Developing a Cabinet Business

      Starting up without large equipment and finance resources. January 28, 2004

Cab Parts

Question
I'm a young carpenter working on getting my contractor's license. My plan for the future is to build cabinets and/or custom furniture. I am currently working by myself for extended family (no license needed) and from word of mouth, I have work lining up.

One problem: no shop and no large tools. I have a truck full of tools for finish work and typical wood construction. I have access to a planer and tablesaw, but in a shop that is slightly open to the outside moisture (not good for cabinets or furniture).

I'm figuring on starting out doing finish carpentry as a sub and I can do remodeling and rot repair if I need to, but I don't want to. Does anybody have suggestions on getting in on the cabinetry market? Has anybody started up a shop with financing and a business plan, and without all the big tools? I figure I need about $5000 to get some large shop tools: table saw, joiner, planer, etc. Also, I'm going back to school to broaden my knowledge about business, design, marketing, etc.

Forum Responses
(Business Forum)
I'm not trying to be negative, but $5,000 won't get all the necessities. You'll need a planer, shaper, jointer, chopsaw, routertable, stockfeeder, drillpress, spray guns, 60 gallon compressor, finishing booth and a bandsaw to do good custom work. Don't forget about bits - a cheap shaper can be bought for $500, but you'll have another $1,000 in bits and cutters. Not to mention a computer and CAD software (starting out at $2,500 I think).

I'm a small shop and I probably have $80,000+ in tools alone. I feel you need to have all the basic tools to start with - maybe not top of the line, but decent; then slowly build your way up. I personally think you should always strive to better yourself and try hard to do what you want, but you should rethink how much money it takes to start a real business.



You have to build up the construction part good enough to be able to get a steady check. Next move would be to buy a house with a really good size garage or, better yet, a house where you can build a good size garage. Then just start buying the equipment one piece at a time. Take a couple of years, but in the meantime you would be gaining knowledge of how to use it and what you will need to use it the way you want to.


To build cabinets, you don't have to start out with all that stuff. For instance, buy your FF stock pre-milled and forget the planer and joiner. To make money with cabinets you'll have to be able to turn a job quickly, but accurately. So, outsource where you can. Buy used equipment, and take a close look at the much lower priced imports. My Grizzly TS does everything the "proud names" will do.

I got by for a long time with a $150 compressor, no sprayer, no shaper, etc. I started with less than $6,000 in tools/equipment, and built slowly. But I had a small, decent building for just $200/month. I know a few shops that started with even less.

As said above, find the minimum starting point and build up. Investing more does not mean you'll make more. It depends mostly on you, how you work, etc. And some depends on your area/market.

And yes, have a business plan and do your homework first. What worked for me may not work for you. You may need more or less. You'll know when your homework is all done.



I'm in the same position you are. This is my first year in a new business. My idea was very close to yours - start out with finish carpentry, remodels, etc. and work into cabinets and furniture. I'd suggest not financing, because even though today you may have 10 jobs lined up, next month or the month after you may be sitting by the phone waiting for the next call. If you don't finance, that'll be one big bill that you won't have to worry about when the slow times roll around. As you get your jobs, buy your tools one at a time in the order that you will need them. I've found that you can make due with far less tools than a lot of high end shops have. It takes a little more time and some jigs and maybe an extra set of hands, but it can be done. And as far as the business license for the price I'd recommend getting it and if you're subcontracting or even doing your own remodels and so on, I'd recommend using your first cpl jobs to get some insurance. Just keep your overhead as low as you can and get the word out that you're in the business.


How about starting out frameless with high quality components from Cabparts? Outsource your doors from Conestoga already finished. You'll get a super high quality product at a reasonable price. I've put top notch kitchens together inside the customer's kitchen itself! No major tools, no mess and no helper needed.


The above is a good point. Good way to get your fair share in the market without the money outlay. While you're waiting on Cabparts and Conestoga, be out there putting that experience to work. A good friend once gave me some very sound advice: "Grow wide and grow out, not up."


