Whether to Go Out of Business

      Facing slow times and scary financials, a cabinetmaker seeks advice on whether to call it quits — and if not, how to turn things around. July 27, 2008

Question
Work has been very slow. My partner got a job and comes in on evenings and weekends. It's only me left in a shop full of tools - CNC router, CNC dowel drill, edgebander, case clamp, spray booth, saws, software, and on and on. Lots of overhead.

There is still hope. We have a job that will start in 3-4 weeks. With that down payment, things will float again, but if it doesn't start soon enough, we'll have to shut the doors. So the million dollar question is, is this worth it? How far can money be stretched? Suppliers and banks are barking at me and I don't know what to tell them anymore.

For you guys that made it through hard times, I know it doesn't get easy, but does it get any better? And for the guys who pulled the plug and found a job, do you have any regrets?

Forum Responses
(Business and Management Forum)
From contributor J:
What are you doing with your time if you have no work and no employees to manage? Are you marketing or cold calling? Where are you located? With a CNC router sitting idle, I imagine you are losing a lot of sleep. What products do you make? With that information, maybe we can help you.

Only you can answer your question about whether it's worth it or not. I think what you are really asking is whether or not you can make a living at this. This is the slow time for many shops. Likewise, contrary to what the media says, we are headed into a recession big time. I have no idea what your debt situation is, but it sounds as if your cash flow is nonexistent. That means that you are going to have a hard time digging out. But as the saying goes, anything worth having is worth working for.

I have been in both situations. Like many others, we've had great times and we've had bad times. The bad times lasted longer than I would have wanted, but they did go away and left with me a valuable lesson.



From contributor X:
Knowing your rough location, size of the community you're serving, and how much competition you have would help regarding advice. A community of 3,000 with another 3,000 close by means a different approach than 500,000.


From contributor D:
Who are your customers? Are you selling direct to homeowners, or are your customers primarily other cabinetmakers? I would think with the setup you mentioned that you would target other small shops. Those guys would be repeat customers as opposed to a homeowner who buys a kitchen from you and is never heard from them again. Does your CNC manufacturer have any sort of production sharing network setup such as Thermwood does that you might be able to list your services on? You might also want to post a message about milling services on the forum for the software that you use. I've got a pretty complete shop to do most tasks, but whenever I have a complicated job, I outsource it to a CNC shop that runs the eCabs software that I use.


From contributor T:
With the economy slowing down and the housing market in a slump, you have two primary choices lying in front of you. The first is to sell your pants off! Be aggressive! Get out there in front of everybody! Generate some new business and new sales leads. Do this today. In this approach, you should be honest with the vendors you owe money to. Let them know that times are slow and you need their help. In most cases, they will want to work with you, rather than risk losing everything that they have going. But realize that they may change your credit with them to cash only. This would be fair.

The second choice is to give up. I seldom recommend this option, but this is up to you. You need to weigh out the plus and minus of having your own business. You also need to admit your strengths and weaknesses. Then decide if you can make it all happen.



From contributor O:
Where are you located? Are you willing to hit the road? There are areas in the country where the demand for custom cabinets is still strong, or at least there still is a market out there. One local shop got a very decent job in a high end resort town 500 miles away. Ski resort towns are still growing (as the very rich still have money!). Last year a guy posted that he had work in Idaho, which was four states away from his shop. Shipping out of state isn't that much fun, but it could be one way of bringing in new business.


From the original questioner:
Yes, I have trouble sleeping. For the last two months I've been an insomniac. Can't sleep all night and have trouble waking up. I start in the morning thinking of what to tell creditors first, then call previous customers and contacts shaking the tree, stop at shops to see if I can get any work out of them, take creditors' calls or call them, work on product development and so on.

Our main product is frameless cabinets, but if it's out of wood, I'll take a shot at it. We deal with both contractors and homeowners. We are in Northern CA. We're an hour away from San Francisco, but still having trouble finding customers. I tell the customers up front that we are not going to be the cheapest because there are shops around selling for less than our cost and lots of people buy based on price only.



From contributor M:
You might not want to tell someone you're not the cheapest, because that right there tells them you don't want their business. Let's face it, everyone wants everything for as cheap as possible, and why would they stop at you when you're telling them they can find it cheaper.

I struggled for a long time and finally pulled the plug after going in debt several thousand to my landlord. I wanted to keep going and didn't want to lose my pride by giving up, but it seemed the only reasonable thing to do since I wasn't getting any jobs, not even prospective jobs. It was either busy as heck or dead as a door nail.

Do I regret it? Yeah, in some ways I do, but when I'm able to pay my bills each month and have money left over to enjoy myself, that's the part I don't regret. I severely miss my freedom, but at what cost? Being in debt for the rest of my life and ruining my credit that takes at least 7 years to fix? No thanks! I make more money working for someone than I ever did being a one-person business, after all of the bills were paid and machines purchased.

For almost the past 3 years, I worked for one company as a cabinetmaker for a year and then switched gears and now work as a full-time draftsman utilizing Cabinet Vision and AutoCAD.

I think out of anything, you'll miss the freedom the most, but the sleepless nights will diminish and you'll start to enjoy life. I do things on the side and let people know that it will take me a lot longer because it's part-time. Most people don't mind because once again, it's cheaper! Don't be too hard on yourself, because others have been there.



