What Does It Take to Start a Business?
Besides woodworking skill, what characteristics does a person need to start up a wood shop business? The question sets off a long and thoughtful discussion on the Woodweb Business forum. September 4, 2005
Question
Other than good woodworking skills, what do you think it takes to start a small, successful woodworking business?
Forum Responses
(Business and Management Forum)
People skills, money, game plan, customers, building, machinery. I have learned that a good businessman running a woodworking business can make more money being a good businessman in another field.
Rather than trying to be all woods to all people, speculating and competing constantly for work, try to lock down a solid customer or market, and then kill yourself filling it.
A tablesaw, a truck, and a plan, not necessarily in that order.
What are you going to build? Who are you going to sell it to? Where do you want to be in five years? How are you going to get there? If you've never started a business, talk to someone who has (I guess that's us, but in person might be better). I specialize in countertops, and I'm good at that, but that doesn't make me a good businessman - time will tell if I am. I still have more questions than answers.
Good business skills are more important, or at least as important as good woodworking skills in running a successful business. I would add tenacity and low overhead during
startup.
Creativity should be way up there on the list. If you're not willing to live it, it might seem like way too much work for the return.
Control, control, control. Control everything from the smallest to the largest when starting up. Always remember these 9 words: "If it's going to be, it's up to me." Do not throw in the towel when things get tough, and they will at some point. The auctions are filled with tools and machinery from those who quit too soon.
Good woodworking skills make someone a good candidate for an employee at a cabinet shop. An owner of a cabinet shop should have good business skills and understand cabinet/woodworking. My shop foreman can outperform me in the shop in terms of skills, but really doesn't understand the business side of things. I think that most shop owners would agree that the #1 killer of small shops is not woodworking skills, but business savvy.
I'll add one more item: not enough working capital. You need to stay out of debt when getting started. You need 3 to 6 months personal living money plus enough to operate your business. Most startups don't have the cash flow to pay themselves for 6 months to a year. Whatever you do, know your costs; don't price low to buy business.
Hard work, organizational skills, planning and sales ability.
Doing what works and not wandering off into new methods or markets all the time because they are interesting.
Marketing from the big picture point of view, i.e. not being all things to all people and at the same time paying attention to what is needed and wanted and changing your business in a proactive manner.
Having all your legal requirements handled.
Personal ethics, i.e. not doing things that are bad for you or your business knowingly or by being complacent (e.g. letting an employee stay that is detrimental to your business because you don’t feel like starting all over with another employee).
Growth - there is no such thing as staying at the same size. You are growing or you are shrinking.
If you have these and probably a few more, you will gain control; until you gain control, you will not make a profit.
If you can not handle failure, you can not handle success. If you want to soar with the eagles, you can't play with the turkeys. If you don't have a sense of humor, your business will never make cents.
Over the years I have learned the following: You sometimes need a thick skin. You never have enough tools, or the right tools. A love for wood is sometimes stronger than the love you have for your wife. (Thank god mine understands this.) A great client base. A great client that pays you for your blood, sweet, and tears. An ability to know what your client wants (they sometimes do not know). One hell of an imagination (you will find that sometimes you have to reinvent the wheel). The most important is a killer contract that protects you.
I've noticed that many small cabinet shops do pretty well if the owner is married to someone with a decent income or a great job. Money earned in the shop can go back into the business for new machinery, upgrades, cash flow, etc. Not that this is how successful small cabinet shops are made, but there are quite a few small shops that do very well because the wife has a well-paying job that take care of the mortgage, food, etc.
I was able to start up my business in large part due to my wife's income and therefore, lack of pressure. It allowed me to keep my overhead low, reinvest most of the profits into the business, and most of all, not get killed by mistakes early on. That's not to say I wouldn't have made it without her, but she sure helped.
I am the one the customer comes to "to get a better deal" and I am soft! I will cave easily and so I have concluded that I need another person who has a stronger personality to keep from losing money. If I am bidding something for a friend or a friend's friend, I always seem to shoot too low and loose money - I hate this part of the job. I sometimes wish I had a partner with this ability.
If you are a good person and want to help people, volunteer some time at the food pantry or homeless shelter. If you want to have your own business, you must cover all of your costs and make some profit every minute of every working day. Just because you like someone or are related to them does not change the laws of economics.
You can do everything else right, but go a little soft on a sale and you're not making enough money to cover your overhead, etc. Good partnerships, or at least some good networking with other cabinet shops or similar trades, can make or break you. There's always that other shop that charges way too much, doesn't do as nice a job as you, and is busy all the time. Selling yourself and your product and service seems to be more important than buying more machinery, etc. Shops need to network more, but here where I live, it's all a big secret. Contractors and homeowners benefit from our mistakes on pricing. When I do pry, I often find out that other cabinetmakers charge a high price, and they don't come down for anyone. Often, the pricing they give me is 30% under the average bid. If shops don't talk to their competitors and share some basic information on costs, this system of failure often continues, to the benefit of the local builders. Some parts of the country, I believe, are better, and some are worse.
Tenacity is important. I like to think that I'm just stupid enough to not quit when maybe I should. Cabinet falls off the truck on the way to the finisher? Put it back in the truck, take it back to the shop, fix it, then strap it in better next time. There will be innumerable problems that arise - some shops will crumble under them, and some will persevere through them and enjoy the good times.
From a somewhat different perspective, I'd offer two thoughts. First, what matters most is marketing. And that means finding a particular product where few folks are able to effectively compete. If the job is commonplace, the pricing will be, too. If selling price is nothing more than materials plus labor plus a modest markup, you're selling merely your time and skill. That means that at least one of your competitors will underestimate the time, overestimate his skill or undervalue his skill, driving down the selling price against which yours will be compared and the job awarded.
Instead, find something few if any others are doing, and for which an identifiable demand exists, whether local or not. Then develop methods of work to build whatever that is to make yourself highly productive, making the guys who will take on any project and have to retool each time (new jigs, new processes, constant learning curve) find your product less attractive to copy.
Second, find something about which you're passionate, and with which you can become uniquely identified at least in your geographical area. For example, perhaps you become known as the unrivaled master craftsman of custom entry doors in your region using native woods, and designs specific to home styles in your area. The more strongly you are clearly identified with one specific product, the more leverage you'll have as you build a cache for it. The fastest growing category of consumer products are in the luxury category. That category of purchasing is expected to double by 2010. So consider parking yourself somehow in a niche there and staying true to the brand identity you build around your specialty. Owning a section of a market is much better than owning a job. And creating a job shop woodworking firm is a recipe for the latter rather than the former.