I started out last year doing installs to pay for my shop tools. Worked out of my garage to save on overhead and invested a percentage of each job's profit into tooling up without financing. It's a lot slower that way, but I believe it is the best way to go. I have run small shops for others and seen what it was like when things get tight trying to make those monthly payments. The owners get hungry to make that payment and lose sight of the business plan. I have also seen where they financed to save the cash payout all at once, reasoning that it would be better to make small payments every month, only to go out and buy a new truck, boat, house, etc. And the stress of making those payments hits each month. Assuming this is your first business, play it safe, accumulate slowly, pay in cash, find what resources are available to you to outsource what you will make in the future, and take courses on money management not just for your business, but for your personal finance as well. I know it's hard to be patient (I lost two businesses rushing things and being uneducated about resources and fiscal responsibility), but true steady business is not built overnight, but established with integrity, hard work and diligence.


Not to burst anyone's bubble, but how come I see excellent furniture makers make pieces with hand planes/chisels and basic tools? They built some beautiful pieces in the 1900's with basic tools. I started out as a trim carpenter and had a portable planer/unisaw and jointer. It cost less than 5000 and I made some nice furniture. It was not museum quality, but my customers loved it and that's all that mattered. I suggest you get licensed so others take you seriously, and take photos of work you do for friends and family once you get a portfolio going. Show people what you can do and in time, you will get work.


Look into renting bench space in an existing shop. I know of two shops in my area that do this. They have a common machine, storage and finishing area with separate bench spaces. Both shops are focused on custom furniture but they have had cabinet makers in the past. In the "do as I say, not as I did department", keep your day job and assemble your shop components as you go. Not too long after I financed a large equipment purchase, I found myself bidding jobs I didn't want in order to make payments. Be very careful with machinery purchases... this seems to be a slippery slope; never buy anything that you don't have a well-established need for. Do not justify machine costs/purchases based on work that may or may not be coming. I would much rather be kicking myself for waiting too long to make a purchase that has made my business more profitable, than kicking myself for creating cash flow problems. Definitely outsource where you can.


I'm in a similar situation. Here's the difference. I am currently employed full time. Got health insurance, etc. covered. I do work on the side and all the money made goes right back into the business to purchase tools and equipment. One entertainment center paid for a very nice table saw.

Every job I do gets cataloged, photographed, and put into a portfolio. I do hand work where it is needed for lack of bigger power tools, and where it pays big dividends (like carving).

While I am building a portfolio, and an inventory of equipment and supplies (I work out of my garage), I am fine tuning the business plan. My goal is to not need to finance the startup, but when I need it, the money is a phone call away. I have borrowed smaller amounts for tools that will be paid for by the job I'm working on. My bank is always trying to sell me more money. I buy smaller tools as the need arises, like bits, blades, sanders, routers, etc. My overhead is as low as possible, and my shop rate is almost as high now as it will be when I go full time.

My customers are mostly word of mouth, started from extended family and friends. I explain my situation to them and that their job will take longer than most other shops, cause I still need to support a family by working full time. Yep, I put in long hours (70-75 hours/week isn't uncommon), but the payoff is absolutely no debt.

It'll take a projected two years of this, but when I quit my job and start my business full time, I will have a fully equipped shop that is fully paid for and a long list of clients waiting. I already have about four months backlog of work and because I sell the customer on quality, they are willing to wait. I have had folks come with checkbook in hand raving about the quality of work I did for their friend and when can I start their job? Yeah, I've lost a few jobs cause they just couldn't wait that long, but that's the way it goes. In that case I have referred them to other shops who I know do good work. (That pays more dividends, too.) Cash is king! Never borrow money that you can't pay back in 2-3 months.

Also, while I'm still employed, I'm getting an education in how to (and how not to) run a business. I build mostly furniture and cabinetry I can install myself in a day. I haven't built one kitchen yet... only because coordinating with plumbers and electricians isn't something I'm able to do on the side. Several contractors that I do design work for have subbed out mantels, bookcases, etc. to me and when I talk to the homeowner, I can pitch an armoire, dining room set, or computer desk to them, usually with good results.



