Moving on up?

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Hi all,

I have been building my custom cabinet company for about 5 years now and have a shop on my property. The current shop is about 1200 sqft and if filled to the brim with tools. I can envision a time in the hopefully soon to come future that I will be moving to an actual commercial building. I would like to do so in order to have more production capacity, to get finishing and cabinet building in the same facility, and to up the overall efficiency of my operation.

My question to you all is what do I need to anticipate?
What did you encounter unexpectedly when you acquired a commercial space?

I plan on just moving most of my current tools into the space, is there any likelihood that some of my current tools won't meet some sort of necessary guidelines?
Where do I find these guidelines?

This post is literally the first actual leg work done towards researching this so I have NO Idea what to expect... That's why I'm starting here. I figure why not use the best possible resource first?

Thanks In advance to any poster who helps me specifically and thanks to the WOODWEB website for making this type of thing possible.

Charles

Member

Michael,

Of course you picked a great place to ask your questions. :-)

The first question that I thought of is will you be renting or buying? There are pluses and minuses to both.

I chose to own.

I can modify the building as I want.

I don't have to worry about the lease expiring.

I do have to worry about making the mortgage payments when the economy goes south instead of simply moving back into the shop on my own property at the end of my lease.

I hope to sell the building for a profit when I am done with it. (The recession still has me in a negative position there. Maybe I can become a landlord when I am done with my business instead.)

Any cost for the modifications I would have done to a rental building would need to be amortized over the lease period. E.g., the landlord is not going to reimburse me for adding electrical outlets where I needed them.

I do have to pay for all maintenance to my building. If the HVAC goes out I cannot get the landlord to pay for it.

That's just a starting list.

Best of luck on this endeavor!

John S

[X] View Member Profile Name: John Shedivy Company: Heitink Plywood Technologies Phone: 812-929-0211 Location: IN Member

When I started my business in 2006, I decided to rent (mine was a greenfield startup, not a move to a new location). Some of the things that I paid attention to were the layout of the building; could I get the machinery into place with a decent "flow" in regard to inventory and material processing and shipping. What if I wanted to expand and add more machinery in the future? Was there three phase electricity available, that's not a given and it's expensive if you have to do it yourself. Was there good access for in-coming and out-going semi-trucks, not only in my yard, but also having easy access to a highway. I stayed away from buildings in residential areas, because of traffic concerns and the fact that most people don't want a factory close to their house.

Be aware that your move might precipitate an unscheduled visit from the fire department, who will check that things are up to code (in my case, fire extinguishers, exit lights, unblocked exits, good extension cords, etc.)

And just expect everything you do to take twice as long and cost twice as much as you have budgeted, even if you think you are being conservative.

Good luck!

John S

[X] View Member Profile Name: John Shedivy Company: Heitink Plywood Technologies Phone: 812-929-0211 Location: IN Member

I thought of one more thing ... sawdust. In a small shop you can fly under the radar as far as OSHA and dust collection, that will likely come to an end. The first person to ask about sawdust will be your business insurance agent, they won't be the last.

Jay

[X] View Member Profile Name: Jay Company: HWC Custom Cabinetry Member's Business Categories: Cabinets - Cabinet Designers Cabinets - Cabinet Installers Cabinets - Closets and Storage Cabinets - Commercial Cabinets Cabinets - Components Cabinets - Custom Cabinets Cabinets - General Cabinets - Kitchen & Bath Cabinets Cabinets - Residential Cabinetry Cabinets - Store Fixtures Member

John is spot on. Your real concern is getting your head around what sort of codes & enforcement is in your area. If you have never had to have a 'real' spray booth with fire suppression and all, you are likely in for an expensive education. Funny, when I moved a shop 10 years ago, that was my biggest headache, now, dust gets way more attention. You still have to have your stuff together in the spray booth (solvent finishes here) but dust was the biggie. You may be small enough to dodge that bullet too, just get the supporting paper work saying you are exempt. (for now)

As for rent/own, be sure to discuss the long term capital gains of owning your building with a good accountant. It impacts your future a lot more than most people realize, especially in the shorter run. It is easy to own your building, and want to sell it in 10 years (for whatever reason) and owe more in taxes than you have in it....

