How do other cabinet/millwork companies handle installations and any liability insurance associated with this?
Our main customers are interior designers and homeowners. We focus mainly on custom furniture and cabinetry and mostly do built-in work such as entertainment centers, libraries and the like. Since we donít typically work with builders who may have subs to perform the installations, we are generally stuck doing this ourselves. Also, since the work is entirely custom, the installations are usually non-standard and the workload is irregular. We have had trouble finding a sub that can work from an installation diagram and is willing to do the occupational job for us.
This has lead to many issues for us. First and foremost, we are a small shop with two fulltime owner operators. So when we are out installing a job, we are losing money and falling behind because no work is being done in the shop. Second, we only carry minimal liability coverage, $500k, to keep costs down. Finally, since both interior designers and homeowners expect you as the cabinet company to also perform the installation, we are concerned that if we stop providing installation, we will lose these customers.
How are other small shops handling this? Do you only provide millwork services? Also, what sort of coverage do other small shops carry (500k, 1m, greater)?
(Business and Management Forum)
From contributor J:
I also am a small shop - 1 owner operator with a few part-timers here and there. I don't understand how you are losing money by installing. This should be part of your price. If you are subbing it out, you pay the sub; if you are doing it yourselves, then pay yourselves. I base all my pricing on a shop rate that includes my hourly rate (take-home), overhead, and profit - this doesn't change if I am in the shop working for them or out of the shop working for them.
As far as liability goes, I carry 1 million. It wasn't that much more expensive that 1/2 mil for me. Also, be aware that if you do sub out your installations and your subs do not carry insurance, you will get hit for it at the end of the year when they do your audit.
As far as liability, we used to have a half mil. When we moved, our landlords required a million dollars in liability... Didn't change the premiums that much.
We all know how it goes. You expect an install to take 3 hours. After spending a week shifting days and times around to meet your client's needs, you show up ready to do your install. After 2 hours of driving, you find out that the client does not want you to do any cutting inside. You explain to the client what type of work you are doing and that you have tarps and a shop-vac and will clean up whatever mess you make. Your client still insists that you cut outside. You kindly remind your client that the contract they accepted clearly states that all cutting will be done where the install is taking place. You kindly inform your client that for you to have to walk up and down the stairs for each and every cut would take all day. Your client refuses to allow you to cut inside and calls the designer that contracted you. Now you are getting a call from the designer asking what they can do to resolve this issue. Since this designer has given you a lot of business and can give you a lot more, you want to keep them happy, so you agree to cutting outside and your 3 hour day now takes you 8. Oh, and you're not getting paid for this. At this point you are hoping that this client never calls you again. But sure enough, they are calling you two days later wanting you to come back out and adjust a door that is 1/32 off. Welcome to the life of the small shop owner.
The whole installation just seems to be a can of worms. Especially when the client knows youíre the owner. Then they want to chitchat about all the other projects they want to do. And what do you think about this and what about that. Another hour of wasted time.
The other issue we have doing installations is most installs that we do require two guys, and when you figure in commute times, you basically lose an entire day doing an install. Since we are a two man shop, when we are out installing something for the day, our shop is completely shut down so no work is getting done. This backs up all the other jobs that we are working on.
You add all this up plus the cost of liability insurance and it just seems that performing the installations yourself is a losing proposition. Are there any of you that just do the millwork and tell your clients to find someone else to do the install? How does that work out? How to you tell your clients that you donít do installations?
1 mil in coverage only cost me 1 grand a year.
I understand if I am at a job site, I am not building cabinets in the shop, but I charge for both. I don't care where I make money. Actually, aside from hauling my tools around, I like doing installs as much if not more than building my projects. At least you have work.
At the end of the day you have three obvious choices.
2. Do not install
3. Sub installation
If you are not making money doing #1, then you can try #3. But by the time you are making money on #3, it will have become apparent that you should have done #2 after all.
We all hear your aggravation. We are in the shop because we like the shop more than the job site. We infrequently go to the job site, so it takes awhile to get acclimated to a different flow. It can be worthwhile to hook up with a really good group of installers who do as good a job as yourselves. Do not plan on making money directly off of them. Essentially, pass it on to them along with the headaches. In turn they will refer almost exclusively to your shop.