I can tell you from experience (I had just posted a message not too long ago about starting a small cabinet/furniture shop) that beginning in your garage is good for bookcase sized items. Much larger than that and you are competing with the bicycles, washer/dryers, dog food dish and several other bothersome items. I just completed a custom kitchen that came out beautiful, but what a chore. I just didn't have the space! Forget about parking a car in there.

As for starting out... You will need some basic tools that can be had for under $10,000. I have found that a good tablesaw with an even better guide that will accommodate a 32" rip is a necessity. I mean a good, aftermarket guide. This is your bread and butter! Next is an 8" jointer, then a 12"-15" 220VAC planer. I have a 1 1/2 HP shaper that I will gladly exchange for a 3HP shaper. Cutters are expensive, but with a little care, should last just about forever. Next is a name brand compound miter saw, a decent 18" bandsaw and an upright drill press. Don't forget clamps, biscuit joiners, shop table(s), air compressors, wood storage space, hand tools and last but not least, a damn good dust collector. This by far is what allows me to work in my garage and be friends with my family. There is nothing like getting a load of laundry out of the dryer that is covered in sawdust!

Until I can move up to a larger area, I'm going to have to focus more on bookcases and small/medium sized furniture.



That's right - do not go in debt! I have a good tablesaw and a router in a table. That is really all you need to make cabinets. Jointers, planers and sanders make work faster, but just about everything can be done on the tablesaw. Read Jim Tolpin's book "Tablesaw Magic" if you don't believe me. I do have other tools - a mitersaw, bandsaw, compressor and brad nailer. I use all my tools, but the tablesaw is the main tool in the shop and in my opinion, the worst one to scrimp on. Get the Unisaw or Jet or Powermatic cabinet saws with Beisenmeyer or Exacta Fence. You'll be happy you did. Make a cut-off box for your saw. I think it's best to make your own jigs and fixtures - your work will only get better with experience and making jigs is good accuracy practice. Also, remember excellent quality work and a happy customer is the best advertising.


From Jon Elvrum, forum technical advisor:
Know your costs. This is more than the unit cost of a board foot of material and includes every penny you will spend to be a cabinetmaker. Some costs are paid for out of the work done, but in the early stages most are absorbed by recording what you hoped to make in profit and then subtracting what you didn't really make and striving to understand why your plan for profit didn't work out. Way too many businesses begin with the presumption that if they make and sell something, they make money. This may in fact work out, but it works out much better if you know what your costs are and what your profit is supposed to be. That way if you meet it, beat it or fall any amount short, you can have a means to understand why and how your result was achieved - whatever the result.

The next important thing to realize in the profit picture is that the profit should pay you a wage over and above actual profit. Pay yourself a salary or hourly rate and over and above that adds in a percentage of job sell cost that pays all expenses including your wage and all calculable business and business related costs and expenses. On top of all these is your job profit - and in this should be added a specific percentage of profit dollars (say 5%) that are dedicated to future machine acquisition and expansion. This should be a separately maintained account file. Every 90 days invest and reinvest this money in some short-term interest bearing certificate (say a 90 day CD). On the roll over anniversary, add in new saved moneys (since the last instrument was opened) to old CD's as they mature and then mulch in the interest. A few years in, you will be amazed at how much you have set aside that can be applied to future growth and expansion.

If you do this early, and monitor the results honestly (no point in lying to yourself) you will be well on your way to building a successful business, adequately financed and able to adjust to changing market place issues with flexibility and strength.

Know your costs.
Plan your profit.
Manage and work your plan.



One quick word of advice. Contact SCORE (Service Core of Retired Executives); they offer free small business counseling under the auspices of the SBA. They will guide you through a business plan and cash flow plans as well as incorporation. They do a great job, and you can find them at SCORE.com or under the SBA.gov site.


