Making Money as a One-Man Outfit
Here is a brief description of what I do. I mainly do unfinished built-ins for a builder and that usually leads into custom stuff for some of the homeowners. Sometimes the items are small and not very profitable but I do them to keep a good relationship with the builder. There are a few times when it is a somewhat profitable project. I find that I have to price things conservatively so that the builder doesn't pull someone else in to price against me. I have to meet with the homeowners (at the jobsite which is 30 minutes from my shop) to discuss details, come up with sketches, pick up my supplies, build the items, paint or stain them, deliver and install them. I try to do every phase of the project so I can make a reasonable profit but sometimes it is too much. I also do some finished built-ins and an occasional cabinet install for a cabinet company that I used to do installs for.
I work six and a lot of times seven days a week to get things done. I never can seem to catch up. Don't get me wrong I am happy to be busy. I just need to figure out how to run more efficiently. I almost forgot to give a short history of my experience. Fifteen years with a custom cabinet shop, four years after that as a subcontract cabinet installer and have been doing this for about three years on my own.
Once you have some additional sources of work, you can raise your prices to be compensated for all the extra work and time you put in as a business owner. The current GC may be you biggest, but he also needs to know that you have others. At that point he will cease to run over you or threaten to price you out. With three years under your belt, you started business just before the crash and I'd say you are doing pretty well to still be alive in this economy.
I can understand where you are coming from in this. Since I retired five years ago, I work for only one guy. He's a spec builder who happens to have a GC license. This allows some us to work as employees on the job site (installs) and have both insurance and a lack of licensing problems. He offers payment even before it is due. We have a great relationship. I do whole house jobs for him and have made it to the point that I don't even have to bid beforehand. He has admitted that it is the cabinetry in a new (and otherwise vacant house) that sells, and that I won't gouge him on price. He also knows that I continue to work on only a limited hobby basis so I don't need the income. This creates a bit of a balanced relationship that works for both of us. The problem with most one customer situations is that the GC thinks the supplier needs him more than the GC needs the supplier and that leads to a losing proposition for the supplier.
When you have added to your customer base, hire a college kid to do a lot of the gofer work such as pickups, delivery, material runs, etc. It will free you up for added production. A certain amount of the leg work such as bidding, hand holding etc just goes with the territory, and try as we might it is pretty hard to turn this lost time into cash.
From contributor G:
How timely this thread is! I met last week with a small business association for just this issue; their advice was not to wait to grow my business to hire an employee. The consultant advised me to hire a part time employee to free me up to do marketing and other office stuff.
This would in turn allow me to find more potential clients and to diversify other aspects of my operation. “Try it for a few months” is what he said, what do I have to lose - a few grand on salary and insurance? If I can’t afford that how can I afford to stay in business? I also set up appointments with marketing consultants through the small business bureau. I am attempting to reach my target market with only partial success so I’m hoping this helps. Perhaps similar moves could help you. I also wouldn’t rely on only one source of income, it’s just too risky especially in today’s financial climate.
From contributor Z:
There are many advantages to part-timers. They tend to be more flexible (realistic) in their willingness to work different hours. They bring a wider range of work experience to the table. You can bring them in for bucket brigade campaigns as. They tend to be more competitive. You can train them for specific operations until they become specialists. Then you can cross train them.
We have two part timers who work just weekends. Today's economy has decreased the lead times we have available for our projects. Keeping the ball moving an extra eight days each month helps a lot right now. Training part timers is harder but that just helps identify the real weak spot, which is a deficit in training programs. If you can develop a decent way to train (or choreograph) then you will have an advantage in the marketplace because everybody you compete with insists on passing the tribal elder method for passing the baton (inconsistent, sometimes stingy training).
From contributor B:
Once we make each operation and the sequence of things smoothest, for me time management is the key factor of my productivity. Whenever more than 50% of your volume is with one client on a constant basis you become vulnerable and dependent. Until you have more volume or more jobs hiring will pretty much give your pay away to train until you have enough of the right kind of jobs to keep your worker busy. I would be careful not to hire before you have the volume lined up.
