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Looking to grow!!7/1
I run a small two man shop out of my three car garage that builds mostly cabinets and some custom furniture(which never seems to pay enough). I really need more space and need to hire some guys so I'm not doing everything myself. Any advice on growing and taking that next step?
Let the Jobs buy the tools !!
Take some business classes. If you expand much more, you won't be doing much woodworking. You'll be running a business. Hire a part-time accountant. Know what a business plan is and how to write one. The bank will want to see that if you need to borrow. You will be amazed at what happens to just get a commercial space. Every inspector shows up. You won't believe what even something as simple as the right fire extinguishers cost. Spend lots of time with your insurance man, your banker, your accountant, and YOUR WIFE. She may just be the component that keeps you solvent. Hopefully she has a great job with benefits already.
I agree to taking business classes. also take management classes if you haven't had the work experience yet. I took mine at night at local community college. Helped me with organizing the business side. Now that I have employees, I don't do as much woodworking as I do managing and sales efforts. No regrets though, as I love having the extra time to leave the shop when I want to and knowing that the work will still be done properly. Having not to do the work has also allowed me the time to be creative with solutions to product flow, problems and new products.
Pay off your debt.
Use profit to invest in used equipment not new employees.
If you have't already find a niche.
FYI the economy is due for a recession probably during the second half of this year.
Thanks for the insight guys. I was trying to keep it short and didn't give much history. But I've been self employed for 14 years, only 6 of those in the cabinet/ woodworking business. I use to own a roofing company and ran 4 crews before the recession. Which I decided to get out before all my contractors went belly up. Good move.
I cannot predict a recession, but I can tell you this, Now work with out material deposits. equipment all paid for and low debt structure.
You will be prepared for it..
PS: we are booked solid till mid summer 15
Thanks James. I will be debt free and have 50k saved before I take the next step. Just trying to prepare.
I should look at my previews first as there is no correction option, Mary has warned me about this LOL
"NO" work with out material deposits, and if it is commercial you may have to photo the material in your shop and insure against loss with most big commercial I do this and invoice 30 days, I have a disclaimer in my quote so the GC is not surprised by this. (funny how they never read them) with 30 day money you do not have to cut anything before $$$ are in hand suppliers paid
Yeah, I don't do ANY work until I get a 50% deposit on the job. That covers my material cost and some of my labor while I building in my shop. People shouldn't have a problem with that if they are using a reputable company. They are either going to pay now or later. Not sure how I'm going to do it when I come across a 100k job?
The only thing you are interested in is the bottom line. Growth does not necessarily correlate to increasing the bottom line. Growth for growth's sake is a common (if not inevitable) mistake.
Moving is expensive, whatever you think it will cost double it. You will burn through 50k right quick.
A cnc has additional costs that can add 30%-100% to the cost of the machine. Vacuum, dust collection, increased electrical service, learning curve, software, etc. When you go to the show this machinery will be seductive, make a decision based on logic not emotion.
Consider getting a cnc parts shop to cut your parts and ship them to you. When your bill is large enough to justify a machine that can be your gauge as to when to buy.
James' comment about being booked up until well into 2015, implies that the economy will be good for you. That is NOT the case. I suspect he has developed a niche market based on cnc carvings. But again is not prescient to you.
You have not answered the marketing question? This is infinitely more important than machinery questions. The crystal ball on this are demographics. If you are doing kitchens? I would say that it will go until the boomers reach 60, the main herd of boomers are 58-57. This means the kitchen business will start shrinking in about 3 yr if a lack of confidence doesn't occur first.
From what I read we are due for a recession in the second half of 2014. Predicting the economy is based off of interest rates and bonds it is a well known crystal ball. Think about it the stock market is waay over due for a correction it has been going up for 60 straight months. It is predicted to come down at least 30%. When that happens real estate will likely adjust as well.
You are making a decision that is a game changer for you one way or another. Do NOT go off of your gut on this.
The economy has a business cycle(albeit highly obscured by the Fed) it is important to make your move in the correct part of the cycle. Which is NOT now. I would Look at doing what you are thinking about a year from now if the market indicates it.
There are some that will discount what I say here, I would listen to their logical reasons. If they are opining based off of emotional reasons (like I got burned once by economics) ignore them.
I had similar conversation to this post, with a neighbor in 2008 just before the show. The machinery guys convinced him that all his problems would be solved by a cnc router. He signed a lease for about 150k. He let go of most of his workers, convinced they would no longer be necessary. He was gone in less than 6 months, after being in business for decades. Admittedly he was foolish but I attribute a lot of it to emotional reasoning.
