Well, I am in need of some decisive thinking and outside opinions. I am 65, in fair health and have a pretty easy day with one good man in the shop. Good products, excellent reputation, pretty easy cash flow, sales around 240k a year.
I have two problems. First, my one employee is solid, smart, and very capable of doing the complex work we do. He loves problem solving and the satisfaction of a finished project. The problem is that he has 5 kids, and is always sick with something. He runs about 12% absenteeism. Up to 16% since early December, when he came down with a respiratory ailment.
He now wears a full face mask all day and seems to be headed towards a sensitivity to dust. We have good dust collection. The time off makes it impossible for us to live up to promises I make, and cuts into my ability to make a living by decreasing my income since we are producing at a lower rate. As you know, in a small shop, the owner is the first one to loose. I try to spend half my time in production, the rest is estimating, business stuff, and dealing with an ill family member.
I also am afraid he may just quit on me at anytime. He does not show any real interest in buying the equipment and business to continue things.
Secondly, we are cursed with far too many requests coming in for our work, almost all turning into work. For many years, this would be cause for joy. But you can see how I am just worried that we cannot do the work with the deadlines imposed on us. Our product is high service, and no one else does what we do, so even though people say they will wait, they call all the time, wondering, cajoling, trying to get their work when they want it. Meantime, the date I gave them is pushed back due to problem No 1 above. We also have projects that expand while we are working the original project, sometimes by 10% to 30% or more. This adds to.....
So here I am at the crossroads. Do I summon the energy and drive to grow the shop, find another employee or two, rent space (we now work out of a shop in the backyard)? Or do I change course, let the one guy go, and market small toys or whatever? I want/need to continue working for the activity and such, but can't do what we do now by myself. I had larger shops in the past, and lost it all in the Crash, so I am a bit reluctant to go that path again.
But if I grow, the shop may be worth trying to sell. Or not. I have had one heart attack 16 years ago, and my wife is ill and requires some attention everyday, which may make it hard for me to be away at a shop. Some uncertainty there, and also with the uncertain employee, it is hard to have confidence in anything.
A third option is to try to align myself with another decent small/large shop and do the sales and estimating (the estimating is the one thing no one else can do in this area), might be called a 'job'. But them I am at their mercy. I've been self reliant for 25 years.
Try raising prices a little at a time until the work load becomes more manageable. That way all the work you do will be higher margin. You might find that the ones willing to pay higher prices are also willing to wait. In the end you might do less business in a year, but the stress level will be down and profits will be up. Might be worth a try?
Well, I'm too young to commiserate, but with nearly 20 years in this industry, I can see your conundrum. You left out an important piece to the puzzle. Personally, how financially dependent are you on the outcome of this business? If you are very dependent upon it, then I'd say conjure up the drive to hire at least a helper/apprentice and push some work through the shop. You may be surprised at what you can accomplish with the right set of hands helping you. I would NOT grow the business without a clear sense of direction and purpose; it doesn't seem worth it to grow the overhead in hopes of something that is more attractive to some potential buyer in the future. You've been there, done that already.
Also, it would be a good time to raise your prices a bit...
You should probably try to keep the good parts and augment the weak parts.
Your guy is "... solid, smart....loves problem solving." He has to like what he does to be good at complex work and find satisfaction in completing a job. You could probably leverage these attributes.
Your financial paradigm and home life seem suited to a shop on your property and as you pointed out it was hard to sustain a bigger enterprise in an uncertain economy.
You have far too many requests coming in for your work and you have a very high conversion rate for these customers.
With these data points in mind I would first raise my prices. You might lose some of the business but you'll offset this with higher margins from he work you do keep.
In these circumstances I would build an organization that fits into your existing shop and homelife. I would try to get your current guy to help you break in a new person. The new person can take care of some of the more mundane things and allow you and your good guy to focus on the best parts that are already working.
There are ways to bring new people on board that are more effective than others. Focus on building systems to train people rather than just training people. You'll get more out of your time and money this way.
I'm with Alan. Bump prices, increase lead times, and hire a new guy that you hope can fill the position of your main man.
I feel like Ive been in your identical situation for years. That said, you'd be shocked at how a new guy can motivate an existing guy. My worry for you is that your existing guy tries to claim some exposure factor with your business for disability reasons.
May be best to try to keep him in the fold if only to help get the new guy on track.
If you've got the demand you are somewhat in the drivers seat though its hard for many of us to ever feel like were in that position. The salesman cap has to go on and you've got to be willing to let people wait til you have the capacity for their work. Many on this forum don't believe that scenario exists but I can for sure be one to say it does. Even in a much larger market I had all the customers I wanted who were willing to wait "for me". Not because I'm anything special, or because of prices, it was just that they liked, and felt comfortable, with me. I have that in my current market as well.
The problem with that is in the "selling your business" component. Your business is worthless. Because you are the business. Your business is only worth the auction value of your facility and its machinery and tooling because the next guy likely wont have the "it" factor no matter how much you carry him along with your customer base.
