Woodworking Business

You are not logged in. [ Login ] Why log in
(NOTE: Login is not required to post)

Should I invest in a cabinet company?

10/15/15       
Denisse Member

Recently I was approach by a friend to invest in his cabinet making company. I don't know anything about the industry so before I say yes I wanted to see if I could get some input from other professionals in the business. He started being a dealer and in the last two years open the manufacturing side. He said there is a need for standard cabinet making since most companies offer custom. He explained that he would use the investment to buy material and get a larger warehouse so he could stock up and be able to offer the customer a three to five day turn around since he would already have the cabinets in stock. He also said at this time no company offers that which is way he can guarantee the investment will be a very successful one. My first question is how true is it that no other company in Georgia is doing it. Second is this a profitable business(we are talking in the six figures). Is there such thing as standard cabinets which are smart to always have on stock? Thanks

10/15/15       #3: Should I invest in a cabinet compan ...
Tony

I would tend to think that there are ALOT of "stock" cabinet manufacturers compared to good custom. And also that the profit margin would be tighter due to the competition and relative ease of manufacturing "stock" (standard) sizes. IMO

10/15/15       #4: Should I invest in a cabinet compan ...
Alan F.

The dealers on the West Coast that import from China have large inventory of stock in a variety of colors, species and door styles.

The Colors, finishes and styles vary a lot, spend a few hours in Home Depot shopping for a kitchen. Whether its stock or custom a lot of the choice is based on colors and finishes and features, if you limit your inventory you miss some sales, if you build that much inventory you have a lot of money tied up for instant sales in a channel that is used to "waiting".

I am sure there is some system of stock parts and ends that allow for a lot of "similar" items to be configured from inventory.

Is there any market research or sales trends that's makes this a good investment?

Similar business, all imported

10/15/15       #5: Should I invest in a cabinet compan ...
Dave

Denisse-

Wow! What a series of loaded questions and statements!

If I were you, I'd surely want to see his books and learn about his business plan long before I would consider investing six figures with him.

I'm fairly sure that anything he thinks he could build in his new shop and store in his warehouse either is or could be made within a day's driving distance of your location...probably for less money than he could build it for himself. We have just in time or next day delivery in almost everything a cabinet shop would need, so building inventory of supplies makes little sense. And unless there is a master plan that can reasonably turn over the inventory of finished goods in a warehouse several times over each year (or better yet, several times each month), your friend is setting up what could be a disaster.

If I were you, I'd find out exactly how much inventory he plans to build, how he plans to sell/distribute it and how often he plans to turn it over each year. 2-4 weeks lead time is not unusual to get even full custom made and delivered in the US, if you know where to look. Stock cabinets can take even less time. Shaving off a week or two might be worth a small premium in price to trade buyers like contractors, builders and designers, but for direct to homeowner buyers, a week or two doesn't make that much difference.

Regardless, your friend will never be able to beat pricing in the entire market without the economies of scale huge manufacturers have at their disposal. As far as profits go, I'd tread very carefully. Custom good in unique niches can be exceptionally profitable, but standard or lower grade cabinets are commodity priced. It's almost impossible to compete on price with the larger, more entrenched manufacturers. But you can do huge volume if you are positioned, marketed and priced right.

Good luck, and watch very, very closely if you decide to invest and expect to get a return on your investment and/or repaid.

Dave

10/15/15       #6: Should I invest in a cabinet compan ...
MarkB Member

I think the OP was stating that the business was a six figure business. I didnt read it as the investment being six figures.

Im not sure a domestic shop could compete with mass produced imports but this shop must have a business plan or some tangible projections that would shed some light on the rate of return.

10/15/15       #7: Should I invest in a cabinet compan ...
rich c.

One way to ruin a friendship for sure. "Guaranteed very successful investment" is another warning sign. Sounds like he is trying to compete with Ikea. Standard cabinets are everywhere! You can order them over the internet. If these aren't strong enough warning signs, have your banker or a small business accountant look at the books and working capital before investing.

10/16/15       #8: Should I invest in a cabinet compan ...
Pat Gilbert

The thing that drives the cabinet business is demographics.

The current cabinet sales are to the last of the boomers. Once people reach the age of 60 they quit buying kitchens. The biggest group of Boomers are 58 and 59.

I think the cabinet business will slump in a year. Because of this.

A big part of the reason for the slump in 2007 was demographics, not the only reason but part of it.

I think a better bet would be starting in 2020 albeit not in kitchen remodels.


View higher quality, full size image (960 X 720)

10/16/15       #9: Should I invest in a cabinet compan ...
Glen

If you were in my family i would tie you down to prevent you from jumping into this investment. He may be making it now but in 6 months he could be bankrupt. This is not a business that does well with financial projections.