Best of Luck!

Alan F.

Depending on what state you are in you may also need to comply with local air quality districts which can be onerous to provide all the details, plans, equipment information, coatings and adhesives and a daily tracking method

A-

rich c.

As mentioned, fire code, electrical code, city inspections, fire inspections, burglar alarms, disposal fees, higher priced electricity (commercial rates based on peak usage), marked parking spaces, handicap access building and bathrooms, paved parking lot, fire rated everything in the building, etc....You won't believe what fire extinguisher inspections cost especially if they need repairs. On the plus side, your customer base may take you more seriously with a commercial space. You'll need it though, since your expenses will likely double!

Tony

Michael, you don't mention whether you have employees or not. With the added demands of a rent or mortgage payment you will almost certainly need to hire help, (or more help) and then you'll be an employer. Month in, month out this may be harder than all the other issues combined. Then you will responsible as a manager to get the most productivity from your employee while still being maximally productive yourself--easier said than done--and you'll need to keep cash flowing for payroll. Unless you find someone who is both competent and flexible (i.e. will work full time when needed but part time when the flow slows) the unrelenting pressure of rent/mortgage and payroll will compel you to work more hours per week. If your making money, no worries, but expect the work to become more grinding. That's my story anyway--made the same move 9 years ago, did good work with one employee but earned a barely respectable income, and just closed the shop.
You might also consider renting space in an existing shop where your contribution of equipment compliments what's there already. Then you could continue to operate solo or at least with lower rent--that's something I'm exploring. Since I'm less than 10 years from possible retirement, I'd prefer to move to a location where I can build a shop adequate for my business.
Buying will take you longer to find the right building in the right location that you can afford vs. renting. But if you are very confident in the long term viability of your business it's an investment worth making. Good Luck!

Bruce H

I'd stay home with the shop process. I am in a commercial space and have steady stream of people interrupting production. Get an office downtown if you think you need the exposure, it would keep them out of your shop.

Will Williamson

Can you put up a bigger space on your our property? If so you could continue as you are, no one would pay much attention. I have been doing that for 30 years now.

Once upon a time the insurance company decided to jack with me and I fired them and got another company. Issue never came up again

Larry

I agree with most everything said so far. Feeding the beast when work turns slow is a big concern. Codes compliance can be expensive. 3 phase is a necessity if you intend to advance beyond a 1 man shop. Where I live wood shops are required to have sprinkler systems if beyond 2500'. Dust control becomes an issue in several ways, Code, insurance neighbors, disposal. Fire code inspections every year, Insurance inspections, OSHA if you get an employee and he wants to be a PIA. Own/lease both have advantages and disadvantages. Good luck, calculate carefully!

Michael Hal

Member

Thanks guys! Appreciate all your time and suggestions.

Would like to buy, but am starting to lean towards renting as a stepping stone. Im thinking maybe renting a modest size space with my finisher and maybe move the cnc and edgebander there and keep the solid wood operations at the house for now... Not set in stone yet though :0

Currently a 1-2 man shop.

As far as meeting codes what is the best way to research them?

Is it the case that they will come to me and not the other way around?

Osha and Fire Department seem pretty straight forward... Osha prob has literature on line and call the fire department...?

Do I call the chamber of commerce and ask what other agencies apply in my area?

Just trying to get ahead of the game as much as possible.

Jim

Something that worked well for me was renting two small shops side by side. One for finishing, the other for woodwork. Simpilfied a lot of issues.

