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Scaling High-end Residential Custom Shop12/29
I don't post on here very often so this may be a well trodden path, but I thought I would put it out there anyway and see what this community thinks:
My father and I run a 3 person (including us) custom cabinetry and furniture shop. Our clients are 95% designers, and their clients are wealthy home owners, so our products are typically in high-end residences.
Iv'e only been involved in the business full-time for about 4 years. In my limited experience, there seems to be a ceiling we keep bumping into with this market in terms of revenue. As far as I can tell, it is a combination of A) a lack of skilled workers that can handle this level of woodworking; B) the level of complexity of these projects, necessitating large amounts of hours devoted to each project; and C) the inability to mechanize or create repeatable production methods for many aspects of the work due to the highly customized nature of each project.
My question is, has anyone been able to successfully scale their business in the custom residential market? And by "scale" I mean move beyond the job shop model of business - one project at a time, not being able to purchase materials in bulk or implement time-saving production processes, and essentially reinventing the wheel for each project. If so, how have you gone about doing it?
Happy New Year All!
A valid question, and one that has not been well trodden.
My shop does about the same work you do, with the addition - and foundation - of custom entry doors. In 1990, it was one man. By 1992, 2 man. By 1997 three man, then 4. Then 5, then 6. When the Crash came in 2009, it was 3 in the office and 6 in the shop, $1.2M in revenue. A year later, back to one. Now two. Revenue has increased proportionately, and will be $325,000 for 2017, with 55 man hours a week in the shop.
At 5 and 6 shop people, we were able to scale some things up, and often had 3 projects going at one time, in various stages of completion. The new guy was relegated to S4S once basic competency was established. He could feed to the other guys from their cutlists. We had no automation or CAD drawing to speak of.
At time we had all hands on one large job - 50 interior doors and jambs, a 30' diameter wine cellar, two curved staircases, etc. But even those jobs afforded the ability to send one part of there work here, another part to those 2 guys, and the new guy could feed them all. We did have a Weinig Quattromat and an older Diehl ripsaw for making S4S.
Materials still had to be bought per job, except the Honduras Mahogany we used on most entire systems. We could stock up on it, and draw from that for projects.
So while you may not be able to buy lumber at a half truck at a time, or units of ply. the process is where you can find some sameness and economy. You, like us, will find that every job requires S4S, so we bought a new Quattromat in 2000. I cannot guess how many hours it saved us, but cut S4S time to 1/3 or 1/4 or what it used to be. With no loss of quality - probably a net gain in quality and accuracy.
You probably sand everything. Do you have a good wide belt? Can you hit 2-3 buttons and be running? You do not want to have any 'fiddle time' with any machine you use. Set it and go, go, go. Mount digital readouts (DRO) on everything so there is no more pulling a tape. Everything - shapers, tablesaws, mortiser, tenoner, jointer, planer - everything. Put Starret DRO calipers around the shop. Everywhere. Put the vernier ones away. Far away. Accuracy goes way up, set ups are faster and better.
In general, tool up. Don't ever let yourself say "we can get by..."
Be sure you spend zero time handling shavings. Set it up so some one comes and gets them, and you don't have to shut down, see or even talk to them. Stop all but essential visitors.
In a small shop, it is common to let repairs go. Get everything into like new condition so you can set it and run. No fiddling ever. This is where your time goes, if you allow it. Allow a little, and soon the camel is in the tent.
Lastly, concentrate on process, taking nothing for granted. Talk about alternate ways to make things. Experiment a little, and then analyze the results. Don't be afraid to be wrong, but know why you were wrong, and learn from it. Lift a process from one type of project to another to se how it might work. Apply it rigorously. Change it, tweak it. f it works, remember it. If not, toss it as soon as you are sure. You soon become proficient in seeing processes, more than one for everything you are called upon to do.
The photos have an entry frame assembled, waiting for sash, a job of Alder interior door frames, a curved stair complete and on its back, and on the right, a second curved stair being built.
