Downsize or Reorganize?

      A busy cabinetmaker is burning out on the fast lane. Should he lay everyone off and fly solo, or try to grow his employees into guys who can manage his company? January 7, 2007

Question
My business has grown pretty rapidly over the last year. I've gone from a one man shop to eight. My salary has also increased, and unfortunately so has my headaches, stress level, and waist line.

The money is great (I was making probably 60K beforehand and probably at 160K now), but I'm beginning to wonder if it is worth it. I figure I can make from 80-100K now as a one man shop as I've increased my square footage (I was so cramped before it really slowed down production). I've upgraded my machinery, and I have better (quality and price) suppliers and vendors.

I'm really thinking it is not worth it. I absolutely hate to let my guys go. They really are good guys and I feel responsible for providing their livelihood now. But I would hold on to them until they found something else and slowly scale back as they found other work.

Am I nuts? Or quitting to early? My wife and I are still young, but in the last couple of years made a move to a very rural community to slow down and raise our children - but have yet to slow down. In fact life has got just crazier and crazier since growing. I guess I am just tired and look forward to the simple days again of running my own small shop. Any advice would be greatly appreciated.

Forum Responses
(Business and Management Forum)
From contributor S:
It's good to see that you are worried about your employees, there are not a lot of bosses out there that still do that. However, the bottom line is you've got to do what is best for you. As an alternative to scaling down your operation, why don't you try delegating some of your responsibilities to your more trusted and capable employees? You could still keep an eye on things, but won't have to actually handle all the details.



From contributor F:
I think all you need to do is take your best employee, teach him a few more important things, and then make him the leading hand and go on a month holiday. If it is still a pain then scale back. You may find however, that they are really great staff and they can do a lot more than you allow them to, and they could take a huge load off of your plate. Give it a go, what have you got to lose.

Some folks may say don't teach them too much otherwise they could become your competitors, but I say if you are going to let them go, they may have to go out and compete with you just to feed their families.



From contributor P:
It sounds like you've been pretty successful financially. What type of business do you have - cabinetry, furniture, millwork? You definitely have to do what's best for you and your family. That's what matters in the end.

I'm glad to hear you're concerned about the future of your employees. Having them continue to work while looking for other employment is a good idea. Hopefully, you have a good relationship with each of them so they don't start stealing tools, supplies, etc. before they leave. It might be a good idea to keep a closer eye on the shop during this time. Working well with them during their transition to other employment will help in the future if you need to hire them back.



From contributor K:
My shop has always been two to three workers. I've been a one man shop for about 5 years now (after 25 years). I make about the same amount of money, maybe a tiny bit less, but it's a struggle. You have to unload all the material yourself, do all the work yourself, delivery by yourself and go back to doing the jobs that you didn't like. But now you will have to do everything, and as you get older even if you’re in good shape the body wears out!

I would say keep your best worker, or the one that will stick around for years and won't quit, and work as a two man shop. One man shops don't work as well as two man shops.



From contributor A:
Exactly what are the headaches, and what causes the stress in your shop? Is it caused by the customers or by the help?


From contributor V:
I have been where you are, and have made it through. I started with myself and in just 2 years have a full time crew of five and a 3 day a week office employee. It got to the point where I was no longer in the shop. I was always on the road or in the show room/office. Then one day it hit me. If I wanted to do "this" I could have stayed where I was and not struck out on my own.

In year five I let all but one person go. That was nearly 20 years ago. It was the best thing I ever did for myself personally and business wise. I made about 1/3 less net but only had one other person and his family to think about. I paid him more, had far less headaches and I was able to get back to what I do best. Now I enjoy my profession and have a life. Keep it small, keep it all and enjoy the freedom of being self-employed.



From the original questioner:
To Contributor A: My employees just can't handle any more responsibility than I'm sending their way (I'm sure trying). They'd be glad to have the extra pay that went along with it, but I guarantee if I went away for a month my business would be bankrupt when I got back. I know many guys think that and just can't let go. I've tried to let go of more than I care to admit and it has never worked and it's been costly. I outsource as much as possible (doors, drawer boxes, millwork, some installs).

