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I am the crazy guy who was bandsawing letters and delivering them.
I promised to give an update, so I'm here.
It hasn't been as easy as I'm hoped. After xmas, sales were just down right awful. Started to think about closing up, but the wife would let me for various reasons.
Then just in the past couple weeks, orders started pouring in. Crazy busy with accents.
Have also started working on furniture catalog, As the accents catalog has really helped.
I am starting to place my furniture in more stores, and starting to get re orders.
The biggest news/upside is I am very close to landing a 10 store chain with about 15 sku's.
1. I am very soon gonna run out of room in my small shop. I have room to add on, but not that much. I have rented a warehouse for finished goods and potienally raw materials. When is it time to jump to a "commercial" building?
2. This chain store could be huge. like 50% of my business. I am scared to death that I build up there business, and than lose it to an import. I can offer some things imports cant, but in my experience, price usually rules.
3. I have started to inventory product. The problem is, this new chain would require a totally different inventory system. They require pack qty, boxing, barcoding, etc.- Do I require all my other stores to by like them? Or carry 2 different inventories?
Thanks for all your help.
I would consider the use of a CNC, even a small table top would get you off the time of the band saw, a good 4 x 4 ( you can still cut large sheets) will make massive headway in time and money
Are you sure you know your costs?
Does the retailer want the hand crafted look?
What can the competition over seas do this for?
Be Very careful of too many eggs in one basket, it has be the end of many.
If you think know all of this, I suspect you don't and just think you do.
Are you going to continue hand delivering inventory?
At this time, I cant do a cnc. Down the road possibly. There is a local company that does nothing cnc work. I have thought about asking them to run the stuff that slows me down. Just haven't got around to it. I dont know much about cnc, but I would think it would take a serious machine to cut 3" thick material. Maybe I'm wrong.
Pat, at the end of a full week, there is plenty of money there to pay bills and me. I do very detailed BOM's on all my furniture. I have anilized the accents(letters and shapes) more times that I care to count. I have been working on a BOM for the accents that this chain store is interested in. Including every little piece of packaging that I can think of. Dont know what else to tell you.
Some of my products are similiar to imports. Some are pretty unique. I am a little bit more expensive. Probably the thing that sets me apart the most is availability, reliability, and service. The imports run out of a product, you never know if you will get it again. They also have rescrictions that suck. There quality sucks most of the time too.
I know I dont know everything. That is why I am asking questions.
Does anyone have experience with having one huge account?
I do plan to continue to deliver. Its the best way to establish new accounts. Without it, I would have been out of business already. The benifits of those 4 days a month are just too great. If I get too busy, I have a semi retired person lined up that can deliver. They are very reliable, and dont cost too much since they are just looking for something to do.
I am not ruling shipping certain items out, I just havent had to and it hasnt been an issue.
One item that I think would be perfect for shipping and expanding my territory would be a cross that I make. That is all some of my florist shops buy anyway. And they also pack nicely.
Thanks for the help.
When I first started, it was a slow go. Then I found 1 really good vendor for my products. Then I kept marketing and got more. So when that first account went away (owner died), I had others already there.
I still have one vendor who is responsible for 27% of all sales that I make. I make sure that this vendor is taken care of by the customer service that I provide. I use her as a partner as I get her suggestions for new products as well ask for her advice on new ideas. Makes it more of a partnership that she has a strong interest in. I communicate with each vendor on a schedule based on sales. Higher sales, I talk with them monthly. Lower sales, I talk with them quarterly. I also send a bulk email once a month to stay in front of them.
You stated that you have a few constraints to your production. 1. Not enough sales; 2. Not enough time/space to produce your orders coming in; 3. Taking 4 days from production to deliver products.
My answers: If you don't have the time to produce enough product, how can you afford to lose 4 days of production to delivery? That is 20% of your monthly production time. If you had that time back, maybe you could keep up with production. You stated that this is what keeps you in touch with the stores. Why can't this be accomplished with a phone call or email? My vendor mentioned above is in Oregon and I am in St. Louis. We have never personally met but communicate regularly through the phone and email. You stated that you have someone who will deliver for you at a low cost. Utilize them and keep your focus on what is important. Producing and communication.
"Dont know what else to tell you."
No mention of labor costs.
Material costs are quite predictable, labor costs can vary a lot.