From contributor O:
The job this shop got is in Tahoe. Have you tried that area? I was talking with a friend that is a salesman for a large millworks and he says that builders that order moulding from them next ask, "Where can we get custom doors?" The next question is, "Where can we get custom cabinets?" Parts of Idaho are booming also.


From contributor H:
I've been there a few times. I can't say that I've quit yet because I'm still in, even though I have changed locations and restarted several times. I've been doing it about 15 years and I look forward to this year after being in and out of it for the past five. I have done a few things recently that made a tremendous difference, and I recommend the following four things to anyone in this situation:

(1-3) Read these easy, fast books:
The Dip (Seth Godin)
Purple Cow (Seth Godin)
The Traveler's Gift (Andy Andrews)

(4) Get this movie ASAP:
Facing the Giants

I read lots of books and these are at the top of the list when I need some answers. I think you will be able to find a creative way to get the CNC utilized and get the shop running strong again. You could read all the books and the movie in about four days and I think it will give you the oxygen you're looking for.



From contributor K:
Another good easy read is the E-myth Revisited by M. Gerber. I just finished it and it makes a lot of sense about how to look at the business as a system and not a job.


From contributor P:
Figure out what the intentions of your shop really are. Take a look at the statistics of your company (income, production volume, growth, etc.). Decide whether it is worth your time. Look at your own intentions. Take a look at your own statistics. Decide whether it is time to stay or go. Tell all involved what your decision is, either way. Whatever you decide to do, play for blood.


From contributor A:
The sad part of this business is that many shops are started by talented cabinetmakers instead of talented businessmen. Most have to learn the hard way that marketing is an expense that cannot be ignored any more than utilities or equipment maintenance. Staying in business means doing the marketing before buying all the fancy toys. Now with the cart before the horse, all that is left is working with creditors until you earn enough to start marketing. The down side is the product life of cabinets. What would it be, ten, fifteen years or more? They say an excellent marketing program kicks in at around 20% of the product life cycle. We all eat three times a day, so when opening a restaurant or grocery store, marketing pays off quick. A cabinet shop, well, not so much. Still, it is possible if you are tough enough. We went five months once, after 9-11, without a major job. Liked to went under. Used the free time to build showroom cabinets so when things turned, we were in a better position to rebound.


From contributor P:
I think that is why we have the roller coaster on sales. Get slow, promote, get business, get the work done, don't have any new work because no one was selling. I think you have to have one person on sales and one person on production all the time.


From contributor V:
I've been told by a few old timers that's why we charge so much... to cover the 3-6 month stretches without work. I have one foot out the door myself. It's easier to get a "real" job and do side jobs with no stress to subsidize the lower income... go back to enjoying woodworking (positive side).

Our service is a luxury good in most cases, not a plumber or HVAC guy. When this economy tanks, people will hold back, and the ones that don’t will smell blood and want a bargain. I already see it. There was a similar (self created) banking crisis indigenous to RI back in the early 90’s and it wiped out my uncle... 50 years in business. Every time I decide to throw in the towel, the phone rings with another job, but not lately. I hope it rings for you and you prevail through your situation if this is truly your passion. I know a guy that makes 90k working at a battery factory, and he has the IQ of a first grader. The hardest part about his job is getting to work on time. It really makes me wonder how we fit in.

I came across a nice woodworker (new) last month picking lumber. Started chatting and he was telling me how he just finished a 4’ 2” thick maple built-in bar with cabinets, and also a matching 8’ entertainment center finish grade... $2800 for all. He is retired and thought it was great he charged that much. He described the process he used and his work sounded very, very good. I guess my point is that this may be a better business to retire to than retire from.



From contributor B:
I have made a few assumptions. Correct me if I am wrong. The business was started in the last 3 years or less or you recently made the push to grow a great deal. You poured a lot of your money into the business and financed or leased most of the major equipment. A risk like this can be respected, but now you realize that this approach may not have been prudent. You and your partner bit off more than you could chew and now you are stuck between a rock and a hard place.

I think if I were in your shoes, I would call a lawyer, throw in the towel, and get a job working for someone else. Then after a little time for reflection and licking my wounds, I would first determine if being in business is the right thing for me. Then if I believed that I would still like to be in business, I would take some night courses in business management, marketing and accounting, do a ton of reading, develop a sound business plan, and get a business advisor from SCORE. After learning how to be a businessman, I would make another approach at starting a business. The second time around I would start small, keep overhead low, learn how to market, learn how to run a business, gain a feel of cash flow, develop a customer base, develop systems for working efficiently in the shop and in the office, etc.

There is nothing wrong with starting a business and then cutting your losses when it is not working out. In fact I think you need to fail at least once to really be successful.



From contributor L:
The slowdown post 9-11 is what kicked us into marketing. We usually have a month every year when we are slow, and some slow time is needed for maintenance and adding new machinery. This year, about three weeks at the start of summer was dead. Other than that, we haven't had the roller coaster ride in years.

We spend more on advertising and marketing than we take home each year, so you won't find a twenty thousand dollar SUV in the driveway, but since starting to treat advertising as a business expense that must be paid each month like the lease payment, we don't have to ride that roller coaster.

We made #36 on the Wood 100 two years ago, #20 or #16 this year (I need to look it up again, as I forget which), so our growth has been very steady. Advertising is a tool, no different than the panel saw. And when you need a tool, you are already paying for it, no?



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