Gee Pat, I'm going to IWF to look @ new routers, is that a mistake? We've got more work than we can get done with just two routers now. Really need to get additional "qualified" help in the shop also. Routers are cheap compared to employees!
I'm just the messenger. There IS going to be a correction. Probably this year.You are on the leading edge i.e. lead not a lag so YMMV?
Are you busy from one customer or one sector?
An employee you can lay off, not so with a machine.
There is always a "correction" and most asuradly one is due. That doesn't mean the sky is falling.
I'm not trying to piss on anyone's parade. I also hate it when people try to rent space in my head, with negative crap. Which is why I haven't watched the local news in decades and shun people who are depressing. That being said 2008 really got me looking at maybe there is something to know about this economics stuff.
Your situation is different than Calvins. He will do what he thinks is best for his situation. On the other hand I would hate to see someone make the same mistakes my neighbor made.
I base my conclusion on reading a number of books and listening to 3 economists.
Brian and Alan Beaulieu who base their thinking on business cycles and trends. Some of their customers are Stiles Machinery and I think the WI.
Mike Shedlock who is an Austrian economist.
Steen Jakobsen is chief economist at Saxo bank.
All 3 predict a recession this year.
Steen uses 25 economic indicators. Mike uses the Austrian axioms to see the trends.
Steen and Mike think the stock market will correct 30%. Although they didn't say the stock market will correct that much this year on the other hand they didn't say it wouldn't either.
The Beaulieu's are predicting a mild recession this year. They are saying in 2017 though watch out it will be bad. They say borrow at low interest rates and invest, maybe it is no coincidence one of their customers is Stiles? I think they are wrong because Yellin has to keep the interest rates low as long as she can. And if Abenomics is any indication a person would not be paying back the loan with cheap money, rather deflation is more likely.
Another Economist Harry Dent says this year will be bad. He bases his thinking strictly on demographics and is wrong as often as he is right.
Anyway I'm not trying to rent space in your head, on the other hand I am saying Look. That idea that "there is always going to be a correction" is BS
IMO the major factors to look at are the interest rates and the bond yield, DEBT, re balancing from decades of mercantilism with Japan and China, and demographics, and the Fed and tapering and inflation.
If Calvin waits a while how much would it hurt him? How much would it hurt him if he can't make his lease payments?
Of course I could be completely wrong at which point I would have to point the finger to these guys and say boy were they stupid.
With a Dow doin leaps and bounds and a retiring Baby boom ready to cash out, yes some correction will be coming, still best to stay as debt free as possible no matter what,
We've gotten off subject. Trying to predict the perfect time to make a small business move is like trying to time the stock market. A solid business plan with lots of what ifs you can run on the spreadsheet.
A small shop can take a surprisingly large amount of working capital. You can ask for 50% down but if the next guy is despirate he will up the ante to 25% down.... My market is very different than the kitchen business. If I told a GC I wanted 50% down, well it just isn't going to happen. On a large job we can bill for materials landed, but it will take 60 days to get payment. By then the job has been completed and I've got the entire cost of the job into it. Materials may only represent 25%
Gee Larry, it sounds like it might be worth trying to find out something about this economics stuff?
A simple rule for all those who are not so convinced as Larry.
Profit comes from control. Control = Prediction. If you can predict when a car is going to stop, start, turn, you can control a car.
All upset comes from a loss of control. 2008 was upsetting, right?
We have an economy of bubbles, one after another. This is because the Fed tries to control the economy through the money supply and interest rates.
A bubble is unnatural as it creates over-investment which creates a recession(a lesson from Economics 101). Right now we have over investment in housing in some areas, student loans, bonds, and some say in shale oil,stocks.
Who didn't see the over-investment in housing in 2007?
But group thinking keeps everyone in denial.
Moving to a larger facility will: cost a lot to move, lost time etc. There will be a big increase in costs in a commercial space.
Stay where you are until you have absolutely maxed out. Get that business plan polished up, make lots of contacts using your lower cost time.
Save twice as much $ as you think it will cost.
Pat I don't put anymore faith in ecconomist's predictions than the weather guessers predition for next month.
I value your opinion Pat (not saying you aren't right) but I am with Larry as far as trying to predict what's going to happen with the economy. Anyhow, I figure it will be at least another year before I am ready to make a move. I have some "big" tool purchases I'd like to make before I take on leasing a building. I really appreciate all the feedback from you guys!! Thanks a lot!
Ok then, I see my work here is done...
Clearly I have elucidated to a proper conclusion.
