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Profit/Loss for 2015....How did you do?

3/8/16       
Jerry

I think it would be great to share how we all did last year, along with some highlights. I'll go first, all numbers rounded to nearest thousand.

Shop Size: 19000 SF
Employees: 1
Market: Residential Solid Wood Furniture

Sales: $281K
Materials: $66K
Distribution/Selling Expenses: $62K
Overhead: $97K
Payroll: $28K

Profit: 27K

I take small draws when needed and do not get a salary.

The distribution and selling expenses are for outbound freight (free shipping isn't free!), credit card fees, 3rd party site commissions, and Google Adwords etc. We sell exclusively online which is why we cover the shipping cost etc.

For overhead the rent is $35k a year, and electric at $19k. $14k is machinery lease payements on the CNC and new forklift. Included is also a lot of 179 write offs.

Payroll is all expenses for one full-time employee at $12/hr.

3/8/16       #2: Profit/Loss for 2015....How did you ...
JR Rutter Member

Jerry, does the profit include your draws, or is that after draws?

My accountant advised me to pay myself a salary, which I do at roughly $40K / year so that it bolsters the S-corp status and not be deemed a sole proprietor.

Last year was tough for me. I lost a bit of money after all was said and done (after fully paying myself with salary and draws). A big reason was the fact that I kept an employee on for many months with full medical until he could find a good job to move on to. Since then, I'm working harder but back to making profits.

3/8/16       #3: Profit/Loss for 2015....How did you ...
JR Rutter Member

Actually, it looks like we managed to squeeze out $4k in net profits last year, my bad. It just felt dismal for 8 months.

3/9/16       #4: Profit/Loss for 2015....How did you ...
David Waldmann  Member

Website: vermonthardwoods.com

We haven't finalized our YE numbers yet, but it looks like we will have had our most profitable year ever.

Sales were down about 7% off 2014 (which was our all time record by about 10%, so still our second best all time sales year).

However, it was our largest profit-dollar year ever. I credit this to streamlining some processes that allowed us to operate with one less production employee (7 instead of 8). Also, the pursuit of higher profit items/lines add more to the bottom line.

Also, we started paying ourselves as owners (my wife and I) a combination of salary and draw instead of all salary. We used to do this, but a loan underwritten by VEDA restricted us from doing this for the last 10+ years. We've now taken the position that they can take it or leave it...

We did also renegotiate the price on our waste chips/shavings from $11/ton to $23. Ok, we only make 300-350 tons a year, but still, that's an extra $4k in my bank account rather than theirs for spending 10 minutes talking on the phone :-)

Lastly, we only bought some relatively inexpensive equipment last year, so our Section 179 deduction will be pretty small - about $35k.

Our goal is a 35% gross profit margin. In 2015 we hit 38%.

Interesting to see some of the expense numbers, which I am willing to likewise share.

We have 27k SF, and a total of 12 employees. Our annual electric is about $40k, heat is about $6k (OFHA). Credit card fees come in at over $20k (overall average total cost about 2.3% - almost all MOTO, not swiped). We own, so there is no "rent", but between mortgage and taxes it costs about $45k per year. The mortgage will be paid off in a bit over 4 years, after which it will cost us $12k per year :-)

I feel rich, until I see one of the houses our product goes into. Then I feel like a pauper. However, I am very satisfied; I make more than I ever dreamed of. In fact, my employees make more than I would have ever expected myself. When I look out in the parking lot I see one vehicle more than 5 years old, and most of them were bought brand new. So I am providing a pretty nice life for a dozen families and contributing hundreds of thousands of dollars every year to the state and federal government. You're welcome.

3/9/16       #5: Profit/Loss for 2015....How did you ...
KAP

Jerry, just an observation... what does 1 person need with a 19,000sf shop space at $35K/year?

Your landlord is making more than you... and when the electric company is making almost as much as you as the owner, something is off...

Many get stuck on the idea of high sales, but the sales number is the not as important a metric as what you are extracting from the company...

Just some thoughts...

3/9/16       #6: Profit/Loss for 2015....How did you ...
David Waldmann  Member

Website: vermonthardwoods.com

"Your landlord is making more than you"

I doubt it. Rent is not profit; it includes RE taxes at the very least. Not to mention the "lost opportunity" value of the dollars tied up in it. That's assuming that there is no mortgage/interest expense involved.

Nevertheless, your point is valid, and one of the reasons I posted our specs - 150% the amount of space, 1200% the amount of employees. And we have lots of room, not like we're crowded.

3/10/16       #7: Profit/Loss for 2015....How did you ...
Jerry

The profit left is what I take my draw from. The building I'm in used to have another tenant besides myself, and they were a royal pain in the butt. When they skipped town I took over the whole building. In my area most rents are in the $4/sf/yr range, plus the landlords have the nerve to ask you to pay their property taxes and insurance for them. I'm paying less than $2/sf and no NNN fees.

The electric is high in part due to air conditioning in the summer. The whole building is air conditioned and kept at 75 degrees. hat's 60 tons of AC running. My widebelt is 125HP and that runs the bill up.

3/10/16       #8: Profit/Loss for 2015....How did you ...
Puzzleman Member

Jerry,

I am sure that your landlord appreciates you taking over the whole building but do you really need all of that space? If not, why do you pay for it and not put money into your pocket?