From Jon Elvrum, forum technical advisor:
Echo the SCORE suggestion. Tremendous resource with time your biggest cost.


I worked in a cabinet shop while in high school and took shop class, and after high school, I took my graduation money of about a thousand dollars and bought a few tools and used my brothers 18 x 24 garage to start with. I built small items like bookcases and entertainment centers, hutches and so on. I took a little profit from each job and bought more tools and upgraded. I then moved to a larger shop and grew as I could afford to.

Now at age 27 with almost 10 years of experience running a business, I strongly suggest you get a good accountant. He or she will make the difference in the end. If I could go back, I would do this up front. Most of us say we are craftsmen and paperwork is the last thing on the mind, but 10 years down the road you can either be making a good living or posting more questions here on why you work 80 hours a week with a 3 month back log but don't make any money. I am first to say that I am a craftsman at heart, but also a business, not a charity. Take others' advice - stay simple, low overhead, and put a little money away for the slow months, and last but not least get a good accountant who can help you put your business plan together and keep you on track. I started small, made lots of mistakes, paid a lot of money for a degree of hard knocks, and almost 10 years later I travel the country building upscale cabinets and furniture.



Table saw: $1500
Miter saw with fence: $800
Router table / shaper: $600
Small tools: $2000
Misc. shop setup: $1500

Telling your boss to fly a kite because you're going to work at home: $Priceless$

Listen, plan and be patient, and it can be done.



Debt is not a bad thing. Any tool you can justify owning will make you more money than it costs. Don't get carried away. (The bank won't let you anyway.) Borrow for a tool, pay it off. Borrow for another tool, pay it off, etc. The speed and convenience is worth more than the interest.


Good point. Stay away from "easy" credit, like credit cards.

I set up a business checking account with an un-secured credit line that works just like an over-draft protection credit. If I see a tool I need, and it does not fit into the cash flow (or I am at a tradeshow or something), I just write a check for it. Then the bank just sets me up with payments, no questions asked. Interest for this is cheap as compared to a credit card. Plus it gives you the chance to build a healthy relationship with your banker which is good for everything from your business to buying your next home or workshop.



I started 12 years ago just like you want to do. We are now a 3/4 million dollar annual business. I made plenty of screwups along the way. You must learn from them as they come. A couple other things I know will help. 1) Never go against your gut feeling concerning a business decision. 2) Be passionate about your work and you will always be busy. Excitement is contagious and people want to work with someone that loves what they do.


You need to account for all the other guys that will be in the same position you are now (which is doing what they can to grow their part-time business) at a point when you have finally made it running a full-time independent business and leaving all the perks of having insurance paid for, steady pay, vacation and benefits from the job you left. Things will change your sideline projects into jobs that must pay bills! If you can make it 5 years on your own (and pay yourself), you have a pretty good chance of enjoying the benefits of owning a business.

Remember this, though - your business is only worth what someone else is willing to pay... Be careful in planning for the future. It may not be the best thing to plan on having your woodworking business provide you retirement. Trying to sell a woodworking business is like trying to convince all those part-timers not to start their own business to make your business more valuable... pretty difficult. I went through all the painful steps of starting in a garage, then moving to a larger shop, then ending up in a 10,000 square foot facility 9 years later, only to find that through all that dedicated work and making major sacrifices, I ended up with something that wasn't worth (in dollars) as much as I thought it would be. I found that having to rely on current workloads and not having much luck being able to forecast future work was a bit difficult, to say the least. All of the sudden you have bills and need to make way for growth. It took some of what I was looking for out of the picture. Stay small and continue your hobby work and enjoy woodworking, because after you own and operate a woodworking business, you see things completely different! I had a facility outfitted with a CNC, nice tables saws, wide belt sander, panel saws, shapers, cut-off saws, air tools (the works) and I rarely ever got to work on all the nice equipment because I was so busy running the business and then had to hire employees to manage workloads. Don't kid yourself that you won't have to consider marketing expenses, accounting fees, bank fees, tax fees, unemployment fees, dealing with the occasional customer that won't pay you. It is an endless cycle that can easily spin out of control.