I feel like if I could just hire the right one or two guys it would be different - but as many of you know it can be very tough to find them and many of you are in urban areas. My shop is about as rural and remote as you can get. There aren’t many folks to choose from and I'm not knocking my guys. They are good guys but not one could run a foreman type position or a sales position (the two I would need) and I've beat every bush within two counties and have yet to find someone who has the unique skills and talents it takes to do those jobs in shop our size because the jobs are so multifaceted.

I'm also tired of keeping track of so many customers. There is a certain amount of hand holding that goes with any customer and it is just way too much now. I think cash flow is finally okay. It was a little touch and go there for awhile because we are a debt free shop and did not borrow any to grow, but have enough profit built up that cash flow isn't a terribly big issue anymore. Although I find customers seem to be slower and slower in sending checks over the last couple of years.

Maybe I'm just a little burned out. But ultimately, the goal is to slow down and I just can't see it at this size. I feel like I either have to grow or shrink. It is too small to have a project manager, sales manager, etc and too big for me to keep up all the various hats I have to wear.



From contributor W:
I have been through all the same dilemmas, and did get very tired and unhappy. I love building beautiful things but the job had grown to a very stressful point. At this time I am down to myself, a part time helper and a part time office employee to answer the phone, keep the check book balanced, etc. I am trying to decide if I want to grow a little or stay small.

The stress is low, and the jobs go out perfect. Maximum output per month is lower but there are a lot less fingers in the pie. My problem is that the demand for our products is very high. I turn away far more than we do each month. Good luck in choosing your path. We are in the Tampa Bay area of Florida and the work available is incredible. The admin of the business has always been the hardest for me to cover well. Good people are available but you better be able to pay $15 to $25 per hour to get the good ones.



From contributor Z:
I think downsizing a bit could be a pretty good deal for you, at least long enough to give you an opportunity to think about what you are trying to accomplish and how you should do it. You possibly might end up making more money than you are right now. Your standard of living would certainly improve.

The ability to generate and manage enough work for 8 people is quite an accomplishment. You must have a fairly substantial customer base to support this. You have to be doing something right or you would not have this many customers.

You are now in a position to cherry pick from these customers. I'm sure there are some jobs you do that go smoother and make more money than others. You probably use some of the profits from these jobs to subsidize the projects that don't turn out so good.

Just like some of these projects are more productive than others, some of your employees are probably more productive than others. Imagine what life would look like if you could only take on the good jobs and you built these jobs with your best crew. Just watching fewer jobs would allow you to become more efficient on the ones you do take on. Cutting back capacity a little bit might even allow you to raise your prices a bit.

It sounds like you have the ingredients for a pretty good company. You now need to look for somebody to help you manage this company. To attract someone like this you are going to need to make the company attractive. A profitable company that looks easy to manage is attractive. You should slow your company down for a little while and spend some time working on systems to make it easier to run.

As for your crew, they are probably all pretty great guys. I doubt, however, that they spend much time around the dinner table strategizing about your family's welfare. Providing for their livelihood is their responsibility, not yours. Keeping that opportunity alive is their job. You might want to involve your crew in this discussion. Talk with them as a group and talk with them individually. You might have an entrepreneur in your midst. This part is going to be tough.



From contributor F:
You have had all these employees less than one year, yet you are emphatic about their limitations. I suggest you reconsider. I have several employees right now that take on huge responsibilities that I would have said the same thing about in their first year. But now I don't work many hours and we are more profitable than ever. Instead of hiring an outside manager, my best employees are the ones that grew themselves as they worked and simply (and not so simply) lived their lives. They matured. I stood back and let them take their time, while being the best leader I could be. I let them know where they stood, and what some of the opportunities there were.

If you are willing to assert that all of your people are good employees, then try giving them some time to also grow and mature. In case you have trouble believing it, I've got 45 employees, and worked about 10 hours last week. No managers either. Some weeks I really have to bust one and work 20 hours, but not usually. Develop your own ability to develop people.