If you want to do it then ask him for a copy of every business deposit for the last 3 years. I mean actual copies of checks he deposited. That will establish income. Then get his tax returns for the same years and have a business CPA evaluate what you have. Good luck.

10/17/15       #10: Should I invest in a cabinet compan ...
Chris  Member

Pat,
I like where your head's at ! very interesting graph. I'm in my 30's and looking for ways to keep a small custom shop going. We're busy now and have been for many years, but it does seem like the writing is on the wall. I don't see how anyone can compete with ikea, home depot, lowes. If you're making cabinets they have to be custom, ( in my humble opinion)
Question for Pat: What's the next demo to aim for? custom stairs for gen-X'ers? entertainment centers for millennials?

10/17/15       #11: Should I invest in a cabinet compan ...
Pat Gilbert

I think the key is to LOOK at stuff.

That graph says the US is in for boom times.

At the same time the US is going to have some very hard times due to an inability to pay for medicare in 2030 because of the boomers going on medicare. This is a well known fact.

Some say the worst depression ever, OTOH that graph says economic growth big-time.

Since 2008 there have been a lot of cabinet shops go out of business, I don't know how many but I would guess well into double digits. That was a changing of the guard which had to occur because of so much money being made available in the housing sector while at the same time the people at the right age to buy houses was at an all time low. Meaning the people who are forming families are a small cohort of the population. Housing sales are at an all time low as a percentage of the population. See graph
But as the above graph shows that is going to change in a big way.

To me the best way to see what is happening is to look at who is making money. (BTW it ain't cabinetmakers)

Right now it seems to me it is the guys doing big commercial because of low interest rates and guys do high end residential because of low interest rates. But the guys doing high end residential (in
Calif) are complaining about not making any money. There is also kitchen remodels but I think that is going to start waning.

The BLC says the growth rate of cabinetmakers is going to be around 8% and for carpenters it is going to be around 24%.

The demand for houses will be there the question is in what form.

I think the growth areas are changing. I.E. they are not going to be Calif rather Utah and Colorado.

IIRC the market for entertainment units and similiar is the mid 30s so that might be good.

Custom cabinetmakers will always have to sell to people who are affluent.

Always be in very good communication with your customers to find out what they want and what interests them.

Join groups and find out who is making money and what kind of work they are doing.

Remember people buy stuff for their houses when they buy one so go where people are buying houses. This is a duh type statement but something to keep in mind.

Another duh statement is do good work and be on time.

Look through your invoices and see where you made the most money.


View higher quality, full size image (911 X 662)

10/17/15       #12: Should I invest in a cabinet compan ...
Hastings Read

Denisse,

Can you afford to lose this investment in its entirety?
If the answer is no, then please run a mile!

10/18/15       #13: Should I invest in a cabinet compan ...
Larry

There is probably a very good reason no one else is doing it! The huge inventory required would result in very low turn over of many items. Obsolescence would be a huge factor. He's looking for a way to fix people that can't plan ahead. Really expensive, are those people willing to pay a lot more?
Good advice by Hastings.

10/18/15       #14: Should I invest in a cabinet compan ...
Riggles Member

Look at the link from Alan F. I'm sad to say that we install this stuff on a somewhat regular basis. It's cheap and nasty, but there's a category of client that sees the price being 1/3 (yes -- 3 times cheaper!) and goes for it anyway. A normal stateside cabinet shop will have challenges fighting against this sort of product. If I was a betting man, I'd say that the imports will become dominant.

10/19/15       #15: Should I invest in a cabinet compan ...
Matt Peterson

Denisse,

Now I am a woodworker and not a cabinet shop so I am just talking, but I would question the tools he is talking about using. The reason there are so many custom shops and not so many quick standard product shops is cost of tools. A custom shop is going to have a sliding table saw, joining, clamping and edge banding equipment. All of which are relatively inexpensive tools. A quick standard product shop is going to have CNC machines, and often auto loading, digital scanning, CNC painting/printing, and dedicated clamping/assembly machines. All of which are relatively expensive tools. I have not been to the IWF Atlanta show but if it is like the Vegas show it would be worth waiting until the end of August to decide if your friend is steering you in the right direction.
If your friend is talking about custom shop tools I would advise against the investment. You will need skilled employees and the cost of employees is going up very fast. If we go to a $15 minimum wage you can multiply current wages by three to see what the costs are likely to be. His premise for the investment is to be different then all the shops in the area and if he is talking about the same tools he will just be throwing his hat in the ring.
If he is talking about production machines then one of you needs to be skilled with a computer because the biggest cost is programming (not counting the real estate to house the venture). Even if neither of you do the programing someone will need a general understanding to deal with problems. If he is talking about CNC work, you can get your feet wet by renting time on someone else's machine. Here in Arizona many CNC shops are not running at full capacity and allow people like me to rent time on them so they can make the payment.