Thanks once again for some incredible insight, refreshing
yes, great info
Drew and David
Please read all of the following through this lense: I think David is if not the most, he is one of the the most, skilled wood workers on Woodweb. He can do things I simply cannot with wood.
Alright, back to the question and the numbers. I find the amount of guys vs. the sales amount to be completely underwhelming. It's not who I would take advice from on the business end of things even if he is the very first I would go to about joinery.
Perhaps his amount of material costs to profit is different than most and skewing everything I know about the woodworkigng industry, but I sincerely doubt it.
But it is almost what I would expect for someone who makes masterpieces. He is more artist than businessman in a sense and most artists that cannot sell a product (think musicians) to the masses will not make money.
Looking at the OP website, your company has talent. But unless you become the top 1,2 or 3 in the entire country and world making one off furniture pieces not in quality but in name/marketing (if someone who isn't even looking to purchase your product doesn't know your company name you probably aren't there) you will not be able to make the money you can doing even middle class homes in *"high end" custom cabinetry* simply because 95% of what you do on each job is not one off, even if it is custom.
You have to decide if you want to be an artist, a businessman or if you think you have the chops- go for being the elite name that folks are willing to pay 5x what it is worth just because they can brag to their friends they have a piece of furniture made by XYZ.
Respectfully to all involved...especially David as I took turns using your information to praise you and then throw you under the bus for a teachable moment. I know you are happy from everything I've read over the years doing what you do so not trying to tell you that you are wrong for running your business the way you do. It very much works for you. But I don't think it was answering the question the OP had, the the utmost respect sir.
Without knowing more about your business and shop, it is hard to make suggestions. However, if that is your Web site, BruceCampbelldesign, you have a very high end product that few can afford.
We re-invent the wheel on almost every job. Our work is not as exclusive as yours. Do you have a CNC router? Do you use AutoCAD or a design software?
When we re-invent the wheel, we don't start from ground zero. Usually we open an existing file, something we have done that is similar, work off that drawing, copy and paste parts from other files, volia, new custom design. But, we serve a market that probably 35% of the public could consider. We primarily are residential kitchens and baths, vertutally, no furniture.
Probably not much help. But without AutoCAD and our CNC, we would not be in business.
Our business suffered greatly since 2009. I could relate to what David said. In 2008, we did $1.1 M, in 2009, we did $225,000. I went from nine people in my shop and doing installs to two guys part-time. The best year we have had since 2009 was $490,000. But, next year does look much better.
Always interesting to read arrogant, useless, self righteous posts.
FM, if you’re not a coward, why don’t you come back and criticize the post by Paul Miller as well. He has similar “underwhelming” numbers as David, clearly neither of them could offer any insights or information to the OP.
I wasted 45 seconds of my life that I will never get back reading your post. The OP doesn’t need you to hold his hand and guide him through which posts have value and which don’t. It’s clear you have no experience in the high end furniture market other than remedial observations.
Next time you want to moderate a thread and dictate who’s comments should be disregarded at least try to bring something to the table other than generic comments and observations that my aunt Harriet could make.
I’m using this post as a “teachable moment”.
I've done some of it but I can crank out a house full of cabinetry for 3x the sales amount in the same amount of time that goes into one high end dining table and set of chairs. And make 2x as much on it take home. Same time frame.
Furthermore, every single house has to have a set of cabinets in it before a bank will finalize a loan/sale. That is not the case with most "high end furniture". Which does two things. It wraps up my cost of cabinetry into a price per month mortgage payment, in a number every client has already been pre approved for and accepted. As long as my cabinet figure fits into the whole house figure we have a guaranteed sale.
When I started in this industry in 2002 the magic # was 100k per employee, and lots of guys were doing better than that then. But it was agreed upon by woodworker magazines, woodweb participants and most shop owners I spoke to. I could buy a car for half of what I can now. I could buy a house for 40% of what I can now. Big Mac, same story. So lets say inflation add 36K per employee (official cooked government inflation stat) to 100k per empolyee. That should put totals between 136k to 200k per employee/worker (including owner)f depending on what you think actual inflation is. Just to be in business, not to be stellar.
