Question
I am a beginning cabinetmaker with a one-man shop and have been looking into outsourcing doors, drawers, and even the whole cabinet system with Conestoga or Waltzcraft. I quickly found out how much labor is involved, especially with doors, using one router table. Dovetails are another labor intensive job using my leigh jig.
My question is, why would a customer buy "custom" cabinets from me if all I'm going to do is order from someplace else? Why wouldn't they just go to Lowe's or some other place? Do I tell them I'm not building them, and if so, what would I say to make both of us feel comfortable and them pay market price? I feel that if I'm able to buy all of this pre-cut/made and even pre-finished, then I could boost my output to more than 1 or 2 kitchens a month. It may cut my profit on each job, but the more I take in will add up with minimal labor involved. I have not looked at prices on a complete job, however. You tell me if I'm right on the profit predicament.
Forum Responses
(Cabinetmaking Forum)
From contributor A:
Realistically, your customers could just go to Lowes or HD and order their own off the shelf units. Many shops order doors and drawers from outside vendors and just build the cabinets, and that's not limited to only small shops.
If you really want to sell outsourced cabinets too, you need to find out exactly what the big home stores do and don't offer and at what cost. You need to be able to articulate to your customer what makes you different, what you can offer that they don't, and those sorts of things.
You need to educate your customer to make the sale. If you cannot put those arguments together in your own mind, then you are unlikely to be successful competing with the big stores in the long run.
Looking back, when we used to make doors, drawer fronts, and drawer boxes, the only thing I think I was accomplishing was making a mess in the shop (that's another advantage - the shop stays much cleaner). I don't think I was making any more money. If someone questions me about outsourcing and still being custom, I ask them what's the difference if one of my employees puts the doors together, or someone from Decorative Specialties? Either way, I am not personally doing it. If anything, the people at Decorative will do a better job because they do it all day long, everyday. If you make your own doors, you are just too limited on door styles to offer, which puts you at a disadvantage in my opinion.
You're too small to compete on price, and you're too small to compete on service. That means you have to market to homeowners on quality and emotion. Building cabinet doors on a router table does not qualify as quality, but it may serve the emotion part of the equation. Especially if they drop by and you're wearing a shop apron while you do it. Outsourcing will cover the quality aspect, but certainly not the emotion aspect. You'll have to decide, perhaps on a client to client basis, which direction you want to go.
I would like to add that there are not many cabinet shops in my area, so competition is limited to big stores and a few other small businesses. You are right - I need to know what big stores offer so I can offer more. I guess their pricing plan would help. If I'm the same price or a little more and offer installation at no added cost, along with the personalization of dealing with one person who does nothing but cabinets, why wouldn't they come to me?
I thought the same thing. What's the difference if I make it or someone else makes it? A door is a door. I think it's just an emotion - that if I make it, then it's special somehow. And that's okay, but I'm trying to make money here.
Based on my rough guessed figures, a 10k dollar kitchen should have no more than 5k in materials including outsourced material. If I could do one of those a month I would be happy. If I could do four of those a month, I would be rich. 20k a month is not bad for a small one man shop! And the only way to do four is to outsource just about everything.
All in all, I guess I need to have my portfolio together and all the selling tools from outsourcing vendors including samples, door designs, colors, etc. I need to offer more than big stores, but with the personalization and expertise of a regular custom cabinet shop.
I do not install - that also dramatically increased my money. I don't even sub out installs. If the contractor can't do it, they or the homeowner are responsible for finding someone who can. Yeah, we've had a few botched jobs, but all in all I would not go back to installing for anything. I also have not lost a single job in 2 years of this no install policy.
Your estimates of 50% in materials holds true for my shop with outsourced doors, crown, and drawer boxes. I couldn't find a box outsourcer who was at a price point I could continue to make money with. I've found it to be expensive to outsource boxes - especially with shipping. Also, my drawer box supplier is now local - shipping costs there also added up very fast.
That 50% is a euro box with 3/4" pre-finished import birch ply, 1/2" Baltic birch dovetail drawer boxes with Tandem slides, furniture grade end panels.
What I've found is that 9 out of 10 customers don't care whether you or your employees make the doors. They just want it to be quality for your price point. Usually I've found when I've encountered the 1 out of the 10, they are the problem customers.