10/19/15       #16: Should I invest in a cabinet compan ...
cabmaker

no

10/20/15       #18: Should I invest in a cabinet compan ...
Ted

My personal opinion is that this is not a good idea- I don't think there are very many "Stock" cabinet companies that keep cabinets in stock. It just doesn't work that way. Better to develop a "Just in Time" system of production. But that's a whole other story :)

10/20/15       #19: Should I invest in a cabinet compan ...
Denisse Member

First and foremost I would like to thank all for you for taking the time to respond. Not knowing anything in regards to this industry and feeling lost each and everyone of your answers has really helped me out a lot and made things a whole lot more clear then I thought. I will speak to my friend as I now have some knowledge and can ask better questions in regards to his request. Again Thank you all so much. I will keep you all posted on how it goes. I have a feeling after the meeting I will have another question .

10/20/15       #20: Should I invest in a cabinet compan ...
Larry

Most of the worlds industries have gone to some form of just in time manufacturing. They can't all be wrong! Greatly reduces inventory costs, manufacturing space, WIP, obsolete product....
What it requires is a modern system of manufacture. Much like Henry Ford developed.

10/21/15       #21: Should I invest in a cabinet compan ...
Jon Giordano  Member

3 Simple Questions,

#1 How much is he looking for? If he's got the profit he says he does, he should have no problem getting financing from a bank. If he doesn't get at least 2-300 grand, his idea won't work anyway, it'll die on the vine before it turns a profit.

#2- What software is he using? If he doesn't have something that links to a CNC machine already, he won't be doing any great CNC work for about 2 years until every machine is in place and someone has learned it and devised/revised the system.

If he's just designing, then he should have 2020 design or something similar

Fact: Generally this business/industry without the proper software/technology will not turn a profit.

#3-Ask him what kind of boat he really wants to buy with your money.

He sounds like the typical numbskull who has no idea why he's not making money and has decided that if he spends more of someone else's money on his non profitable operation he'll make it up in volume. It's very easy to buy things, the hard part is selling, harder still is getting your money.

You'll lose it in volume faster. The Best I'd do for this guy is build him a warehouse and rent it to him or he puts his current operations real estate (if he has any) in your name or you buy that from him.

Jon Giordano

10/26/15       #22: Should I invest in a cabinet compan ...
Mitch Suber  Member

Website: subercustomshutters.com

Extreme risk, at the best. Without knowing more about the company, I say "NO".
Knowing what I know as a business owner and I consider our company successful, if you offered to invest in my own company, I would still tell you not to do it. While I might risk borrowed money from a loan institution (they know the risk), I couldn't make a projection to an individual and take their money. There is just too much craziness in the building industry these days.


Post a Response
  • Notify me of responses to this thread
  • Subscribe to email updates on this Forum
  • To receive email notification of additions to this forum thread,
    enter your name and email address, and then click the
    "Keep Me Posted" button below.

    Please Note: If you have posted a message or response,
    do not submit this request ... you are already signed up
    to receive notification!

    Your Name:
    E-Mail Address:
    Enter the correct numbers into the field below:
     

    Date of your Birth:



    Return to top of page

    Buy & Sell Exchanges | Forums | Galleries | Site Map

    FORUM GUIDELINES: Please review the guidelines below before posting at WOODWEB's Interactive Message Boards (return to top)

  • WOODWEB is a professional industrial woodworking site. Hobbyist and homeowner woodworking questions are inappropriate.
  • Messages should be kept reasonably short and on topic, relating to the focus of the forum. Responses should relate to the original question.
  • A valid email return address must be included with each message.
  • Advertising is inappropriate. The only exceptions are the Classified Ads Exchange, Machinery Exchange, Lumber Exchange, and Job Opportunities and Services Exchange. When posting listings in these areas, review the posting instructions carefully.
  • Subject lines may be edited for length and clarity.
  • "Cross posting" is not permitted. Choose the best forum for your question, and post your question at one forum only.
  • Messages requesting private responses will be removed - Forums are designed to provide information and assistance for all of our visitors. Private response requests are appropriate at WOODWEB's Exchanges and Job Opportunities and Services.
  • Messages that accuse businesses or individuals of alleged negative actions or behavior are inappropriate since WOODWEB is unable to verify or substantiate the claims.
  • Posts with the intent of soliciting answers to surveys are not appropriate. Contact WOODWEB for more information on initiating a survey.
  • Excessive forum participation by an individual upsets the balance of a healthy forum atmosphere. Individuals who excessively post responses containing marginal content will be considered repeat forum abusers.
  • Responses that initiate or support inappropriate and off-topic discussion of general politics detract from the professional woodworking focus of WOODWEB, and will be removed.
  • Participants are encouraged to use their real name when posting. Intentionally using another persons name is prohibited, and posts of this nature will be removed at WOODWEB's discretion.
  • Comments, questions, or criticisms regarding Forum policies should be directed to WOODWEB's Systems Administrator
    (return to top).