Personally, I hate to go on installs. We do our best to price accordingly. We are still looking out for that good to better installer.
A cabinetmaker friend doesn't do any installs. He builds boxes with doors (nice ones). His installer is a subcontractor, licensed and insured. The installer asks female customer where the bathroom is, or should he just pick a tree. Needless to say, the cabinetmaker is looking for a new installer. It was just unprofessional and rude.
The custom stuff was burning me out. The little I still do is mostly outsourced. I assemble and finish only. I pay my contractor buddies 10% for any new work and add it to the final price. They sometimes get the install too.
My business insurance covers everything, 1 mil liability and fire for the shop, $125/mo., Toronto.
Find some mid-sized med-high end furniture retailers that are interested in your woodworking shop and work with them as far as pricing goes. Custom cabinet prices do not work for them, but manufacturer's prices do.
Then you will be able to stay in the shop and use the van once a week maybe. You will save $200 a month just on gas. Same old truck will now last forever! And since you're in the shop working all day, the billable hours will pile up.
Besides hand-holding the little install problems, that is the last point at which we have any major contact with the client, unless there is follow-up. That is the final impression the client has of my company. All through the project the client has had close contact with us (usually me).
If I did sub out the install, myself or my business partner (who is the shop and project manager) would have to go out there anyway to do the final look-see and punch list.
If we were slightly larger, we could have two guys on an install and two guys still in the shop working (and we did have that a year ago when we had a bunch of commercial stuff all at the same time).
I might consider having an independent contractor as an installer, as long as one of us was there with him to oversee and hand-hold the client if necessary.
Also, it always takes longer than you think it will because even if the install only takes three hours, it works like this...
1 hr - waiting for helper to show up (late)
1.5 hr - wreck on the interstate
.5 hr - chase the dog down the alley that got out of the open gate
.5 hr - answer a bunch of questions about something another trade did and you don't know anything about
.5 hr - call the GC and try to figure out why the plumber roughed it out wrong
.5 hr - talk to client about the entertainment center that they probably won't build
1 hr - what do you mean you took the battery charger out of the trailer yesterday?
.5 hr - lunch
3 hr - install cabinets
1 hr - traffic
Of course they don't all go like that... Some are worse. You just have to plan and charge for it.
I agree with contributor W about the cost issue differing between the shop and the install. This is kind of what I was talking about when I said you lose money doing installs. Itís more apparent when doing custom work because your profit margin varies greatly. You really donít have a set hourly rate. Yes, you have an hourly rate that you base your pricing on, but on top of this you always have to consider what the market will pay for certain work. Just because you have an hourly rate of, say, $100 per hour to cover your overhead, this does not mean that you are going to bill every job at this rate. This is the minimum that must be covered for your business to stay solvent.
For example, we did two mahogany end tables and an oval coffee table for a client. The material cost was about $600 including finishing supplies, etc. It took us 3 full days to complete this job and we sold the lot for $5500 plus a delivery cost of $150. The client had found very similar pieces at a retail store for about $6500 or so and had asked us to bid this work also. Knowing the retail cost, we are not going to simply bill at our minimum hourly rate which would have only given us about $2400. We are going to bid what the market is willing to pay. So in this case, our hourly rate was about $210.
Using the above example, had we been out doing an install at an hourly rate of $100, we would be losing $110 per hour for these 3 days. Even though you bill installs at your hourly rate, you are really losing money because of the higher profit margin on the shop work.
In most cases, we are hired by a designer. So we donít have any interaction with the client until it's time to do the install. In fact, when working with designers, you even schedule your deliveries and installs through them. You as the cabinetmaker have very little if any direct contact with the actual client.
So when you show up on a job site to do an install, you are technically representing the designer and everything you do to show how professional you and your company is gets reflected back to the designer. You are making the designer look good. You really have to be careful here because if you try and promote you and your company to the client, the designer that hired you may feel you are creating a conflict of interest, even more so if you also do design work as well.
The rule of thumb we follow is when we have been contacted by a client directly, we do everything to promote our business and our professionalism. When we are hired by a designer, we treat the designer as our customer and keep them happy.
The biggest problem with working behind a designer is when it comes time for the client to give a referral to a friend, itís the designer that gets the referral, not the lonely cabinetmaker who showed up one day to do an install.