Good luck and stay out of debt. You will be surprised what you can build with $10-12k in tools.
Let me help you understand the difference between a custom shop and a company like Kraftmade. The large company will cut boxcars of materials a shift. They will have many lines that include the same machines... think 14 edgebanders on a floor. They are mass customizers. They have a catalog with many standard sizes, and adjustable fillers. This is semi-custom.
Now, if you were to go to Big Box and ask for 3/4" instead of 1/2" or 3/8" carcasses, or plywood instead of melamine, they would say that it cannot be done, and would shift you to a different line, with features that you may or may not want. If you want fillers that are 1", you are out of luck unless your walls fall in 1" increments. If you want a custom pullout, you will generally find it doesn't exist.
If you find a shop that is willing to work with you, you can have all these things. Some shops want you to buy their products, others will make modifications, and others will produce what you want. But the beauty of outsourcing is that you have expanded your capacity. You have, in essence, the benefit of me and my equipment, and you don't have to worry about big overhead. And, I am sorry to say, having learned this from experience, manual labor cannot compete with automation. There is no way I can cut, machine, and drill a cabinet side as fast and as efficiently as my router. And a small shop cannot compete with shops that are well equipped (CNC router, etc).
If you are going to make it in this trade, you must have access to automation. A new shop trying to compete with an automated, well-established shop will be next to impossible. Outsourcing lends you the benefit of automation without the investment or hassles. Whether these parts are made by your hand or my machine is of little consequence when they are hanging on the wall. What matters is that it is something that you feel proud to put your name on. Is it something that you can stand behind that would be equal or better to what you produce? After all, don't you want to one day be hobnobbing while the guys are building cabinets in the shop to your standards?
Outsourcing allows you to focus on the customer instead of figuring out how to meet your deadline because one of your guys didn't show up, and another one couldn't make a part square to save his life. It is much more important to build your business than to build all of your own parts.
1) How many of you guys that responded do mostly kitchens? It seems like a lot of the focus is on knocking out basic Euro kitchens and maybe not so much on the higher end beaded face frame with all the extra goodies kitchens or custom entertainment centers, or other projects?
2) Contributor M, I wonder if the lower overhead can help a small shop like mine compete with larger shops? I don't have a CNC, but then again I also don't have to pay for one - that's a very large monthly payment. Plus payroll for a guy to program and run it and a guy to load and unload. Obviously it's going to take me significantly longer to produce the same amount, but then again it's just my time that I'm paying for.
Lastly I'll add that what I try to do for my business is sell myself. I try to sell my clients on the notion that they've hired a craftsman to build their product, and that I'm building everything by hand. Then of course I explain how so many other cabinet shops are just re-selling parts from other shops. When they visit the shop I'll show them some unassembled door parts and how they're made and go together. Maybe a dovetailed drawer box or any other thing that they may be interested in.
For some clients it does make a difference, for others not so much. I do feel like it's a worthwhile sales point, I just have to refine it and find the right clients to pitch it to.
When you go to buy a car, will the fact that the manufacturer did not produce many of the parts used to make the vehicle bother you? For me, as long as it is well built, durable, and has the features I want, it is a good choice.
If your foreman Moe, assembler Larry, and helper Curly built a great set of cabinets, and your customer is satisfied, then I think you have done your job. Now if you have my Moe, Larry, and Curly do the same work, I think you have still done your job.
Be careful about knocking others' work. I find that people would much rather hear about how your cabinets are going to fit their needs, instead of what horrors there are in the cabinet industry. If it comes up, you can tell them how you have a close relationship with a larger shop that machines parts to your specification. You have the benefit of hundreds of thousands of dollars of equipment, but you only have to pay for what you use. And then you pass the savings on to the customer. They are not paying for the huge router for the 30 hours you did not use it that month.
As far as banging out euro cabinets, let's keep that in context. We prefer to do frameless because it is an efficient system. Some guys do economy work and choose to use frameless. That is not to say that all frameless is economy grade. We use our equipment to supplement our construction methods. We just bid on a house full of inset cabinets.