I too started by working out of my home in the garage/basement. I started in woodworking at the age of 14 and am now 28. I started my shop 4 years ago this January and it has been very rough. You can have all the best machinery, all the best tools, the largest shop, etc, but it doesn't mean crap without a good clientele to support it.

When pricing jobs, don't price yourself out of the market. One way to find out what things cost is to take a drawing you have done, call up a local cabinet maker, fax them the drawing and ask them to price it out for you. (They'll think you are a potential customer.) See what others are charging. I have lost jobs by screwing up the pricing. I guess you can say I get big headed and refuse to use a lesser material to lower costs and get the job. I use top quality materials and hardware. No matter where you are in your pricing, there is always going to be someone who is willing to do it cheaper than you. Most customers don't realize the difference between an A-1 and a B-3. Most customers just want what they want to get out of it and for it to look nice. Most people don't care whether you use dovetail drawers or a nice plywood veneer drawer. Always be very upfront with the customers and let them know what exactly you will be using for hardware, materials, etc. But not the prices! Just let them know the company names, such as Blum hinges, Accuride drawer slides, etc. And educate your client on what exactly they will be investing in. Do not, under any circumstances, give up your drawings to the client, architect, designer, etc. They will take the hard work you've put into your drawings and bring it to someone else to bid out. If they are really adamant on wanting your drawings, they will have you manufacture the job.

Be careful what you say - anything and everything you do is a reflection upon your business.

Learn who your clientele is - you will need to read people's faces and learn the business games or you will get taken advantage of like I did my first year.

Never adjust your prices, only adjust the materials. Re-design the unit to help lower the costs. If a man is willing to go down $10.00, he will go down $20.00. That means, if you lower just your price and don't adjust the unit, they will keep trying to knock down your price. When they knock you down so low, they will ask you "Why didn't you give me this deal to begin with?" Also, whoever speaks first loses - once you give them the price, do not be the first to say something. Let them speak first. If you speak first, it puts the ball in their court.

You'll have a lot of sleepless nights and no money for at least the next 3 years if you do it right and put the money back into your business. I'm at about $65,000 in tools/machinery and I'm now in a 3,500 sq ft shop paying $1,800 a month rent. That doesn't include electric, gas, water, garbage, 3 phones, a dedicated line circuit for my spray booth to be monitored, and the monitoring charge from ADT. All and all it costs me about $3,000 a month to support my shop. It's a big shop, but something I can grow into. If I started out renting a small space, the costs would be even more because of the move. It cost me about $28,000 to move from my house to my shop. I had to buy my spray booth, new table saw, compressor, and other odds and ends that I didn't think of. I wish I had contacted each village to find out what their requirements were for a business like mine. The town will find violations that will require changes be made.

Your landlord will most likely require you to have insurance for the shop. I'm through Country Insurance and I pay about $450.00 year for a million dollar policy. Not all, but some of your clients, will ask you to prove you have insurance. Well, to give you an idea of the hard work that is involved, it's now 2:30 am on Sunday and I'm going back to the shop after a little rest, so I can complete a job for today.



Regarding the comments above, you have no problem acting like a bogus client to get other shops to waste their time and energy preparing a bid so you know what to charge, but you get upset that someone would take your drawing to another shop. Sir, you have an ethical paradox here.

On a business note, pricing your work based on others is poor judgment - you need to know what your costs are in order to accurately price your work.



Why not just be a trim sub? Forget all the headaches of a shop. And when you get good, start a niche business such as balustrades. That's what I did. I'm 27 and very happy and not over-stressed. Plus, what I do can not be automated like building boxes, so I feel a little bit secure.


The comments below were added after this Forum discussion was archived as a Knowledge Base article (add your comment).