I realized how my post sounded, but didn't know another way to make my point. David is as talented as it gets but doing what he is doing automatically caps what he is going to do. Which is exactly what my point was, no matter how poorly worded.
If you are going to make one off pieces, you had better be a household name. Someone that auction houses, dealers and buyers alike are willing to pay a serious premium one just because your name is on the product because you cannot gain much efficiency of scale doing one of pieces. That sir was my point.
I think your observation about revenue per man is pithy but I don't think you necessarily made your point.
I agree with you about the comparison between revenue per worker and the cost of a loaf of bread over time. I think about this every time I go into the fish market. In 1975 we were getting $3 a lb for fish still on the boat. Today that fish sells for $11 per lb at the store. I could have bought my house in 1975 for maybe $8000. Today it is 100 times that.
Somehow I think the people in the fishing industry today are making a lot more money than we did back then. Other than woodworking there can't be a stupider way to make a buck than dragging 36 herring behind a boat and hoping a salmon will see them (and a sea lion won't see the salmon).
What I think you are missing is the difference between gross & net. You think, for example, that the output at my company is quite low per man but you don't stop to consider that my prices do not involve finishing cabinet, putting into a trailer and dragging them to a house and carrying them up the stairs. In other words you are making conjectural arguments which are unsupportable.
One of the great things about low margin industries is that it doesn't take a lot to improve your standard of living at home which what all of us family men value most. The work David does warms the heart and the hearth. I work with a lot of young guys and we talk about issues of the day. They forgive me because they think my sexism is a generational disorder. I tell them I doubt very much that when I'm on my death bed I'm going to wish I'd only slapped the necessary amount of ass and ate more kale.
You should look at a company called Woodland Furniture in Post Falls Idaho for inspiration. They aren't in exactly your niche but have successfully leveraged lean manufacturing to increase their capacity significantly. If I can figure out how to do it I will link you to or scan an article I have saved about them from around 2001. At the time they were faced with extinction because they couldn't ramp up to meet their customer's requirements. The article talked about how what used to take 4 to 6 weeks to accomplish now took 3-4 days. Travel distance per product was reduced from 1 1/2 miles to 1500 feet. Space they used to use for transporting product through the factory was now used to hold low-tech dedicated machinery. Is a great comparison of before-after transformation.
Another thing to note: There are a few famous woodworkers all of us know that pretty much used the Paris Hilton business model to achieve acclaim. Their work is good but no better than thousands of guys squirreled away in a garage. The difference is they made a video and nobody else did. First thing I would do with your product is sell it better. Your website sucks.
cabmaker, You are referencing another post. In that post I used only your information and the amount of men in your shop and your location (which gives me an idea of the overhead). In fact in that post I referenced that you did not paint your cabinets nor deliver them. But I do know what a sheet of 3/4" prefinished maple costs, hard maple costs per bd ft, a BLUM tandem costs, etc. I also know what insurance, machinery and labor costs. It is not hard to reverse engineer what a business is making with that information in the best of times you and I will ever see for our industry. I respect that you handed that information out. Those OP's can examine that data and see if it is the direction they want to go. Perhaps the mistake I made here, like then, was doing my calculation publicly with publicly given information and asking questions about it and making certain observations. Instead of just doing it behind my computer and going on my way. Woodweb has been invaluable to me over the years precisely because I examined the information and asked the hard questions- both publicly and to myself. I will keep the hard ones to myself from now on and the other posters can ask them. Thank you.
This is another "the question is the answer" type deals.
People/shops do this all the time.
The bulk of the work is going to be cabinets though not David type stuff but some of it will be.
Something else occurred to me that you might be interested in. I thought about it today with respect to our own operations.
I used to have this pickup truck that took a long time to warm up each morning. While I was waiting for this to happen I would read from Taichi Ohno's memoirs. Some of what he wrote did not make sense to me at the time though now rings very clear to me. Whenever I was in doubt or didn't understand something I would just capitulate and conclude that it didn't matter whether I understood it. If Taichi said it was so then it was so.
