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Expensive industrial space

mack s Member

When did you decide you were profitable enough to move out of the 1,300 square foot underpowered shop without running water and move into a 5,000 square foot space in the industrial zone in your town that costs almost 10% of revenue with all the power you could ever need?

3/11/23       #2: Expensive industrial space ...
james e mcgrew  Member

Website: mcgrewwoodwork.com

When i decided I wanted to be more efficient and make more money 1st shop 300 sq ft 5 moves 35 years current shop 21000 sq ft

3/11/23       #3: Expensive industrial space ...
Dave Edgerton  Member

3 years in a 2 car garage, moved to a 1600 sf shop with single phase 200amp.
We have been in this shop 7 years and in that time left cabinetmaking and completly switched to furniture. Upgraded power to 400 amp 1 phse plus huge phase converter. lots of machines. past 2 years bursting at the seams with machines and product but a shop 2x as big is 4x the rent so it would be a big jump and a month of downtime plus reinvesting in capital improvements. Not quite ready to grow as we are watching noirth american markets change rapildy down.

3/11/23       #4: Expensive industrial space ...

After 15 years of part time working in my basement and having a year of backlog. With all my machinery paid for and that kind of backlog, I could quit a very good day job. Of course my wife had to agree to get a job with benefits at the same time. I could charge more once I had a big shop as it seemed to influence customers that I was legit, and they didn't balk about giving me a downpayment after that move.

3/13/23       #5: Expensive industrial space ...
Tom Gardiner

What are your growth plans? I would not recommend taking on 5000 sq ft if you do not have three or more people working on the floor. It is too much overhead to be sustainable. I have been in a 1500 sq ft shop for 20 plus years and whined to my wife constantly that we needed more space. If we had made the jump to 2500 sq ft it would have doubled our rent costs plus the move and fit up. What I would have gained in efficiency with the extra space would take a long time to cover the costs. I put it off long enough that it no longer makes sense - I only have a few years til retirement.
You must have a plan for what you need the shop space for, what machines, work flow etc.
Will the landlord allow a sublet of half the space that you could rent out with the future possibility of taking over when you grow? I wouldn't recommend sharing space but that is a whole other subject.

3/13/23       #6: Expensive industrial space ...

Hey Mack,

All those answers are spot on, but one last point of view: It's always a leap of faith! Are you ready for the next level of selling and building? I found that we move and the business will come to you. I played it very safe, and sometimes to our detriment. but never regretted our moves.

(happy to say that 20 years in, 800sq me alone, 1000sq 1-2 employee, 2500 3 employee, 3500 5 employees, and FINALLY, we just moved to a building we purchased with 5000 sq ft, 6 employees, and option to expand another 4500 sq ft when needed)

3/13/23       #9: Expensive industrial space ...

I made the move last lear from 1500 to 6000 sq feet .

900.00 a month to 7250.00 a month before utilities and insurance.

Needless to say it was a big jump. Was in the old shop two years learning the CNC,boring machine , bander etc..

I tend to move fast and take big risks. I'm surviving , but it's a lot of work . I have only one employee and me in this space . I need one to two more , but still working on system that are not all the way there yet.

Mozaik,v carve and sketch up for software. Can't afford microvellum yet .

Can do larger jobs , but I work way too much .

Wish it was just a shop on my property so I could slow down for a month if I wanted to.

After this lease I will.

All trucks and machinery are paid for , otherwise Doubt I would have survived.

3/13/23       #10: Expensive industrial space ...
mack s Member

James- do you own the current building?
Dave- Iíve been worried about the market since I got caught holding a lot of debt and having no work in the recession. It was a bad time. I wonít take on any debt but a big lease feels like debt to me too.
Tom- I want to grow, I have 4 employees, 2 of them are good, 1 is currently being coached out, and the last is my son who is young 16 but has grown up in the shop. I actually have a pretty decent supply of good young men who want to work for me.
Ted- I appreciate that and I think youíre right.
Quicktrim- thatís quite an upgrade. I appreciate your commitment to no debt.