And, no offense here, but I would say that the parts we produce, and the cabinets we make, are of a higher quality than what you are doing. I say this only because we are able to maintain higher tolerances more consistently. It is hard to compete with these machines when you are building cabinets. Now if you are doing a one-of-a-kind free-form piece of furniture, that's a different story.
To answer your question about competing with an automated shop, yes, it can help you compete with a larger shop. Don't underestimate your time. You may be willing to work for peanuts, but are customers willing to wait for the guy who works for peanuts? One of the largest time requirements for building cabinets is buying material and machining parts. If you streamline your process so that all you have to do is design, assemble, and install, you have added more credibility to the service side of your business. Frankly, most customers don't want to wait six weeks for cabinets, unless they have a good reason to do so. The big shop will be backlogged because they have the perceived demand. The customer sees that they have the equipment to produce quickly and efficiently, but they just have so many people wanting to buy their cabinets that they cannot keep up with demand. On the other hand, contributor J is cutting each piece separately, carefully inspecting each one, and assembling with all the care and respect deserving of a piece of furniture. If they need furniture quality cabinets, they may consider you. If they don't know about construction methods, quality materials, etc, they probably will choose the large shop.
Contributor J, this is where you can have an advantage. Choosing the right shop, you can have your cake and eat it, too. Outsourcing allows you to have the benefit of industrial equipment, but still allows you to control the process. There are some limitations, but you need to be able to produce as efficiently without the huge overhead. I think it is a great option for smaller shops.
This is exactly the phrasing I was looking for because I just know I'm going to run into tons of potential customers around here who want an explanation as to why I'm outsourcing. It is also hard to see through most customers' eyes because I look much more deeply into quality, construction, finish, and cost to build of an object.
I'm totally with you on smaller shops outsourcing whether they build their own cases or not. That's the easy part as far as I'm concerned, but it's still the time factor. I'd rather wait for that big shipment of parts and materials to come in and start assembling without even starting my saw.
You also say, "It is much more important to build your business than to build all of your own parts." I've arrived at that conclusion as well. It has just been the selling aspect that has held me back. (I'm not a good salesman unless I'm totally honest about everything and hide nothing.) I'm also considered a young man at 28, so proving my points and letting them know how serious I am is another small challenge. I currently have 45k into my business working from a 30 x 40 shop behind my home. So I have to do things different since I have no showroom or fancy office. It's a little inconvenient right now but I'll manage.
Thank you all for your expertise and encouragement.
I have found that if you look at many of the big box guys, you can find a broad range of offerings, ranging from stock/standard to semi-custom, to custom.
I don't agree with the car analogy, as I don't want to be selling a Ford (average car for an average price), and competing and arguably losing to the mass of competition. I want to sell them a one of a kind hand-built car (or at least the notion of one). I want to sell them a product the other guy can't or won't, for slightly more money.
Now there isn't the same market for what I'm trying to do as there is for selling, say, a generic $10k kitchen for example. But I'm hoping there is enough of a market to support my shop as I continue to get my name out. And although I agree many people want their cabinets yesterday, people who appreciate what I'm trying to do are usually much more relaxed about the timeline. It's usually the simpler jobs that I have a harder time schedule-wise.
For example, my last kitchen (plus some other work) was a $50k job that took over 15 weeks to build. The client had seen my work, knew the time line upfront, and never had a complaint. (I also did quite well as far as making money on it.) My current job is building 20' of average white melamine closets within a short time line and barely making a profit on it. I wouldn't have even bid the job last year, but with the slowdown we've had lately...
Also I'm not knocking Euro style or other shops for outsourcing. I do a good amount of Euro myself. The reason I was asking is just out of curiosity to see if there's a difference in attitude between the face frame and the Euro guys. I personally like both styles and used Euro for my own kitchen because it was a better fit for us.
I'm also not opposed to outsourcing - I buy all my hinges and drawer slides which is also outsourcing. We all outsource something in cabinetmaking, it's just a question of how much. I'm trying a different marketing approach by selling the fact that I make them. That doesn't mean they are better than anyone else's, it just means that I'm making them, not Moe or anyone else. On several occasions where time was considered an important factor, I've offered to save time by outsourcing the doors and drawers. I have read here many times that customers just don't care about those things. Well, in every case I offered, the client decided to wait a little longer for me to build them, which is part of what has led me to my current thought process.