About three or four pages into his memoirs he made the statement that in order for a worker to create a list of processes that was useful to his co-workers he had to first be convinced of it's importance.
Every single time we have ever taken the time to write down our processes we have improved the product quality, decreased the necessary skill level and decreased the amount of minutes associated with these processes. Decreasing skill level requirements expands the available pool of viable workers. Decreasing production minutes increases capacity. It's like adding square footage to the building.
We've been building a certain drawer box for over fifteen years. You would think after this much time we knew how to do it. As a result of using Taichi's approach we discovered five process improvements, three of which were very significant. We've also been building a particular recycle cabinet for over fifteen years. When we stratified those sequences we found 15 process improvements, ten of which are in place today. Some of them are merely improvements in sequence. Some of them are spatial. They just change where we do something. Several of them were 90º sea changes.
Writing things down is like looking at a photograph. Go to a jobsite sometime and take a picture of every wall. When you get back to the shop you will usually see something that wasn't apparent when you were onsite, or maybe it just didn't seem salient. I think this is because rather than being IN the moment you are looking AT the moment. In a photograph you are looking at a 2D representation of a 3D object. When you are looking at a list of processes you can see things you can't see when the machines are running and you are in the moment.
One of the perplexing things Taichi said to do was to focus on the little tiny things you do very seldom. That defied gravity to me until I realized the the little rabbet we put on the front of some face frames really needs a dedicate shaper so that we can produce the infill part without a turning it into an art project. The type of shaper I need for this can be had for $100 on Craigslist. My opportunity cost to produce this piece is probably several times that whenever it needs to happen.
This is also another one of those which tool is best suited to your need type deals.
Tim would have you pickup the magnifying glass first, I say pickup the binoculars.
BTW the magnifying glass Is more comfortable to use, but not as effective.
Get bigger jobs and you will figure out how to get it done. To do otherwise is getting the cart before the horse.
That is not to say Lean is less than awesome though.
I have had this disagreement with Tim and Paul Akers for a long time time
I agree with you that some of the logic of lean defies intuition. I would say, however, that the proof is in the pudding. Eli Goldratt is sound in his logic that there is but one true constraint in any manufacturing paradigm but Taichi Ohno provides the actual tools to identify & elevate that constraint.
I will say this for our own shop.
I personally prefer to hire inexperienced people because I know everything that we need to get into their head. With experienced people we don't know what we need to get them to un-learn or if we can even get them to un-learn those bad habits at all.
A good example of lean is batch size. If you give a new person a batch of 20 doors to build this week and another 20 next week they will likely forget some of the processes they learned last week. After a month or so with this technique they will know how to build a door.
If you break this into 5 batches of 4 doors by the end of a day or so they will have been up to bat five times. Under the lean scenario they become a door master in one week.
Taichi says in his memoirs that if you use his system there is nothing in your processes that takes more than three days to master. They won't know how to do everything in three days but they will know how to do something. Acquiring skill is morale building. With competency come confidence and with confidence comes competitiveness.
You can call that looking through the wrong end of the binocular but it works.
I'm sure it does as you appear to have successfully scaled your operation.
The OP is asking about how to scale his operation.
The ZERO step is finding a niche until you have done that you are smoking your wheels.
I had this same argument with Paul Akers he has gone on to talk about which products to market and which ones not to.
Anyways Lean does Not answer this question. It is only answerable by an entrepreneur who determines what a customer values. As production that does not create value is Not production.
E.G. Steve Jobs, Ross Perot, Larry Page, Sergey Brin, Larry Schweitzer, Paul Downs, Tim at Seattle Custom Cabinets, Derek S.
"When you build for the classes you’ll eat with the masses. If you build for the masses you might be eating with the classes”.
There's probably a thousand other similar articles based upon this Quote.
Great looking product, but as someone mentioned before update your website so it reflects the same quality as your furniture.