Tony

I would take the initiative and approach the local building inspector and fire dept. inspector, once you know your target location, even before you have the building. Not only will they be helpful, they'll be more accommodating and flexible if you have a professional and cordial relationship that you initiated. Finishing is where a lot of hurdles will be faced. Not every commercial space will be allowed to have a finishing booth. The exhaust stack on a multi-story building will be a lot more expensive to install vs. a single story building. A chemical suppression system in a spray booth may or may not be a requirement, but it's a $3-4000 item--something you'd want to know ahead of time. Then you'll need to look at air make-up for all the heat a spray booth may suck out of the shop.

Larry

Finishing booth: code 100'/minute across width. If 8' X 14' that is 11,200 cfm Minimum! Fan will need to be capable of more due to filter & duct restrictions. In the winter that is a lot of cold air being pulled into the building. You will need makeup air from either an out side inlet vent or an air makeup heating unit. A fan that size will use a 30" duct, big hole in roof or wall. If you are in a space with a sprinkler system it is cheaper to have that add some heads to the booth than a chemical unit. Just put some plastic bags over the sprinkler heads to keep them clean. We have been 100% water borne for a long time now. No code issues with that. If using solvents you will be required to have an annual permit and inspection. Also figure on buying a fire safety cabinet to store flammables in. You may also be required to show how you disposed of any leftover solvents & likely have a permit for that too.

Kilgore Trout

Member

Asking local bureaucrats if you need to comply to whatever will almost always get a 'yes' response - even when they have no idea what the real answer is. Asking gives them the opportunity to tell you your business. This is what empowers them to hound you if they think there is something you should comply with. Keep your dust collection inside as well as any other part of your business. Business is private in the US, or should be, and it is none of their business.

Now, that said, you do need to be responsible and sensible about everything you do. This does not give you permission to abuse people, loose common sense or ignore good practice. Setting high standards and adhering to them is your best defense should the bureaucrats get pushy.

In my area, it is not uncommon for local bureaucrats to give 20K a year in tax breaks for every job created for such gawd-awful places as call centers and the like. You are an employer, so let them know you are supporting their fat a** and you can go down the road with your jobs if they don't like it.

To paraphrase Will Rogers "Ignore them politicians. Payin' any attention only encourages them"

Alan F.

Kilgore,
I would go to a city near me and say I am considering opening a business here as well as town x. I expect to generate x dollars in sales an mill taxes if I choose your city/town/county. Before I make my choice I need to know the counties codes on a type h or type F-1 (no finishes) occupancy. Sometimes 2 miles can be 500k difference in fees and expense

Without knowing what area he is in we don't know which codes he needs to comply with.

Pat Gilbert

I would reiterate what Larry said in one sentence yet is more important than anything else mentioned here. How are you going to stay above the break even point, i.e. "feed the beast"

IOW the most important part of the plan is the marketing plan.

Michael Hal

Member

Feed The Beast!... Is it the case then that if you cant feed the beast, the beast gets hungry and the beast may turn around and eat you? That is very scary! (because its true!)
How about this: In the beginning the beast will be hungry as it has just been born and needs nutrients to grow (start the beast small). Feed the beast! As the beast grows you develop a relationship with the beast and learn the beasts needs, before long you start to be able to master the beast, you are in control of the beast and you can steer the beast in the direction that you choose. After all you created the beast right?

I don't mean to be a Klutz or offend anyone with that. I just have a hard time dealing with looking at my future and something that I want to create in that light. Im not trying to create something that will control me... That is why I married my wife, I've come to find out... LOL!

Am I naive? Of course I am!! But it is the way I prefer to look at it, and it makes moving forward more fun at least :)

So this brings me to marketing. I read "the e-myth revisited" because it has been suggested on many of the knowledge base articles.
I loved that book and I love the dude who wrote it.
I disagree with him here however.
Once it got to what I think is the final chapter, about marketing, I could only read the first few pages. I literally couldn't make myself read much more. It starts off with all of this mumbo jumbo (IMHO) about how you need to understand the "science" of marketing.
1)That you need to perceive your customer based on demographics, and market accordingly.
2)That you need to be aware that people in Blue shirts make more sales than people in red shirts (or something like that)
3)Most of all the world largest corporations invest heavily in this type of research and that basically proves the validity of these "sciences"

Ok here I go!