I would say make all the smart adjustments you can to bring in a new guy or two, perhaps step it up in the shop yourself for a period, and be prepared to phase the sick guy out should he need that. You've got to protect yourself.
Better yet perhaps offer him the option to help work with the new guy in an effort to get him into the front office in hopes of getting him out of the need to wear a respirator. Now there is a carrot on a stick
I think you need to prepare for circumstances to change for the worse, and out of the control for those involved. The employee's health is more likely to get worse instead of better. This would make me realize he is most likely not going to take over your business. His responsibility is first to his health and his family.
Your wife's health can take a turn for the worse too. You are at an age where you are more likely to succumb to health issues. Your first responsibility is to your wife and to your health.
I would not consider taking on additional overhead with a relocation of your shop.
I think your best recourse is to dial up prices to lower demand to a point where the business can operate with the equivalent of only one of you full-time. This would allow both of you flexibility to deal with life's issues. I would also see if you can partner with another shop for fulfillment to allow you to the flexibility to dial sales up or down. Estimates are much easier to schedule than fulfillment.
Wishing you the very best in these difficult times.
Have you asked your employee about the situation? Do you have a relationship with your employee where you could ask? I think that is key.
I also think where you are financially is of upmost importance to the decision.
I personally also would not expand people or facility. I'd raise prices a little, promise later dates. If there was anything I could outsource or gain in efficiency I'd do it- and you know there is, there always is a way to pick up 10-15% if you put your head to it and work smarter.
Your sales aren't enough for another man. Your circumstances would make it tough to manage another man.
It sounds like the most important question you first need to answer is where you want to see yourself in the future.
Do you have a future reason to grow the shop? perhaps to sell down the road or pass the business to a family member.
Are you dependent on the current cash flow or would you be ok making small toys and managing everything yourself?
The tricky thing (and probably no 100% right answer) is that you could significantly increase your lead times and handle it how you are currently, but the business may not be there when(if) you are ready to ramp back up. Alternately you could make a strong push to make everyone happy and have business slow in another year.
Personally it sounds like you should figure out where you want to be and work towards that end goal. Each option you laid out takes you on a very different path. Definitely a tough conundrum.
I'm 63 and retired. Selling some artistic woodturning to keep myself busy. Also helping the kids on their homes. Just had our first Grandson added to the family, so will soon start working on his toys. If I had a history with a heart attack in my life, I would have retired sooner! In the shop, we used to describe our lives as only having so many Saturdays left. It was a measure of time, describing how much time we could spend on family and hobbies. I'd suggest you think about how many Saturdays you might have left. The stress of ramping up and handling more employees is NOT going to increase your longevity! Also keep in mind that the last few years of Saturdays aren't going to be worth nearly as much as the ones you had when you were 40.
I agree with the others. Figure on losing the current employee. Hire a helper if you want to continue doing the heavier projects or just go it on your own. Raise prices! Getting old is a bitch, I know, can't do much about it.
1. I try to never put myself in a position where I rely on any one employee.
2. I don't want to hear about employees family issues, and if they have health concerns that are resulting in any form of absenteeism beyond a rare sick day. They are gone. I write them up as soon as it looks like its becoming an issue, and if it happens again. Canned.
3. I am very aggressive about terminating employees. Its rare for an employee to make it more than a few years in my shop.
I make it a point to never rely on any one employee, and I do not play favorites.
Employees are terminated as soon as I can legally fire them "with cause". I don't care if they have one bad day, after years of acceptable performance. I have zero tolerance for anything detrimental to my company.
3. This leads to what some may say is high turnover. However this lets me continuously recruit, and bring in every qualified applicant I can find.
Well, I am 66 and my employees have all been here for 30 years or so. I respect them and I sacrificed heavily during the crash to make sure their families had food on the table. I was from a background as an executive with 156 employees so I have fired a number in my life. I think that causes stress in itself.
I would start looking for someone with the skills you need and a personality to fit your business. Get them hired and start thinking about a relationship where they can earn ownership and eventually take over the shop. It may take some time but if you start planting seeds with your vendors they can come up with a few good candidates. Good luck and hope you find a solution that works for you.
Have you done any work using exotic hardwoods, like Makore or something? The dust from sanding those build up on places near the ceiling and stay there for years, only to come down when the heating system blows it around. Then, employees get respiratory problems that go on for months. Like I did nearly 20 years ago. All that dust needs to be cleaned out of the shop. Long list of trees that make bad dust. http://www.wood-database.com/wood-articles/wood-allergies-and-toxicity/
Great thread, and great advice.
I think I'll act on some of it for myself....
Though, Jake I have to say that you remind me of my brother in law.
He's had "labor problems all his life" while running his business.
And as far as the employees health issues, meet them head on to avoid liability.
Buy him a supplied air respirator tomorrow.
Clean your shop, and make sure you've got 1 micron filtration everywhere, all the time.
It worked really well for us, and as a side benefit customers who walk through the shop looking at pieces are impressed by how clean the place is.
And raise your price.
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