Surviving Tough Times
A Woodweb forum maker says he's ready to throw in the towel, and others describe why they're not — and explain the tactics they've used to hang tough.October 26, 2013
Question
I’m a one man shop (cabinet business) and starting at the end of 2007 I realized I’m beating the same dead horse every day, and I’ve decided to close my doors a few months from now, depending on the election outcome. Is anyone else in the same boat? I’m in California and so far two shops closing out, one at Orange County and the other one at Inland Impair area.
Forum Responses
(Business and Management Forum)
From Contributor V:
I have a slightly different outlook. I figure if I can stay afloat during this challenging time then I can manage to be there, up and running when things rebound a bit. I have diversified so that my income stream is less dependent on a single industry (an advantage as a CAD outsourcer, I do work for machine manufacturing companies, millwork companies, and even some high end show horse breeders), and I also have expanded into documentation control consulting so I am not only reliant on CAD clients, but even with that it is a challenge. So I’m not hanging it up yet, but I really do feel for you. Diversifying means I also can focus on whichever industry I work in if it is the first to start to recover.
From Contributor D:
Six years ago we were doing 1.1 million a year with a new building - full 9,000 square foot shop. Four years ago, it dropped to 20% of the former years; layoffs, downsized like crazy, fought bankruptcy. Two years ago, barely enough to keep one man busy. Scraping and hustling.
Today we’re turning down work, more than the two of us can possibly do. We’re raising prices and getting very choosy – we’re booked (over-booked) until spring of next year (normally no more than eight weeks). I am doing the same thing I have done for 24 years. We’re doing it faster and smarter for sure, but also for more money and on my terms.
From contributor F:
I'm a one man shop and this will be the fourth election since I started my business. What I've realized as a one man shop is it doesn't matter one bit to my business who wins. All that matters is if you can keep yourself busy in your local market. If you’re a bigger shop with a decent amount of employee’s things would be much different. As a one man shop either you make it or you don't, finding a scapegoat isn't going to change that.
I was as slow as I've ever been this summer, and now I'm backed up about a month having turned down several jobs. I'm also raising my prices and getting a bit more picky about what I want to do. I figure either I'm going to be paid for what I do, or I'll find something else to do with my time. I can say that whatever happens with my business over the next year, it'll have little to nothing to do with who wins the election.
From contributor E:
It was almost four years ago today that the world was on the precipice of a complete financial implosion. It's no wonder that your business dropped to 20% of what it was back then. Money stopped being free on that day. The fact that you are raising prices and getting choosy again suggests that things are improving. You are overbooked until next spring for more money and on your own terms. Something had to make your business turn around. What do you think it was? Maybe you don't need to wait to build, expand, hire, borrow, etc. again.
From contributor G:
You started right before the big crash. We cut employees and space and fought hard to keep the doors open. Now we are very busy and getting back to our old pricing and things are looking up. We are booked for the next four months. If you can hang in a little longer you should start to pick up depending on where you are located. I will give up when they throw dirt on me. Our expenses are 35% lower than pre-2008 so things should be much better.
From Contributor D:
To contributor E: I do not think it was any political or economic decision that has helped my business. That is, once the economy settled, people re-discovered me. Obviously, almost everyone is better off today than four years ago. Outside forces had almost nothing to do with this recent success, while they had 100% caused the failure. Success may be premature - talk to me in five years. I am detail oriented, build very high quality in a niche market I created and I deliver what I say I will when I say it will be there.
As a result, I have no desire to grow the way I did before - and that has nothing to do with the political scene. If I do anything, it will be to grow the bottom line only. Keep it small and keep it all I think is one way it is stated (better equipment, better systems, higher prices to control flow, and more money for myself and my employee).
From the original questioner:
According to the responses it looks like I'm one of the few giving up. I meet in weekly bases with suppliers and sales people. Last week I received a fax from a customer showing plans and a proposal done by another cabinet shop. The proposal was over 23K and he told me he will give me the job if I can make it for 15K. If I agree it will be as I'm working at a low hourly rate in my shop. Adding overhead and risk is not worth it to me.
From contributor T:
The numbers you just quoted were exactly what I was working with recently. I made a proposal to produce about 19 cabinet events for $23K. The customer however only had $16K in the budget. My take on the situation was that what was important to them was to get a certain volume of cabinets but still maintain numbers that made their job work. (Remember that they are living in the same environment that we work in. While people expect more cabinets for their money their houses are worth less too.)
Our second proposal changed the cabinets from flush inset dovetail drawer boxes, fully mortised butt hinges, to overlay construction apple ply drawer boxes and concealed European hinges. Rather than try to tell the customer what they ought to want we just focused on what they did want. We had $16K to work with but we sold the job for $15K. We made this concession because it was important for the customer to save money too.
The second part of this equation was how we could save money. Since our construction resources (people plus equipment) is somewhat inelastic the only tool we have to work with is management. If you asked any one of the shops on this forum if they could improve recent margins if they could do the same job over again there's not very many people who would disagree. If you can actually make more money the second time around then this extra money has to come from how you manage your project. If it takes a punch to finally finish a job then a punch list at the beginning will expedite progress.
In the example below I broke the job down to constituent elements and color coded them by complexity. Usually red signifies custom work that will never be repeated. Green is more complex than average but something we do with regularity. Black and white is pedestrian work. We can do black and white work in our sleep. Focus on the things you can affect. You can't change the customer's budget but you can change your costs. You can't change your resources but you can change how you manage those resources.