From the original questioner:
For me and my family, the bottom line is we want to slow down and I want to be around to see my kids grow up (or not be so stressed out when I am around to not enjoy them). My employees are going to have to step-up. I'm not saying they aren't bright enough or don't have the drive - they are loyal and a pretty hard working group but they just haven't done it, no matter how much urging has been done or how many incentives have been offered. For the most part every guy would like to just come to work, put in their time and go home.


From contributor Z:
You've apparently got the assets in place to be a successful smaller company. Your children and family are the most important thing in your life. Do what is best for them. Your (remaining) crew will either rise up or not. You've got your priorities right.


From contributor N:
This might be too simple but try adjusting the schedule to make more time. Put a week off in the schedule every so often. Limit the number of jobs and installs to something that is more workable within the hours you want to be there. It doesn’t solve the employee problem but you could also look outside since you don’t have anyone inside that could do management and take up some of the slack for you.


From contributor J:
I would start cherry-picking my jobs, taking only the most trouble free with the highest profit potential and I would increase my prices until my workload is at the desired level. Try to start narrowing down the type of work you do so that it is all similar requiring less detailing and intervention on your part, making it easier for someone to step up, standardizing if you will.

Some good advice I got once said that if you want something in your life, create a place for it. Create a vacuum that is attractive for a motivated employee to step into. This is where the shop manuals and standardization come in. I would also start thinning my work force one at a time, after one or two you should have someone step forward to accept additional responsibility. The best description I've heard is "hogs feeding at a trough". If there is only room for five hogs to eat then the 5 hungriest hogs get to eat. I did this after a particularly stressful time and increased my bottom line with fewer employees and less volume.

It also sounds a little like some burnout; don't let the burnout make your decisions. Good luck, sounds like you’ve done a great job to get to this point and you have your priorities straight, the last piece of the puzzle is 'balance'.



From contributor L:
It sounds like you have a profitable business that can sustain growth and cash flow. You should seriously consider looking for someone who you are willing to turn the reins over to as a manager of the day to day operations. You will still meet with him and discuss things and sign the checks and maybe you will do selling and drawing or drawing and run the day to day of the shop but you would need to defer to him when it’s in his area of responsibility.

For this to work you need to do what he tells you but he will also need to understand that you will be working 40-45 hours per week and when people call and ask you have them talk to the manager.

If you are going to let go of something try letting go of the day to day responsibilities and keeping some of the profits for the future. Develop a long term plan/goal to sell the business at some point; if you can develop a capable staff that can run the business without you it will make your business much more valuable.



From contributor D:
Back up a bit and take a longer view of the big picture, so to speak. Include your future beyond the next 15 years.

The ultimate goal of any business - if it is truly a business - should be to increase capital and equity. This is very different from a one-man business that is really just a "job" and goes from hand to mouth forever. A self-sufficient business should be of a type and strength to stand alone, and ultimately build enough value to be sold as an ongoing operation.

As a small one or two man shop, you will be the central focus. What happens when you get hit by a bus? Or have serious health issues? Or any other nightmare scenario no one wants to consider? You and your family and your employee will suffer, perhaps terribly so. Very high risk behavior.

However, if you take pains to build a sustainable growth shop, you can train these or others to take the responsibility and continue the day to day, week to week, while you look to the year to year.

Then, a marvelous thing happens. You have a saleable commodity that you can sell to your employees or others, and then retire. This will be a long term benefit of very high value to you and your family and any employees. Far better than shutting down today for the sake of today. While you are correct to seek the correct level of balance in your life, you need to hand off some of your responsibilities.

For instance, you mention outsourcing. To me, this takes me more time than building. I have to determine the exact dimensions of whatever, with all the details, and then package it in the way the seller wants to see it. This is the hardest part of the job! Teach a guy in the shop how to figure this out (write it all down clean and clear as part of your manual), then let him do it. Then, instead of spending your time spelling out details to a supplier, you can just instruct the shop to make maple drawers. Then go to something that is productive. This outsourcing myth is rarely addressed by the sellers, but the time is significant, especially to the small shop.



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