Comment from contributor A:
Re: sending out ficticious bids; never do this! Would you like to spend your time pricing what you thought was a honest inquiry for work to be done? A better way to see how others price is to simply ask! Show them photos of your work. Maybe a big shop will reference you to a client they thought too small... In business, it is wise to be upfront and honest with everyone - clients, employees, vendors. This way you limit your sleepless nights. Another benefit is you do not have to be careful what you say. If you are upfront with people they will know where you stand on pricing, quality, materials, etc. I am a general contractor and resieve many "referals" from people I did no work for, because I return phone calls, show up when I say I will (or call if more than 15 minutes late), and am completely honest with potential clients. How do you like to be treated?



Comment from contributor B:
I have been doing side work for years building entertainment centers, etc. while working in the carpenter's union. After 9/11, work started running out and I haven't worked in the union since before Christmas.

I expected this and immediately after my last job started looking for the best places to buy materials for the way I do things, writing a business plan, and getting the word out that I am in business. I bought insurance so that I can sub for cabinet shops that sub out their installations. I figured this would give me some steady cash flow as I built my clientelle. This hasn't worked well because my heart really isn't into installing someone else's cabinets. I am a woodworker. So it has taken a while, my unemployment has run out and I am 10 days from bankrupcy, but I am 1 day from signing my first full kitchen. $18,000 worth. I, too, have sold my quality and done 3 free jobs for my family as show kitchens.

I have 7 bids out there right now that are all coming in at the same time, which will swamp me if I don't schedule correctly, but like others have said, outsource where you can. The area that I outsource is the doors. I can get a high quality product for less money than I can buy materials shipped to my house, with a warranty, and I can put my own finish on them to match the cabinets.

The area that I have stressed about the most in my bidding is pricing. I "acquired" a price list from a salesman at the last shop I worked at and use it as a guide, but many things I change because I just can't justify charging too much, although I realize that the best way to grow your shop and buy more and better tools is to price yourself with the big guy. If you keep your overhead low (working out of a garage), this extra overhead money that gets billed into a job can be for buying more tools. Now, sure, I haven't established my business yet, but it's starting to roll in and I have a history in my side work of getting taken to the cleaners. I just got real tired of that. So now, I do less work for more money and can concentrate on the quality to the nth degree. Someone once told me "no one is going back after you to finish the job." So your quality can't suffer or your business will.

In my quest to bid more in line with industry standards and not miss out on jobs because I overbid, I found the r.s. means book in the reference section of the library. They post every cost and charge imaginable for every line of work, product, or service, averaged out to national or regional standards. I found that the average woodworker in America charges $45 for their shop time and why not? There are a lot of weekend warriors out there, but the pros can do it much, much better.

As far as tools go, I built a table that my table saw (Dewalt 744) fits into perfectly and the height of the outfeed table is the same as the saw. I have a ton of hand power tools, and a miter saw. No planer, no jointer, although I am purchasing a planer with the proceeds from this job. I built myself a router table out of melamine and a frame and manufactured the baseplate out of a piece of 1/4" aluminum my dad had lying around. I use a Campbell Hausfield dh6500 1 quart cup with an air compressor to do my finishing and I get an excellent finish, although there is no substitute for a high quality HVLP, which will also get purchased from the proceeds of my first job.
Keep a very good-looking portfolio. Spend time on it, don't just throw some pictures together.

As others have said, do not go into debt for tools. This creates a downward spiral that you really don't want to be on. My policy from day one has been 50 percent down, 50 percent on delivery. I strayed from this once and got burned. It was the only time I have ever gotten burned. This may seem excessive, but it does a couple of things. It gives you working capital for that job, and if you bid it right, a paycheck of sorts. Also, once someone has 50 percent invested in a project, they are not likely to back out. Make sure to write on the receipt that the down payment is not refundable. What happens if you buy all their materials and then they want their money back? Also, if they give you 50 percent down, that means they trust you. Which is what we all want. To provide a high quality product with impeccable service and treat our clients like kings and queens. Of course, all of this comes at a price.



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