    Carefully review your message before clicking on the "Send Message" button - you will not be able to revise the message once it has been sent.

    You will be notified of responses to the message(s) you posted via email. Be sure to enter your email address correctly.

    WOODWEB's forums are a highly regarded resource for professional woodworkers. Messages and responses that are crafted in a professional and civil manner strengthen this resource. Messages that do not reflect a professional tone reduce the value of our forums.

    Messages are inappropriate when their content: is deemed libelous in nature or is based on rumor, fails to meet basic standards of decorum, contains blatant advertising or inappropriate emphasis on self promotion (return to top).

    Libel:   Posts which defame an individual or organization, or employ a tone which can be viewed as malicious in nature. Words, pictures, or cartoons which expose a person or organization to public hatred, shame, disgrace, or ridicule, or induce an ill opinion of a person or organization, are libelous.

    Improper Decorum:   Posts which are profane, inciting, disrespectful or uncivil in tone, or maliciously worded. This also includes the venting of unsubstantiated opinions. Such messages do little to illuminate a given topic, and often have the opposite effect. Constructive criticism is acceptable (return to top).

    Advertising:   The purpose of WOODWEB Forums is to provide answers, not an advertising venue. Companies participating in a Forum discussion should provide specific answers to posted questions. WOODWEB suggests that businesses include an appropriately crafted signature in order to identify their company. A well meaning post that seems to be on-topic but contains a product reference may do your business more harm than good in the Forum environment. Forum users may perceive your references to specific products as unsolicited advertising (spam) and consciously avoid your web site or services. A well-crafted signature is an appropriate way to advertise your services that will not offend potential customers. Signatures should be limited to 4-6 lines, and may contain information that identifies the type of business you're in, your URL and email address (return to top).

    Repeated Forum Abuse: Forum participants who repeatedly fail to follow WOODWEB's Forum Guidelines may encounter difficulty when attempting to post messages.

    There are often situations when the original message asks for opinions: "What is the best widget for my type of shop?". To a certain extent, the person posting the message is responsible for including specific questions within the message. An open ended question (like the one above) invites responses that may read as sales pitches. WOODWEB suggests that companies responding to such a question provide detailed and substantive replies rather than responses that read as a one-sided product promotion. It has been WOODWEB's experience that substantive responses are held in higher regard by our readers (return to top).

    The staff of WOODWEB assume no responsibility for the accuracy, content, or outcome of any posting transmitted at WOODWEB's Message Boards. Participants should undertake the use of machinery, materials and methods discussed at WOODWEB's Message Boards after considerate evaluation, and at their own risk. WOODWEB reserves the right to delete any messages it deems inappropriate. (return to top)


  • Forum Posting Help
    Your Name The name you enter in this field will be the name that appears with your post or response (return to form).
    Your Website Personal or business website links must point to the author's website. Inappropriate links will be removed without notice, and at WOODWEB's sole discretion. WOODWEB reserves the right to delete any messages with links it deems inappropriate. (return to form)
    E-Mail Address Your e-mail address will not be publicly viewable. Forum participants will be able to contact you using a contact link (included with your post) that is substituted for your actual address. You must include a valid email address in this field. (return to form)
    Subject Subject may be edited for length and clarity. Subject lines should provide an indication of the content of your post. (return to form)
    Thread Related Link and Image Guidelines Thread Related Links posted at WOODWEB's Forums and Exchanges should point to locations that provide supporting information for the topic being discussed in the current message thread. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related Link that directs visitors to an area with inappropriate content will be removed. WOODWEB reserves the right to delete any messages with links or images it deems inappropriate. (return to form)
    Thread Related File Uploads Thread Related Files posted at WOODWEB's Forums and Exchanges should provide supporting information for the topic being discussed in the current message thread. Video Files: acceptable video formats are: .MOV .AVI .WMV .MPEG .MPG .MP4 (Image Upload Tips)   If you encounter any difficulty when uploading video files, E-mail WOODWEB for assistance. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related File that contains inappropriate content will be removed, and uploaded files that are not directly related to the message thread will be removed. WOODWEB reserves the right to delete any messages with links, files, or images it deems inappropriate. (return to form)