Thanks again for your feedback!!!
Off main subject:
Yea yea, there is nothing to know about the subject, it is all hocus pocus.
You are an economist when you make investments? All economic decisions are caused by scarcities, almost everything is scarce. You make decisions of what is relatively abundant and what is relatively scarce. So you buy low and sell high. If you are a good economist you make money if you are a bad economist you loose money. In your considerable life are you ahead or behind when it comes to investing?
Admittedly there is so much horseshit from the media you could easily come to Larry's conclusion.
Henry Hazlitt wrote in the 40s that there is so much going on in the economy that no one can know everything that is going on in the economy as there is too much, imagine what he would say today.
But imo there are predictable parts of the economy. It gets muddled up by the media.
Because of the internet it is now possible to get useful information, if you can shuck the Nebraska corn down to the cob.
The basic dynamics of the economy boil down to the study of these scarcities. And how they are influenced by inorganic forces namely the Fed. The trickey part is not the if but the when. The reason is that reality is determined by agreement. In other words who can determine that tulip bulbs, housing, South Sea Stocks, Dot Com Stocks are worth many multiples of what they were because people agree that they are worth it.
Other than people who are good at engineering agreement?
That aside there are things that are predictable about the economy and there is something to know. Why I have heard people say there is nothing to know about woodwork, can you imagine?
Since I'm not getting paid for posting this I will let this sleeping dog lie.
There's really nothing in our current economic environment to suggest any major correction, downturn, etc will occur in our lifetimes. The financial crisis in 2008 was a once a century event. The last time such an event occurred was 1929.
Investment bubbles are only an indicator of an impending crash if those bubbles are fueled by debt, as was the case in the housing run-up prior to 2008. Banks have been very tight with their lending standards since then.
Both housing and stock prices are historically very high right now. But those prices are being driven by people with the cash to pay for those assets. So even if those prices take a major hit, it's not going to effect the broader economy. All it's going to do is make the balance sheets of the 1% slightly less attractive.
"There's really nothing in our current economic environment to suggest any major correction, downturn, etc will occur in our lifetimes "
Au Contraire, printing 4 trillion dollars out of thin air is quite ominous.
The demographics are also quite ominous. As once people reach the age of 60 they quit buying much of anything, the bulk of the boomers are going to reach 60 in 3 more years. This has been happening in Japan since the 90s, no mater how much they print they cannot get their economy percolating. Yet no inflation until recently.
Then there are the unfunded liabilities for medicare and SS. That smallest I have seen them estimated at is 60 trillion. When the boomers all are drawing medicare and SS in 2030 there is going to be a big time problem.
After 3 decades of mercantilism and the US able to borrow because of their reserve currency status the dollar has been devalued, not that other countries haven't been doing this as well. But the point is the reserve currency is starting to be changed by the BRICS. As this happens there will be less demand for dollars. Which could result in inflation.
"The financial crisis in 2008 was a once a century event. "
No it is not. The consensus is what you are saying sort of. But the bubble trouble started when Nixon took us off of the gold standard. When the dot com bubble burst Greenspan printed money to "keep the economy level" this built up to create the housing bubble. Then Bernanke printed to "keep the economy level" which has led up to the current bubble situation. Bernanke has printed 4 trillion dollars worth of bubble. To say that is not going to cause a problem is tantamount to saying it has been snowing every day for 6 months but there will not be an avalanche.
"Investment bubbles are only an indicator of an impending crash if those bubbles are fueled by debt, as was the case in the housing run-up prior to 2008"
The 4 trillion dollars is debt in the form of bonds owned by the taxpayer and worthless derivatives purchased by the Fed.
"Banks have been very tight with their lending standards since then."
Banks have not been tight with lending for some time. The problem is the price of RE is very high so no one can qualify.
"Both housing and stock prices are historically very high right now. But those prices are being driven by people with the cash to pay for those assets."
The economy has bifurcated with the low interest rates benefiting the those who can invest and not benefiting those who cannot.
The prior group are your customers. When they quit spending who is going to buy your stuff?
This recession is predicted to be mild. The main reason is simply that Yellin doubled the interest rates. They then went down so the economy should pick up again next year.
But there is plenty of reason to think that the next 15 years are going to be anything but normal.
As all can see, there is no agreement here.
"Both housing and stock prices are historically very high right now. But those prices are being driven by people with the cash to pay for those assets. So even if those prices take a major hit, it's not going to effect the broader economy. All it's going to do is make the balance sheets of the 1% slightly less attractive."