1)If you are concerned about only a certain demographic, then necessarily you alienate a section of the population who might be interested in your services. I sell mostly to rich people... but that doesn't mean that I wont do a small job for some old lady that wants a weird cabinet built her way (don't mistake this for losing money... but maybe not making as large a profit instead). I serve my surrounding community and I don't think there is a better marketing tool than word of mouth and a perception in the community that you care about your customer.

2)What in the world does that have to do with providing the customer with what they want? Maybe this only applies to company's who sell worthless pieces of crap you don't need...
What happens when this "science" proves that indeed blue is the very best color of all, and we all start wearing only blue? What will we do to the Green shirts? :)
(do you really need "science" to tell you that more potential customers will buy from a company that has a leaf as their logo than from a company who has a blue skull and crossbones as a logo?)

3)Hardly proof of anything other than that these company's have way to much power and resources to blow!

(again IMHO)

What are some good marketing techniques that a real small business can use?

What has worked best for you?
Big or small business.

Obviously I haven't really done anything in the way of marketing... :/

Also thanks again for all the info/suggestions. Now I have a much better sense of direction for where to go when I do hopefully move on up!

Michael Hal

Member

Just realized there is probably way more for me to learn still about moving to a commercial space and what it implies... So keep those coming too please!!

Pat Gilbert

The E-myth is a great book, if you do not get it then you may want to figure out why.

Marketing in this world is about finding a niche. The way to do this is to survey the different markets that cabinet shops cater to. Survey means to find out about the niches. E.G. if you were to survey the construction industry I think you would find that electricians and hvac guys do very well. Then if you surveyed some more you might find that cabinetmakers do slightly more poorly than the guys who pump the honey buckets.

What I found by doing this exercise was that when wood work is used for promotional purposes it is more profitable. This means store fixtures, trade show booths, hotel lobbies, paid better.

Right now it appears to me that commercial work is way off with the exception of the bigger jobs because of low interest rates most of this related to healthcare. Same for residential remodel for the same reason. This also varies from state to state.

Demographic IMO are good for kitchen remodels but I think this will die down as the last of the boomers reach 60, right now the biggest chunk of boomers are 57-58. IOW if that is the niche you are looking at it might go away soon.

No matter what construction is created where there is demand. This means that growth states like Colorado, Utah, Texas are going to do better than states like California.

The most successful thing I have ever done marketing wise is to send out a postcard every month to former customers.

Until you figure the marketing out I would be reluctant to raise your break even point.

rich c.

When thinking about feeding the beast, I reread your first post. You stated the problem was the place is filled with machinery. I guess when you are filled with work, that would be the time to go to the bigger space.

Larry

"before long you start to be able to master the beast, you are in control of the beast and you can steer the beast in the direction that you choose. After all you created the beast right?"

Nice thought but I am not convinced. 2007 sales $2.4 million, 2009 sales $1.1 million! beast is eating me! What jobs there are, are being taken in desperation by companies that will be broke in the next couple of years, due to "buying jobs." My "break even point" is far above $1.1!!! I kept my employees because I wanted to be able to get producing with experienced help when the economy turned. Another miscalculation. It took much longer than I had hoped. We had no debt in 2007, $200K in the bank, not to worry, right? 2010, living hand to mouth, no money in bank, $300K in debt. 2014 sales back to pre-recession level. Enough $ in bank to operate on but still owe a bit over $110k.
Risky business! We have always operated in/on somewhat of a niche market. Lots of curves, most any material you want. All business in the commercial area.

Michael Hal

rich c., the issue I'm trying to solve (esp. regarding my first post) is my lack of knowledge about moving into a commercial space...
Im trying to plan for the future and workload will be a big part of the equation if I do move...

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