If the customer is offering you $15K then take it. Spend a half day doing the kind of planning you probably don't do often (not cutlisting but strategizing). The benefits that accrue might not be enough to break you into profit but they may be enough to minimize downside risk. You live to fight another day vs. trying to get a job with one some other cabinet shop that is struggling. That's the first part. Decrease your batch size is the second part. You will lower your costs immediately by decreasing your batch size.
Click here for higher quality, full size image
From contributor K:
I'm in Maine and I had a relatively slow summer after having an incredible spring. There are fewer customers out there that have an unlimited budget. Slow times call for a re-evaluation. Ninety-five percent of my work has traditionally been beaded inset. The last two have been overlay and I have two more coming up. When I quote I now give them two numbers - extreme high-end and extreme low-end. We then play with options to get the number where everyone is happy. Again, I don't come down in price, I decrease options. It is far faster to build plywood drawer boxes then dovetailed drawer boxes for example. Since employing this bidding technique I have lost few jobs and am booked solid until the end of January. Customers used to look at my beaded inset high-end number and say "no way", and go with another overlay kitchen. I was fine with that because they weren't my customer. Not the case these days – need to try to grab them all!
From contributor F:
I'm in Mass and will agree a bit with the concept Contributor T provided. It is a good idea to explore whether the project can be built a different way to affect the overall cost. However my experience has been when a client wants to pay less, they generally just want to pay less. There's not much willingness to give up on quality. They don't want to settle for a Chevy, they want to get the BMW for the Chevy price! So you can certainly go back and explore the idea of building a less expensive product, just make sure everyone is on the same page in regards to what product they're getting.
From contributor G:
We are in AZ and the housing mess hit us as hard as anywhere. Rich people are our customer and they are rich for a reason. They know they have more leverage now and use it. I cut prices when I had to and we fought a lot of nice looking furniture. The landlord took the rent down by 27% and we also cut from 10,000 feet to 7,500 feet. We cut six of our eleven employees and put more work on the ones we kept. We are now lean and mean and ready to finally bank some money. My pricing is back up to pre-cut levels so margins are really strong. The rich are spending again at least here. It has been hard times but I do think we will come out stronger and have fewer competitors so I feel good about the next few years.
From contributor A:
I’m in Sarasota, FL and work has been picking up steadily here, however prices are still low. I bid two jobs recently and lost both because I increased my pricing by a mere 5%. I too am holding on hoping to be still standing at the turning point but I feel that that point is a moving target. Fact of the matter is I don't think business for one man shops will ever be great again. That being said I am sure there are success stories unfolding as we write. Before giving up completely, have you reached out to past client’s with a sales pitch or a referral program approach? I had to close my doors for a while and hated it. Once you are the lead dog you know the scenery never changes.
From Contributor D:
I'm in the middle of the Midwest - conservative and traditional as can be. I have over 40 years as a professional and 24 years as a shop owner. This market was one of the most stable in the US until the banks took over. Now it is flat, but they are starting to spend. I had years and years of 10% to 15% growth as a one man shop. Added employees and grew slowly, and kept the same growth and profits.
If you are floundering, working for nothing, or second guessing every move then it is time to shake it up and do so now! To keep doing the same and hoping for better is, as you know, the definition for insanity. Or is it the reason?
I created my own market. I took a normal thing and upgraded it, customized it, and pushed it to the upper limits. No one here had ever thought they could have items like our product. Even today, the biggest problem is that most folks here are hoping for a Chevy or Ford, and have never driven a Maserati or even a Jaguar, much less thought about it. No one is even thinking along the lines I am. So education is a lot of what I do, but everyone wants what we make - everyone. Most just can't afford it.
Fortunately, most people want what their neighbor has, but just a bit better. So If I get into one place, then the whole area gets infected. I let them know they can have something unique and hand made by real craftsmen that out performs the Big Box items and avoids the internet guessing games.
I really feel for those out there still suffering. I changed everything but my core products and have now turned the corner and this is fun again. You need to re-think what you make and why. You need to shake it up, think out of the box and all those other business-speak phrases you hear. Anyone around me in related business has done the same and also flourished. I’ not saying it’s easy, but it is the only way to stay alive and get back to where it is good to get up in the morning.
From contributor H:
Given the nature of our business we have customers across the US. We have seen a noticeable uptick in both quote requests and orders over the past six months. This has been strong enough to convince me that while things are still tough around the country they are beginning to go in the right direction. I too think all this has little to do with politics, at least the climb back out of the hole. I believe the economy is driven by the housing market. Every new home construction start means more than just a need for building materials. It also creates demand for all the accoutrements that go into a new home such as appliances, furniture etc. All this drives the economy upwards.
As such it is the foreclosure problem that is holding us back. What reasonable person is going to pay $200k to $400k to build an upscale new home when they can buy a similar bank owned property for half that amount? The foreclosure problem is finally beginning to clear a bit and as a result housing starts are up. Unfortunately there is not a uniform rise in fortune across the country. Some areas will undoubtedly recover slower than others and I think we must count ourselves fortunate if our particular area and businesses have begun to feel the recovery.
From contributor U:
Just to offer a different view, we do closet systems and mostly wood shutters, plus other window treatments. We are all working the same customer base and rely on remodels and new homes for work. We are located in Southwest GA, but work in North FL a lot. We have been very busy all year and looking real strong going into the fourth quarter. While I would say I am in a better position to keep operating versus four years ago, I would not say across the board that I am any better off. I would not give the government (either party) any credit, but like many I am doing well because I have trimmed the fat, cut out a lot of normal expenses, working more hours personally, running a leaner business, converted payroll to stay in-house by employing my son, and sadly not hiring any permanent employees in over two years.