I operate out of 2700 sq ft and had sales of 750k with 9 employees. Yes it is tight and we have to be creative in how to make things work but there is little wasted space. I am always trying to find ways to reduce out footprint and improve work flow.

With that much room to heat and cool, I couldn't afford it.

3/10/16       #9: Profit/Loss for 2015....How did you ...
Jerry

I guess I should point out that our product is 100% solid wood edge glued panels which we make in house. The CNC defect optimizing saw, fingerjoint line, moulder, radio frequency glue press all take up a decent amount of space. I've tried outsourcing this numerous times and lost thousands each time due to quality. If we could just cut up a sheet of plywood for our parts then it would be a totally different story perhaps.

I couldn't fit all that in the 5600sf I started out in. If I took the back half our our building I would lose the drive in door, if I took the front half I would lose my loading dock.

It is an older building, so the energy efficiency isn't that great....original 1956 single pane windows etc..

3/10/16       #10: Profit/Loss for 2015....How did you ...
KAP

Jerry, I don't want to feel like you have to defend your shop... it just seems like an awful lot of wasted space/money that could be better utilized for a two-man show...

But at least you get some exercise walking that 19,000sf...

For the amount of sales you have, what you extract from your business should be much higher IMHO... just think how quickly you could retire your leasing debt... In that scenario, I'd be willing to give up a drive-in door to do so when there was a loading dock available...

One of the first things I would encourage you to do is get out of the idea that "profit" is where you take your pay from... profit is what you pay your company and is allocated towards a variety of things (i.e. - capital reserves, emergency fund, debt retirement, equipment purchases, bonuses, etc.)... when bidding on a job, your salary should be calculated into the mix the same as your one employee...

L - abor (which should include your salary)
O - verhead (annual expenses)
M - aterial (PLUS mark-up)
P - rofit (after all above is calculated, this is what is added on top of it all)

Please don't take it as a critique but rather an observation...

Great topic for discussion... thanks for starting it... 8^)

3/10/16       #11: Profit/Loss for 2015....How did you ...
Karl E Brogger  Member

Website: http://www.sogncabinets.com

Shop Size: 2500 SF
Employees: 1
Market: Residential Cabinetry
Sales: $255k
Materials: ~$102k
Overhead: $35k
Payroll: $31k (employee didn't start until about may, he makes $52k/year as a sub)
New Equipment purchases and payoff of loan on one piece ~$55k

Profit: $32K

The business got hammered on some back taxes to the tune of about $20k. I only actually paid myself about $3k last year.

Last year was my best year by far. I'm expecting this year to be a bit better. I picked up a new customer that fed me more than half of last years work, and that was from about May on.

3/10/16       #12: Profit/Loss for 2015....How did you ...
David Waldmann  Member

Website: vermonthardwoods.com

"Payroll: $31k (employee didn't start until about may, he makes $52k/year as a sub)
...back taxes to the tune of about $20k."

I hope you know the IRS' definition of Employee and Subcontractor.

If you don't, I suggest you immediately start research.

If you do, please make sure you don't mix up the terms, as they can lead to big trouble.

3/10/16       #13: Profit/Loss for 2015....How did you ...
Karl E Brogger  Member

Website: http://www.sogncabinets.com

Last year it was kosher, the bulk of his income wasn't from me, he's got his own s-corp, and insurance. He was partnered with another guy and that fell apart and he came to work for me. It was questionable whether he was going to stay temporarily or something more permanently. This year he's going to have to go on the payroll soon. Yes, I realize that the IRS will rape me for it as it can't continue forever as is.

The back taxes/fines are unrelated. I screwed up, that's the way it is.

That's a whole 'nother topic of my hatred for their practices.

3/10/16       #14: Profit/Loss for 2015....How did you ...
JeffD

I find the discussion of space and rent interesting. Seems like if you could do with less space what you save on rent would easily pay to put in a new garage door and ramp if necessary wherever you might need it?

On the other hand I'd say your paying about as cheap a rent as anyone could. I'm in 2400 sf that runs me $22k a year. So you have about 8 times as much space for about 50% more than what I pay!

This will be my second year in this space and I don't think the numbers this year will be too good. I raised my prices when I moved in, since the rent more than doubled from my last shop, but am still not bringing in enough to make profit. Am struggling to hold on and still trying to raise prices as I go, but not overly optimistic these days.

good luck,
JeffD

3/11/16       #15: Profit/Loss for 2015....How did you ...
Amanda Conger

Website: http://www.cabinetmakers.org

If you want to share this information, I recommend you complete the CMA's Benchmark Survey.

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Your answers will be kept strictly confidential. A summary report of the results from this Benchmark Survey will be published in FDMC and the full results are available through the CMA.

Access the Survey

3/11/16       #16: Profit/Loss for 2015....How did you ...
Larry

We have always suffered from swings in sales, too little or too much. It has a huge affect on profit for the year. We have significant OH, so until we reach sales enough to cover that, margins are tight or non-existant. Once that has been reached profit margins increase dramatically. Much of our work is bid to GCs so raising prices usually cuts sales. I'm happy with 10% net, not always happy! Best year was 2014 with a net of 16%.


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