I'll even disagree, slightly, with that statement. A major hit would affect the general populations perception of the economy. Perception is reality for many. So they will act on it. For me, that would be fine. As an investor in the market for the long term, a falling market is a benefit. The only time I want it to go up is when I'm ready to sell. I'm not a market timer, but I am aware of cycles and the bennies that can be reaped from them. It's a gambling game and I & many other people try to improve their odds. Fools sell when the market goes down. You don't need an economist to tell you when to jump into the market with both feet. Just watch the # of smaller equity sales. At a certain point it will start to drive the prices down. Not because the companies were paying smaller dividends then or in the future but because of fear/perception. If the market takes a 20% hit I'll jump in with both feet. It may even go lower, doesn't matter as long as I don't sell. My dividends will be buying more shares at the cheaper price. When the cycle reverses I'll look like a genius, of sorts. Not of course, just applying logic.
I'll have made more $ from a down cycle than I can in woodworking. Pat, would you like to compare your results to mine sometime? I'll assume you've followed the economists, you know I don't.
I would say that when woodworkers start giving advise on stock, it is time to get out of the stock market.
You sound like an economist! I'm assuming you have made more than you lost.
Your premise of the stock market always goes up is a bit flawed. Before you measure the stock market you have to adjust it for inflation. The fact is that if you bought stock in 1929 you would have to wait until 1989 before you broke even.
BTW if a Nebraska farmer invested his money in Nebraska wheat in the year 2000 he would today have realized a 5% return.
Yes Pat, Nebraska is a strange place to live. The NE constitution requires a balanced budget and a slush fund (emergency fund.) It is the only state with a unicameral. One house, not two like the Fed or every other state. We are in tornado alley, makes life interesting. My stock portfolio has returned an average of 12% handily beating inflation. I don't own any gold or anything else that doesn't pay a dividend or is totally speculative. All of my property & equipment is paid for including two farms that I didn't buy in 1929. How is California doing? I have taken some risks to get here. But I only gamble on my own terms, never the house's. Life's a gamble! Bet when you've got most of the aces, otherwise wait for better. I think Confucius said something like that.
Boy.... you guys are way over my head with all this economics stuff. Lol!!! I guess I'll just keep paying cash for stuff and buy equipment when I have enough to pay for it and when my shop is full then I'll look for a larger place. Thanks again guys!!!
"It is the only state with a unicameral."
You may have taken that as me dissing Nebraska, just the opposite. You know how California is doing. Unicarmel I wish, how about a supermajority in both branches. The only thing that can be said about Calif is that it can be used as an example of what not to do.
Dividends are the key. I think gold is a good buy now even though it does't pay a dividend. As that 12% IF it is Inflation Adjusted is going to be hard to come by down the road.
If you read that article he points out that gold is only slightly edged out by stocks. Since 1913.
But that is not considering stock that pays dividends. But in that case why not bonds (but not since ZIRP)
The past does not predict the future.
It is all about the Fed.
Pat, Why not bonds? Mostly because they have no capital appreciation. Long bonds are also subject to deep discounts if you need to sell before maturity. I suspect interest rates will move up meaning the value of currently issued bonds will move down. Munis might be OK for people in really high brackets, but as some towns in CA have shown, not bullet proof either. TIPS might be an option for the ultimate safety people. Problem is I don't think the CPI represents all of real inflation.
As for the perfect investment, have no idea but I'll play my own cards. I'm actually considering selling on of the farms. Land prices seem way too high for what can be farmed out of them.
Anyone else have investment ideas? Woodworkers need to have a retirement plan.
I have made 2 long posts that did not post.
Did i violate another now you are supposed to's?
"Mostly because they have no capital appreciation. Long bonds are also subject to deep discounts if you need to sell before maturity. I suspect interest rates will move up meaning the value of currently issued bonds will move down."
That is why I said before ZIRP.
"I'm actually considering selling on of the farms. Land prices seem way too high for what can be farmed out of them."
That is because farm land has been getting scooped up for a while now by people looking for real value. This is the reason Buffet bought the entire Burlington Northern because it is all hard assets that have value no matter what the dollar does.
Larry has made it clear that he thinks what I'm saying is BS. Who could fault him his ideas have been working for a long time, my dad says the same thing about bonds even today with ZIRP. But they are both wrong mainly because they fail to consider the effects of the Fed.
I would not be so stupid as tell anyone to do anything. I'm saying LOOK...
Ref regarding bonds:
Ref regarding the macro future tends
At the very least I would look at this one.
This link is worth watching.
This video gives a macro perspective