Wonder if I can get some advice/help from the experts about my business situation.
We are 4 men show on 3000 sq. all residential cabinetry (most kitchens), we manufactory, finish and install all our product (I try to sub the install but never came across a good installer), right now we are booked all the way to April and one big job for July, good problem to have, but in the last 4 weeks we lost a few good projects from designers/Architect that want their product done within 2 months or so, unfortunately I can not hire more people because we are already bumping against each other here, so my next option will be move to bigger shop. well right now we rent/lease month to month (been here for almost 10 years) and we pay $1800 a month for it. Moving to a 6000 sq. we probably be paying around $3k to $3.5K in rent, but if I buy a place my mortgage could be less than that, sounds good but I don't have $150k to $200k for a down payment and new shop set up right now. I don't want to sub it out the work, because believe or not, most of my customers (designers, Architect and builders) they like to stop by my shop to check their product, I don't mind. Sub it out parts ( doors, drawers, face frame) can be a good idea but, again with the issue of space, I can only put so many kitchens at the time inside my shop and finish. Wonder if anybody else are having the same issue and how you're coping. sorry about my ignorance, I'm a cabinet maker more than a business man. Appreciate any help, thanks
No Eddie, that is the first time I have heard of this problem.
Just kidding, sorry I couldn't resist.
Check out Lean manufacturing and how it can shrink the amount of space you need.
Most people that buy a building get an SBA loan so you don't have to come up with as big a down payment.
Why not outsource, get over yourself, chances are good they are better than you at what they are making because they specialize.
A general rule of thumb is not to take on any job that is bigger than 10% of your annual gross otherwise you start losing regular customers and if something goes wrong with the big job you might be out of business.
Outsource the finishing, or order the parts prefinished. Some climate controlled storage space might help you, but you would be moving items quite a bit more. Moving to a new shop would also kill your production for at least 2 weeks (more if you add a bigger dust collection system), and tough deal when you are this busy!
Pat, thanks for the help, i check with a company that work with SBA loans, they don't require a big down but it is a short time, 10 years, i will get stuck with a big number Mortgage.
We do outsource our drawers. Outsource door and face frame may be a option, we can turn around doors and FF in few days.
"A general rule of thumb is not to take on any job that is bigger than 10% of your annual gross otherwise you start losing regular customers and if something goes wrong with the big job you might be out of business." 99.9% of our jobs are under the 10% of our gross, so on that prospect we are in good shape.
Rich,thanks for the help, we already outsource our finish, he is right next door to our shop. Order parts pre finished? who does that?? we use refinished ply for our boxes but that's it, most of our kitchens are custom colors and custom stain match, we just delivered a kitchen last week with painted uppers and Rift White Oak Cerused lowers, not sure how can you order these parts prefinished. Storage is not a problem, the company that does our deliveries, also have a climate control facility, we did that couple times and he charge me like $150 month for it, very good price. Move to a new place is not ease, did that twice already.
I like to grow my business, but also I'm very cautious about make the right move, i can easily move to a much bigger shop and almost double my shop expenses, that's the part that worries me, we are very busy now, but the well can dry in 8 months or so. i saw few shops shutting down because they stretch a little too much.
Bill, Our price is very similar with our competition around , raise may be a option, but i want to be compatible and not scare my customers way, i rather say i can't make your kitchen at this time because we are too busy, than give them a higher number, bad news travel fast and they will tell others. I sold a job the other day, that the customer postponed the house remodel because i could not delivery on time they want. You're right, after 10 years i should have the money, well the 10 years has not been always great, been busy for the last couple years, before that, paying bills and trying to keep my house.
"I would also suggest looking for a building that the owner would finance. The terms can be whatever you agree to." That will be nice. Thanks for the help Bill
Fearing your customers will all go away with a price increase is head trash. If you deliver a quality product as promised and on budget, you are far ahead of nearly all of your competitors. There is nothing wrong with being the highest priced shop in the area...other than it might take a bit longer to count the profits you are making that you left on the table before your price increase.
We are super busy now, and like you have work for months in the pipeline. The only thing slowing us down is the availability of qualified help or sub contractors. The good ones are already booked for months too.
There has never been a better time to raise your prices and to tell you clients they will need to wait for you. When or if they start to look elsewhere, they will probably find the same story that prices are higher and lead times are longer.
Do it now and do it again in 3-6 months. And outsource as much as you can to get through the backlog, including pre-finished custom color components. You'll thank me a year from now.
I agree with raise your prices. It doesn't need to be a huge increase. Maybe, try 3-5% and see how it goes for a few months or so. Besides that 3% in overall price means a lot more % in profits. (Say your net profit margin was 10%. You are selling something now for $1000. That would be $100 net profit. Raise the price to $1030. Your net profit is now $130. Your increase in profit is 30%! Your numbers will be different, but you might want to give this some thought.)
LEAN. There are some many things that can make virtually anyone's shop/business run more efficiently. Having the correct tools at the right place. Smart ordering (not too much: it takes up room you don't have, too little: overhead costs of ordering, receiving, and waiting for parts is costly) is helpful. Shop layout: what is the work flow? Do the parts have to travel too many paths and too far? This costs labor time, which the customer does not pay you extra for.