Having more than 10% of your sales from one source is not good.
Your time in production should be able to carry overhead and wages to the tune of $100 per hour. If not now, eventually.
4 days = 4 x 8 x 100 = $3,200. Those better be some large deliveries to pay for costs like that. Those numbers will pay for almost 1 person full time in the shop.
Knowing your true costs is still the hurdle you (anyone) have to realize.
If the CNC guy down the street comes back and wants $10.00 per unit, you are going to say - "but it only takes me a few minutes to do a unit!" When in actuality, it takes 15 minutes all in. That is $25.00 per unit - your cost. Simplified, but that is the way many start out. 12 months later, they are wondering what happened.
Know your real costs.
I had an oak breadbox business.
Like you I thought the important connection was the personal touch. I found myself in more Buyer's offices than I care to remember. One common denominator in all of these offices was a mountain of coffee cups and post-it notes on every vertical surface.
These were busy people.
One day I got behind and couldn't make an appointment. I called the buyer up and offered to send her a free sample. She placed an order. I realized right then that I would have a lot better success closing sales if I stopped selling and just made it easier to buy.
Putting a sample into a box and having the UPS man make the appointment for me seemed to work better for me and was significantly less expensive. I ended up opening 42 stores in 70 days with that technique.
The real beauty of this business model was that I could identify which specific businesses had a tendency to buy things based on a free sample. Now I could have a marketing company along with a breadbox manufacturing company.
The marketing company would be worth 150 times what the manufacturing company was.
The thing you have to recognize about buyer's motivations is that like most people fear of failure is a more powerful motivator than potential success. They won't buy anything if they like it 51% to 49%. They got to like it 90% against 10% dislike. They are never haunted by the money they left on the table buy not making a good buy. It's those stacks of glow in the dark underwear they have to walk buy each day in the warehouse that keeps them up at night.
If you give away a free sample the buyer can put it on the corner of their desk. Someone else can come in and pick it up and look at it and say "Are we selling these?" Your buyer has a much greater chance to fall in love with your product if they have the opportunity to do so.
Spreading out the customer base also indemnifies you against one dominant customer finding a better supplier or a better product. It also gives you more people to sell more things to.
If you want you can even do some basic statistical predictions based on sending out 30 samples. With a sample size of 30 you can predict a probability of occurrence and assign a confidence interval to that probability. Sampling was how it was done before the days of Google and the Russians.
Hey, Dumbass (I do like saying that),
I like your idea of sending free samples to potential customers. I want to try your idea with my own products. I have a couple of questions.
1. Did you contact the potential ahead of time and talk with them? If so, how did the conversation proceed?
2. Did you send a return label with the product so they could send it back if they didn't want it?
3. What was your percentage of success?
I PM'ed you yesterday with my contact details.
Why in the world would you want to work for one account? That's called a job.
Things will be all dandy the first year or two. Then you'll go out and lease a shop space, hire an employee or two, maybe buy some machines and have payments on them equal to a mortgage. This is when your customer knows they have you.
They'll start asking for price concessions. Then there will be something wrong with a huge shipment. Then they'll tell you that another supplier can beat your prices by 15%, you need to do better.
You're welcome to call anytime. Late afternoon is best.
"I realized right then that I would have a lot better success closing sales if I stopped selling and just made it easier to buy."
I have been following this thread and have a number of comments that may be helpful. I hope so. But, I will let you be the judge.
You are selling to business people. Look at it from their perspective. Put yourself in their shoes. What are their daily goals? How much time do they have to deal with you, and lots of other suppliers. What other things are on their agenda? Do they really have time to talk with you? Do they look forward to your visit? Or, do they claim to be busy and let someone else accept your deliveries?
If I had to wait for a sales person to show up once a month to place an order... That just does not fit my business model. My business manufactures a product. I need to order things so they are delivered on my schedule to meet my business needs (our production schedule). This in turn allows me to meet my customers' needs (delivery schedule). I have learned the lead times for each of my main suppliers, including the occasional interruptions to their timing. I want/need every item to be on hand when they are needed for production. That is extremely important to my business. When I decide what materials I need when, I want to have the ordering process quick and easy. I have other things to do as well.
In addition, many of my suppliers are located a couple of days drive or more around the country. Many of the folks I deal with I have never met. Some I have met at the major industrial woodworking shows. Then, I have never seen them in person again. But, I deal with them, or other people in their organization, on a regular basis. And, UPS and Fedex make delivery of their materials a simple walk to my front door.
