line. Sure, I'm making a decent wage for myself, and paying all my bills, but the company profit is just not coming forth. God forbid my planer goes down or my compressor motor freezes up. I just don't have the cushion to pay for things like that right now. I've been in the new shop for two years and if nothing tragic happens in the next year, I should be seeing some profit starting to build in the ol' bank account.
I didn't get into this business to become rich - I love to create, be my own boss, work my own schedules, and see the look on a customer's face when they see their product for the first time.
From contributor J:
The first thing you need to do is slow down a bit and get a plan together. Being down a grand is tough, but it's not the end of the world. Evaluate what jobs are in the pipeline and make darn sure that you have money built into them to make them profitable. I would recommend against bringing in a seasoned partner this early in the game unless you are willing to give up a lot of control. Instead, hire a part-timer to handle as much paperwork as you can. Get a day planner and budget your time so that you are more efficient with your non-manufacturing time (i.e. don't dawdle on the phone or running errands). Get into the shop and evaluate your processes. Consider outsourcing some of the processes. Better yet, position yourself where you handle smaller, yet similar, outsourced projects for other shops. That is a great source of income. It does get better.
By the way, you really made $3.55/hour? What did you do with all the money? Grin.
From the original questioner:
I'm saving it in case this next month gets worse! Of course, if things get too much worse, I may have to pay a bill to my own shop, just for letting me work there. Seriously, I do understand that businesses can lose money at first. I just never realized that I could be in the position I'm in now.
From contributor R:
Before you get so drastic as to throw in the towel, there is one more thing you should try. Increase your prices to a rate you need to in order to make a comfortable living! Keep close track of all your shop time and use it to calculate operation costs. If you develop good rapport with your customers and get repeat business from them, ask them if they would consider working on a cost-plus basis. When I approached a great customer and told him I was going to have to stop doing his work because I was losing money quoting his very complex projects, he said to me he didn't want to find a new cabinetmaker and that I should bill him on a cost-plus basis, so I get paid for every hour I spend for him, from designing to meeting the electronics expert to meeting with the plumber to the shop time and installation I do. And now I'm happy, he's happy and everything is great!
If you've been at it for 15 years, you should expect to get paid for abilities and effort and nothing less. You should have developed enough goodwill with your customers that they should understand your situation. I bet that many of them would pay more in order to not lose a good cabinetmaker. It can't hurt to ask for more, if you're serious about closing the doors.
From contributor F:
Hang in there. As many have stated, it is extremely important you know your costs. Keep meticulous track of the time it takes to build things, not just for the next few months, but for years. Don't let people take control of your time - make them make appointments. Charge for everything (know your cost) and don't buy anything you don't absolutely need. Do not take work you are sure is not profitable. Work as many hours as you need to in order to get a handle on things. And your attitude is correct - you're not in it for the money! Hopefully we will hear from you again when things look a little brighter.
From contributor C:
A while ago, one contributor offered excellent advice. Follow the link below and read the entry "From Contributor P."
Business Start-Up Advice
From contributor A:
You mentioned "it's just me and my wife". Does she actually help in the shop? If not, get her to answer the phone so you are not bothered by every salesperson that calls or people that are just fishing, and may not be worth your time. Have her screen your calls. Planning your time is very important. Those runs to the local home center for $2 parts that you forgot will end up costing you $100 or more in lost time. Send your wife on your errands when you can.
Most of us small shop owners that are married and trying to carry the load all by ourselves have a wife that is perfectly capable of many of these things and we often don't give her enough credit. My wife does most of the sanding, some of the assembly and the small machine operations. She doesn't run the sheet goods through the table saw because of an old back injury and I don't want her hurt again, but since I asked her to quit her part time job and come home full time, she has been invaluable.
Advertising design, dealing with sales people, running the smaller machines, help with design, running errands, measuring jobsites for cabinets are just a few of the things she does. She goes on all of the sales calls with me. She sees things from a woman's perspective, which is very important, since most of the customers that make the decisions on kitchens and furnishings are women.
Keep reading forums such as this one and keep asking questions.
From contributor L:
I was in a similar mode when I first started. I would take on almost anything that came in the door. At the end of the month, I had made $2.00/hour. I started keeping accurate track of time and expenses. Stopped doing jobs that didn't pay well. Turns out I got more business, not less, from increased prices and doing only what I could do efficiently. Actually made a living at it! I revamped my shop to do a limited number of different things. Reduced the setup times and started doing things that few other shops did in the area (very short run moldings on a shaper with a feed, hand ground knives by eyeball), reproducing elaborate trim for big, old houses being restored. It didn't take expensive equipment, but not the light weight stuff, either. Hang in there, know your costs, charge for your capabilities, and don't compete with Home Depot.
From contributor W:
First, let's talk about what you build. Give us a list of the types of projects you are working on. What is your market (where are you)? Give us a list of the tools you have in your shop. Does your wife work with you or are you by yourself?
From contributor J:
I'm in the same boat, man! And I have actually started the search for a "regular" job because I can't make it work. I am 34 years old with a master's degree in woodworking and 15 years of experience and I can't get someone to talk to me unless they want their kitchen redone for $1500.00. I guess this is the dilemma of being a woodworker. At least you've got your wife to help - mine divorced me!
From the original questioner:
I have fired myself from the position of shop owner/manager. I have reassigned my duties limited to production only, except for 1.5 hours per day where I'll pick up managerial tasks until I find and hire a competent shop foreman. I've backed off from attacking jobs too large for my capabilities and focused on what I really know how to do - stairs, custom cabs, and doors. I farmed out three trim packages already. The business plan was a huge self help! Thanks for all the advice.
From contributor H:
Many of us have been in your situation. Don't get too discouraged. Diversify! The kind of money we're all looking for is not in kitchens or remodels - it's in things that no one else is making. Get artistic, look at all those old Fine Woodworking gallery photos and morph them into your own designs. I supported my family doing just this for about ten years. After a while you won't hardly believe these things were built with your hands. After a few great pieces, people may commission you to create rooms or houses of furniture, because nobody else has the 'nads to try it! Over those 10 years, I did sell some pieces for less than they were worth, but only because of great further opportunities. Now I work for a very high end millwork shop, only because the owner bought a couple of my pieces, and had to have me under his roof. I am paid very well because of the self teaching and not shying away from the artistic side. Don't limit yourself. Make one piece a month that you want to make. Then sell it! There will be time for family heirlooms later. So many things that were intended for me and my family became "How much are you asking for that?" Learn to visualize, imagine, dream. Use color, a little figured wood, curves, mixed media. Push the envelope of design once in a while. Who else is going to?
From contributor X:
Make sure that each job includes a living wage and benefits - part of the overhead. You may be doing that now. Just raise your living wage to where it is satisfactory. At your present wage, you're giving your work away. Keep track of your time.
From contributor T:
Been there, done that. I learned a few things along the way. Answering machines are great - check the messages on scheduled times, on breaks and at lunch. Have someone else do the paperwork. You are a shop man and the paperwork is a time consuming mess for guys like us. Also, make sure they keep up on the paperwork - nothing like being backlogged two or three months.
Do work you enjoy. Don't be afraid to say no to jobs! Set a schedule for work and a schedule for play. I forgot how to play and that cost me too many other things important to me. I was charging $50/hour shop time and felt I was charging too much until I found out some of my competition was charging $100/hour, and some of their work was inferior to mine. Put little humorous posters up in your shop along with pictures of your kids or wife or good times you had. It helps keep it all in perspective.