3/15/23       #11: Expensive industrial space ...
David Sochar

Website: http://www.acornwoodworks.com

It is like when one hires help first time and decides to not withhold taxes, etc. You get used to it, and then, when you realize the liability you are building and decide to pay the taxes, and it is so hard, so expensive. But then you are on a par with others, legitimately.
But you have to do it. When you have to go out into the marketplace for space, you are then competing with lotsa other companies for space.
I always brought in customers, therefore had to have nice space in a decent area. Made it nice for those of us that spent our lives there also. I tried to use 1,000 s/f per man for shop space.
After the crash, I downsized from 8,000' to 1,000' and two of us in the shop. It was close, but we concentrated on logistics and planning and produced far more dollars per s/f there than anywhere.

3/16/23       #12: Expensive industrial space ...

As someone who is in a similar smaller 2000sq ft space, I'm surprised your able to have as many employees in 1300 sq ft. When I had one person helping there was a lot more organization needed just to fit the projects in the shop have a machine room and leave room to work comfortably. Space has always been a limiting factor for having employees.

I would think its time to move shops just based on the number of people you have.

The deciding factor for me would be your tolerance to risk and depend on having enough money saved to cover the move, electrical, dust collection upgrades etc and still have some money for cash reserve for the business.

I'd be curious to hear what others use for a rule of thumb for costs to upgrade new spaces and how much reserve they would have in you situation.
Its a not hard choice after that requirement is filled in my eyes.

3/18/23       #13: Expensive industrial space ...

Ive always thought 7-8K or more for rent is one hell of a payment, would this money be better used on a commercial mortgage or new building payment... better then sending it to some landlord for eternity, in 20 or 30 years at least you'll have something.

3/19/23       #14: Expensive industrial space ...

One perspective to keep in mind is that in order to qualify for a 7-8 k payment when buying a commercial building you have to have a documented history of profits , and pretty healthy ones , before the bank will allow you to take on such a payment.

The kind of revenue you need to run through your company to do this is in the 2-5 million per year range . It is very difficult to run that kind of volume in a start up shop space ie. 1500 sq ft or such.

This is the reason I lease my space , I am just starting on year two of the large space lease. With the space I was able to ramp up volume to the point where , if I am able to maintain it over the next two years I will be able to qualify for a building of my own . No bank would loan me the money to buy my own building untill I proved a viable business with large enough revenue to make the payments , and I could not physically pass enough work through 1500 sq ft to show that income . Also the first year most new machinery purchases were depreciated so my paper income was low and this first year in the big space didn't help me to show income but it did grow my throughput and capacity.

It's a strategy and a process. Not everyone can go out and buy a building , esp in a major metro market right away , you have to prove yourself first , and that takes time and space .

3/20/23       #15: Expensive industrial space ...

We started in 4,500 sq feet but it was very cost effective although it did not seem it at the time. I always was able to see more business coming and we would get more space before we needed it. I was lucky in that we were taking over additional 4,500 sq ft units in a multi-tenant building so it was easier. If you can't see more business coming I would say take more space when you cannot produce any more in the space you have. In over 20+ years we went from 4,500 to 9,000 to 13,500 to 18,000 to 20,500 and then we bought a 60,000 sq foot building. The building cost less monthly than the 20,500 sq foot rental space. Read that sentence twice, it is important. It is also an appreciating asset that you can depreciate.

There seem to be two types of businesses on this forum. Businesses that want to stay smallish and businesses that want to grow to their full potential.

If you are the stay small guy I would say, be very cautious, controlling expense is very important.

If you are a grow to your full potential person I would say try and buy space when you are ready that you can grow with. Meaning you will continue to grow so buy something you can add on to is important.

Finally, most people on this forum are more of a technical
cabinet maker engineer type person. If the business end makes your head spin, as you grow you can hire a general manager / sales manager type person. Don't fear the growth. The business with the best team wins. Try and surround yourself with a great team. Hopefully they are better than you at the task they are doing. I can honestly say that a 5-person company is harder to run than a 20-person company and a 20-person company is harder to run that a 40-person company. If you are imaging a 40-person company and you are responsible for everything you are responsible for now you would never try and grow. If you do it right, it will not work that way.

Enjoy the journey, it should be fun.

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