I actually do not allow any sales personnel in my building. I have had sales guys waste more of my time over the years than I care to admit. I just don't allow it any more. That is time, and money, that I will never be able to retrieve. What do your customers prefer?
Now, think about how you, as their supplier, can make ordering as easy and pleasant as possible. Can they order, and re-order, online? At any time of day or night? It could be an online sales catalog. You could have it set up with a userid and password for each customer. They could place orders, track shipments, etc.
Or, you could keep it as simple as on-line form that they fill out and "send" to you by clicking a button on the screen. The form then sends you an email with what they want. You can then handle the order "by hand" to get started.
Or, even simpler for 24-ordering, some of my suppliers accept my emails. Some of the products that I order are complex with lots of measurements that need to be exact. They make a great product, but they have some many variations to meet all of their customers' needs, I don't trust my filling out their ordering form properly. I find that sending them an email, having them fill out their order form, then emailing it back to me so I can double check the numbers, works extremely well. And, using email is more convenient and efficient for both of us.
If you do not have a website, you might think about one. It does not have to be expensive or elaborate. It does need to work reliably, whatever you choose. The do's and don'ts of a website are beyond the scope of this discussion.
Do they really need/want to wait to see you in person to place their order?
There will be times that ordering on-line just does not work. When they have questions they may want/need to talk with you. Be sure that they know you will take the time to talk with them on the phone. If you can't answer right away, be sure to get back to them promptly. I am sure you already know this. I just want to be sure that you understand I am NOT advocating a complete on-line ordering system that prevents folks from talking to a live person in your company. People are still people and sometimes need a live conversation with a real human voice.
NEW ITEMS YOU WANT TO SELL:
Sometimes you may want to give customers and prospects a phone call about a new product. Be excited about your new item. Smile while you are talking to them. It makes your voice sound better on the phone. Then, tell them you are shipping a sample so they can see the item in person. If it is something you cannot realistically offer as a sample, then get a photo in their hands or in their email INBOX.
Phone calls are a lot less expensive than in-person visits. And, it still has the personal touch that some customers need. But, you need to weigh the time it takes to service that customer against the profit from that customer. Yup, I know it sounds kind of wrong to evaluate customers this way, but you have to decide what is the most profitable for your business. Always treat everyone respectfully, but you need to expend your resources on the customers that are contributing to your company's success. Some customers are more valuable to your company goals than others. Again, you decide how to operate your business. You, as a person, only have a finite amount of time every day and week to get everything done.
And, make the ordering process EFFICIENT FOR YOUR BUSINESS.
Others have listed some great ideas. There is a lot to think about. Then, you get to choose and try what you think is best. If what you try doesn't work, then try something else. I would venture to say that none of us got it right the first time. It may take a few attempts to get it right. Then, as time goes on, you may need to modify your system again. That is exactly what you are doing now: changing your system to improve.
Best of luck!
I sent my breadboxes out without any prior discussion. At the time I found sales leads by going to the local university library and looking up gift/kitchen stores in the yellow pages. The library had a section which held all the yellow pages for major cities.
I looked for stores that had two or three locations. I also looked for stores with just one location. The stores with several locations had professional buyers. The stores with just one location were typically staffed by the owner. Half of the owner's job each year was to find merchandise to sell. Only half was the actual selling.
What I did was give the breadbox away. I included a note in it that said I would like you to give it a try. If it didn't work out you could give it to your neighbor, put in it the dumpster or burn it.
I offered a discount if they would place a minimum size order within ten days. I always kept the initial order size relatively small because I wanted them to clean out their inventory quickly. Small orders gave me some insight how quickly they paid and whether or not they were a PITA.
One thing you might want to consider about strategy is using statistics to predict probability of occurrence. Basic Statistics 101 (as Pat can tell you) teaches us about something called a Gauss Curve Analysis. It is sometimes called a normal distribution curve.
With a sample size of 30 you can learn about the efficacy of any given sales method. The OP could, for example, test the results from sending out a single sample of one of his bandsaw letters along with a link to a website. He could also just send the link, or just send a brochure that did not require going to the interweb. The point is that different marketing methods will achieve different results. Gauss curve analysis can not only predict the likelihood of a particular response, it can also give you an expected rate of return for that particular method. This tells you how many dollars makes sense to invest in a particular method.
