Profitability of a one man shop
With any business, especially a startup, you have to hustle the work. Identify what you can and are willing to do. Do some pricing. Maybe start a little on the low side but not too low. Adjust prices as you go. People will not knock your doors down unless they know you are there and they want what you make. It takes gobs of promotion over several years in a form that makes sense for your area. Talk, talk, talk, and listen even more. Let the newspapers do a startup story about you. Be creative. Read books on ways to promote. Work, eat, drink, sleep your business 24-7 if you wish to be successful.
There has been much said about business plan development, promotion, skills, product offering and machinery needs. "Gobs of promotions *over several years*". Have you asked a CPA (serious accountant) how long it 'could take' to turn a profit? I think I've read that a new business takes about 5 years. Maybe some of the guys who've started lately would like to comment on this aspect. Some turn a profit sooner and some have money in the bank at the end of the month sooner--those are not the same.
Turning a profit and making a living are two different things. Because small shop owners provide the labor, they can put money in their pocket after the materials are paid. It is this reason that there are so many small shops--it seems to keep the money we get for our product low. Because plumbers and electricians are required to be licensed, they can charge more money. As cabinet shops we will never turn a large profit, but we can make a living and like what we do.
I was in your shoes about three months ago. I started out with a few custom jobs for family and friends. I have outgrown my garage and am leasing a small shop in town. I haven't made it out of the red after purchasing my equipment yet. However, I am well on my way. I am far enough into it to truly believe that I will be able to make a comfortable living working with wood. As some of the others have said, keep your records up, promote yourself, and price for reasonable profit. I have cut my own throat a few times already as far as pricing goes. Just take it slow and learn from any mistakes you make along the way.
I started off that way and didn't make a living until I figured out what I made money at and what I didn't. I stopped doing what I didn't. I did very well at making moldings on a shaper that were no longer commercially available. I learned how to hand grind knives quickly and set up with a power feed. There was a good demand for this from all the remodelers. I tried furniture but couldn't make a living at it--too much time trying to figure out what they wanted. It can be done - but it ain't easy!
I did the one-man shop for several years before I hired 1 good man to help out. I found that my costs for just the shop were around $9.00, with nothing for me, if there was work or not. Add another man and they become less, but not half. (This was in a different market than you are in.) You should pay yourself rent and utilities as if you are a landlord when figuring jobs. Doing anything less would be cheating yourself out of the value of your building, etc. Everybody else has to include these costs in their bids; so should you. Don't forget the value of your machines, and most importantly, of your experience. That is a lot more important and has more value than most other things.
You will wear many hats being the owner, janitor, etc. I was around 50 when I started and I wouldn't give up the independence for the world.
Entertainment centers are somewhat of a niche market here. A few contacts with people selling high-end components (electronic) can land some work that can lead to other referrals. People paying big bucks for equipment have a few bucks for cabinets, especially custom. You just need to be not too busy - they want their stuff when the components arrive. Good money here. Fairly simple as well, if you have good people to work with in the electronic component supplier end of the business. They can help with special needs of components, etc. and welcome our expertise as that helps them sell, too.
The first thing I would suggest is getting the book "The E-Myth" by Michael E Gerber. It talks about why most small businesses don't work, and what to do about it. Being able to build furniture, and running a successful furniture building business are two completely different things. You will work, eat, drink, sleep your business 24-7. But if you want a life outside of the business with a paycheck each week, you need to have a plan from the start and not just fumble your way through things like I've been doing for the last six years!
For 13 years I had a partner. We went our separate ways (without hating each other) and I've been on my own for 7 years now. I love it, but I wear every hat that a business calls for and this is very stressful at times.
The best thing I do is buy exceptional quality components to free up my time and turn around time to keep up with all the work that I have. It is either that or buy all the necessary equipment and someone to help. Even if I had a partner again I would still buy components. Anyone can make a box with a door and drawer, but my niche is selling and designing and listening to the customer and giving them what they want. I'm a very good woodworker and when waiting for my components to come, I do specialty work or sneak a small job in.
I am 25 years old now and have run my own shop for 7 years. I worked in a custom shop in high school and left when I graduated. It is very hard to run a business. Stay small and don't grow faster than you want. Customers can run you if you let them. I went from a one-man shop to a 10 man shop and I am now back to just myself. Know your bottom line and profit or you will struggle forever.
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