I could go on and on about LEAN. Hopefully you can see how important it is. Even little improvements here and there can save time and money. Every bit saved is more profit. The answer is not always "bigger is better." We downsized to 1/4 of the shop size we had. The huge building overhead is gone. We own our new building outright at a very, very small fraction of the old building we (and the bank) owned. And, we are making much more profit. And our volume of work is still increasing.
Moving to a new shop is a large endeavor. SBA loan would increase the time by at least 60-90 days. When you move you will be subject to the latest fire, electrical and building codes which may cost more.
I suggest you start on two paths, to solve the current issue look at out sourcing door/drawer fronts, and reviewing LEAN.
Then start looking at what involved with moving. I would hire a plant consultant to lay out an ideal shop with a plan the includes growth and expansion for future machines. Then you know how much space you need and then you can get quotes on things like dust collection and start the loan process.
The SBA loan may make financing in the future more difficult and you will need you accountant involved.
Check out Walzcraft. Huge selection of stock colors, and will custom color. My friend does mostly custom furniture. When he does get an occasional kitchen, he used KCD software, orders the boxes from Cabinotch, and doors and drawer fronts from Walzcraft. Several skids of prefinished parts show up, and by himself, can do a full kitchen in about 3 days. It's easy to bid, all costs are fixed, just add assembly labor and profit. Walzcraft will do glazes, paints, and custom. Those jobs are very profitable for him!
If you buy a building, buy one twice as big as you need and immediately rent half of it out. At the very least, find a building with land a possible addition can be built upon later. You can slowly grow into it as needed without a large disruption like re-locating r maintain passive income from commercial rental space.
I'd put some real effort into locating or creating a great install crew and outsource more to stop losing work. Raise prices and do what's necessary to grow. Partner with some good shops, most customers won't care if they get exactly what they want when they want it at a fair price, if you trust someone to build quality, they should trust your judgement or not know.
Meet with your local economic development office, they'll steer you to quality small business lenders and some incentives to build or buy in certain areas. You'll likely need an SBA backed loan if you lack a significant downstroke or collateral. Resist the urge to mortgage your home or personal assets to get a business loan, it's bad practice and can really bite you. A SBA loan requires a lot of time patience and persistence. Keep in mind they are bombarded daily with half baked requests for loans, therefore they have a long rigorous vetting and approval process. Buying a building is a wild journey , not a destination, know that things will come up at the worst times and it's how you react and persevere. You'll think your close and an inspection issue such as sprinklers or zoning with punch you in the guts. Work with them and they can give you some great business tools.
The word "demographics" means nothing all by itself. There is, for example, nothing at all that confers on someone at age 30-40-50-60 the desire or means to remodel their home. This set of attributes has much more to do with economic status, faith in the economy, confidence in the housing market. These are all derivatives of policies within communities.
About 6 years ago we made a living building kitchens for self-financed projects. Our customers had resolved themselves to spending the rest of their lives in the house they were in. The projects became much more limited in scope because you had to actually pull the money out of your wallet than pay for it over time. There were a limited number of people with $100K in the bank they could spend and thousands of available carpenters to do the job.
The economy improved and people started feeling more confident. The money started to flow. You can chart that progression with posts on the Woodweb. Six years ago it was all about how to stay alive. Today it's all about what kind of CNC machine we should buy.
This change in cabinet land had to do with the policies in place that created this economy. It did not come from some magical change in demographics.
Eddie posted this response this morning and it was inadvertently removed. My apologies - Here is the full text of his response:
Thanks for all the response and good points guys. Run a LEAN shop is one of my main priority tasks and i believe I am very good at, I'm sure some people are impresive with the amount of business we produce inside my shop and how well organized we are with the work flow and schedule. We are very busy with a "new" customers and now facing the problem with fit our loyal/everyday customers in our schedule. We already outsource some and looking to do some more. I spoke with some realtors about whats available in the area and also will meet with a local banker next week to see my options. Moving to a bigger shop may not be the right solution, but i like to check my options. Set up a new shop is a very expensive and a lot of work, fortunately like many other shops owners i do all the work myself, did it twice already, so dust collection system, air lines, electrical ( my brother is a electrician), frame up partition walls and move equipment is not news to me and i can save a bunch. Next week i have a appointment with a building owner of a great shop space, next door to my shop, great location, the best parts is that he will lease for 2 years with a option of selling to me, so i can raise the money for down payment and skip SBA and go with a local bank. I know the owner well and he may even hold the "note" for me, will se how it goes. Again thanks for all the help guys
It has very little to do with demographics. It's simply a matter of the business cycle. The fallout from the mortgage / financial crisis created a massive trough in construction of all kinds. A lot of people left the industry. As demand has returned, there are fewer suppliers to meet demand. Prices go up, profits go up, people come knocking on our doors because other shops are backlogged.
Underlying all this is leadership that decided in 2009 (you know who) that the government needed to spend money to keep the economy afloat while the private sector was not spending. If our government had spent more stimulus money, we would have been seeing this recovery much sooner. It's common sense that you want the government to spend money during the troughs of business cycles, but there's a lot of people who don't subscribe to common sense.
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