All based on a random sample size of 30.
One other thing to note is something called KEYSTONE markup.
A keystone markup means that the merchant has to mark up ALL of his costs 100%. A product that the manufacturer sells for $40 has to retail for $120. This assumes $40 for the guy who built it, 25% for the Manufacturer's Rep and 10% for shipping.
A good Manufacturer's Rep may charge more than 25%. This is the guy who knows which stores sell what kinds of products. A gift store, for example, can only have a specific amount of shelf space committed to wood gizmos. They also need to have space for paper products, glass products, fabric products, electronics etc. Go into any tourist/gift store and you will see a similar array of products. These stores need to be all things to all people so they need all types of products to satisfy all types of wants.
The Manufacturer's Rep fights for the products that make him the most amount of commission. The harried store owner relies on the Manufacturer's Rep to tell him what is selling and what is not.
If you can get your product into the store without surrendering 25% to the Rep your product will now sell for $100 instead of $120. This is where price elasticity of demand comes in. The store owner will always sell more gizmos at $100 than he would at $120.
The interweb has, of course, thrown all of this out on it's ear but the principles still remain. You got to make it easy to buy.
I don't know of any salesperson or rep firm who gets 25% of sale right off the top. If that were true all of us on here would simply sell other peoples stuff and make hundreds of thousands of dollars a year.
When I used to sell wholesale the top rep firms in the country were getting under 10%. 5% of less for volume and chain accounts.
The issue with a few large accounts is you aren't diversified so when you lose that account sales drop off the edge.
The other fear is selling to big box stores at very little margin.
Think about how much work you would turn away if you made this retailer your primary customer, would you lose the accounts you turn away or could you have a longer lead time?
There is a risk in have limited customers so contrary to conventional wisdom of lowering price based on volume maybe you need to consider the cost if you lose them when pricing and let the price have a risk factor or higher margin.
There are lots of economies of scale when making a lot of something maybe you need to keep some or more of the savings to offset the risk.
The other thing you could do is grow your business so the large customer is not as big of a % of the gross.
I think if you are borrowing money you will find lenders don't like to see concentration of sales with a few customers.
Pat, i know there are other costs. I was speaking in general terms.
David, am i supposed to be in shock at your $10 figure? I'm not and would pay more than that on certain items.
Jerry, i kept your number and may call.
There is 3 misconceptions, and if we cant move on from these, its kinda pointless continuing.
1. Too cheap. One person on here(can'tremember who) once implied that i needed to make 2500 of an item to make $2500/month. So i took that analogy and flipped it around into say a 1000 vanity. So a one man shop would make 76$ on that vanity. Or would be making $396,000 product a year to take home $30,000. I charge more than you think.
2. Delivering. I will stop delivering tomorrow if i can figure out the sales side. I have done everything suggested. here is what worked. Emails-useless. Phone calls-slightly less useless. Professionally done eblast-ok. Sending samples-ok, good if backed up by meeting face to face. Catalog-great if backed up by meeting. Traveling door to door-better than all those combined times 10. I could show at gift market. Knowing what i know about markets from previous life and what it cost to be at market, i would be 30,000ish deep before seeing serious results. I am just not there yet.
3. Not using cnc. I know a cnc can cut a lot more than i can on bandsaw. To that i say so what. If i could cherry pick the top 5 things i would improve efficiency wise, cutting would be about 5 or not even in the top 5. Point is eventually i will probably need one at some point. Its just not in the cards at present moment.
Thanks for all the help. I have taken a few things. I appreciate it.
Has anyone took on a big account with the goal of continuous growth? Thus lowering the their % of sales. I know its bad to have 1 big fish. I also feel its a opportunity i shouldnt pass up.
I guess looking at this on the other hand, going door to door certainly is a unique approach and that in itself may leave a lasting impression on your customers. Everyday they receive sales emails and calls that they don't want to deal with.
I would do the door to door thing in a heartbeat over wasting $30k on a trade show. There is just zero return with trade shows.
CW apparently not the answers you wanted to hear. These are pretty good answers from guys have been doing woodworking for a long time.
And yes most including me have had a big customer hoping to grow them into a smaller percentage of the sales.
I would listen if I were you.