From the original questioner:
I have thought about hiring someone part time but I am nervous about them getting hurt on one of the saws or other pieces of equipment. If I hired someone they would probably have little to no experience for the amount of pay I could afford them. As far as adding more sources of work I have been experiencing more of the feast side of construction for some time now. I do know that I don't need to put all of my eggs in one basket but I have a hard time keeping up right now with what I have. I would certainly have to hire someone if I was to spread my eggs around more and I am afraid that we might be headed for leaner months with the holidays and colder weather coming. I do understand that it is very important not to lock myself into one source of work. It is disheartening because I endure these long hours and stress only to look at my books and realize how little I am netting. Contributor E hit the nail on the head with that one.
From contributor B:
I have been there, and sometimes still am. I hated losing bids, so I would price according to what I thought they could afford. I was buried and making little money. I read the advice on here, and more often than not, the answer was to raise your prices. If you raise your prices 10%, then you can afford to lose 10% more of your bids. "Think like a business man, not a woodworker". Remember that line.
A few years ago ('07) I believe, I did 50% of my total sales to a large home builder in my area. I was constantly busy with work for them, but realized the train wreck that I was setting myself up for. So I reached out. I advertised and made time to do projects for other homeowners so my name would get out there. Thank goodness I did because the following year, the train wreck happened. This builder went from 50 some houses in one year, down to 15 the next. My schedule was still full with work from other clients (new clients). My income increased, even though the amount of work I did for this builder had decreased significantly. This year I have done a total of eight orders for this company, and that is going to be it for this year. I avoided the train wreck by taking the advice of others on here. Raise your prices so you can make a fair living, and reach out to other customers. It is ok to lose a bid, and it is ok if the GC wants to put the bid out to some other poor person who will lose trying to do the same thing you are doing.
From contributor Z:
Most entrepreneurs do not have the word failure in their lexicon. There is no such thing as a problem for these people, only opportunities. This type of entrepreneur does not recognize a problem because problems do not exist. As a consequence when the problem shows up they sleep right through it. Eventually they stop dreaming and wake up. Realizing there is a problem they scramble to develop a strategy. This takes a bit of time just to get your head around a game plan. After the new strategy has been decided and implemented it takes a while for the fruits to show up. The problem, however, is that the problem exists for three full cycles of time and by now there is no more time left.
The entrepreneur who employs contingency planning has already defined what constitutes a yellow flag so he is very quick to recognize them when they show up. This same entrepreneur also has a plan worked out for if this yellow flag should pop up. When he sees the first one he goes over to port side and keeps an eye out for the second yellow flag. If that one shows up he is already standing next to the red lever and he knows what he is supposed to do.
From the original questioner:
Again, thanks to all of you for your responses. I will certainly try to take the good advice and put it to use. As I mentioned before, I used to install as a subcontractor. The money was very good. In fact, I made a lot more than I do now with a lot less headache. I could work three long days and make more than I do now putting in seventy plus hours. Show up on jobsite, unbox, install, then call in anything missing and roll on to next job. No contact with anyone but the person at the cabinet company. No shop rent, utilities or trash removal.
I was wondering what you guys consider to be average yearly sales or net profit for a one man operation? What is a good hourly shop rate for southeast region? I have read many posts on here about these topics but after reading so many they all become a blur.
From contributor E:
I agree that you need to know what your expenses are and determine a shop rate. To say that is doesn't matter what other shops in town charge is not relevant and is dead wrong. All this talk of just jack up your rates is totally out of touch with reality of sales. You have to assume right out of the box that the guy down the street is producing a finished product that is equal to yours. Every client expects perfection, and will always try to avoid paying if he feels he isn't getting it. So, if you are both bidding the exact same specs, and the customer expects perfection no matter what, the other guys bid is very important. That sets the price. That is the common denominator. The only way you will get any more money is to build a trust in the customer that you are providing something that the other guy can't: Delivery time, special features that the other guy can't get (hardly the case), or just plain old trust (salesmanship).
If you can't compete with the other local prices and make a profit through better management or efficiency, you won't be in business long. This is why so many shops close. When work gets scarce, price cutting sets in, and in the end the only ones left standing are the best financially managed shops and the most efficient ones. We all pay about the same for materials and labor. We all want a profit. The size of that profit is determined by how well we manage our use of labor and material. The amount of that profit in the end determines whether we remain in business or whether we are satisfied with the returns the business produces.
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