I guess what it comes down to is I'm trying to go in the opposite direction than the mainstream cabinetry industry. Where Lean manufacturing is the ultimate goal for most, I'm trying to find that segment of the market, however small it may be, that just doesn't fit into the scheme of Lean. I think the small shop these days has little to no chance competing with bigger shops. As you and others have laid out in your posts, you just can't compete with multi-million dollar plants who are buying materials by the truckload, or even just larger shops with several hundred thousand in equipment. So since there is little logic for me to compete price-wise with them, I needed to choose another avenue. Whether or not it works in the long run, we'll just have to see. In any event I'm certainly not tying to knock the other guys so much as differentiate us, and that's just part of the game.
The major issue I see with pre-finished products from door and drawer companies is poor sanding. They sand the doors to perfection, leaving super sharp edges. They spray and ship. They save themselves money by not breaking all of the edges (very time consuming). The doors are very fragile.
Beyond that, outsourcing is an excellent method of business on small to huge scales.
That's the good part. The bad part is that the way it works around here, if I was the one who had contracted with the customers, I would have the legal exposure for $30K worth of work being satisfactory to those customers in its final form in their houses. If I did only one $10K kitchen a month, doing all the labor myself to maximize my take, I would only have exposure for one third that level.
Back to your system, during your $30K month, all the bills from all your subcontractors still have to be paid on time whether or not you have customer or job problems which hold up the payments to you. It's like the proposition facing shops that have employees: you have to pay the help on schedule even if your jobs aren't doing the same thing for you.
The other problem with your scenario is that when work gets scarce (read that "now!"), and you only get one $10K job a month, it might actually be nice if you yourself got some of the wages you have been outsourcing all along.
This subject comes up quite often on this site, and invariably seems to get settled in favor of outsourcing. There are many advantages to outsourcing, as have been well mentioned here, but it does have its dangers.
I can not make doors for what I can buy them for. Plus for a normal job I save a week of time, an absolute no-brainer. I started out as a firm believer in doing everything, but then I decided I'd actually like to make some money. Here I am 29 years old and own my house, ranch, and shop outright - believe me, I wouldn't be even close without outsourcing.
I also get it that you are basically a shop operation for cabinets. You are like Merrilat or Kraftmaid, but custom (and, of course, smaller). This way you avoid dealing as much with picky final consumers, and probably deal more with contractors or do-it-yourselfers. That's a great model, but around here, all my residential customers seem to want installation in the package price. They want their huge investment to give them the final product done in their homes.
What I don't get is that, since you do your own boxes and finishing without helpers, and do three $10K kitchens a month, how you have any time to sleep? For me, for that much volume of finishing, it would take approximately nine eight-hour days. If you can do all of this, you really deserve the $15K/month pay.
My customers were like that too... at least I thought. I finally started saying, "it's a deal breaker" as far as not installing. What I've found is they think I'm worth doing business with even without offering that. I still do install for one contractor who kept food on the table the first couple of years - heck, I'd do about anything for him, but everybody else is SOL.
Lastly, I want to mention one other thing that allows me to do this. I've found that by offering a top quality cabinet (3/4" pre-finished ply, dovetail Baltic birch drawers, Tandem slides, furniture grade end panels), but offering it at a price point that is what other shops would consider low (at least by those on this site, but maybe not some of the other local small shops), I get about 9 out of 10 bids. I know they will all say I'm leaving money on the table, but I've found the opposite to be true. I don't have to spend all that time selling. It's very time consuming and gas consuming!
Also, I don't go after that "high end" customer, just nice custom homes. Most of our jobs are $10-20k for a whole house of cabinetry. I've done the 60k plus jobs and found I make much more money on the smaller, less detail oriented (read less butt kissing of customers) jobs. Just what I've found works for me.
A typical job looks like this for me:
1 day - sell, design, create cut lists, order materials
1 day - cut job
1 day - band job, misc.
2 days - assemble job
2 days - finish job
1 day - hang drawers, doors, and wrap
1 day - deliver
Obviously, some go faster (5 days) and some go slower (forever!).
50% of my business is semi-custom cabinets and we consistently make more money selling than we do building. That is with a fair amount of outsourcing as well.
You asked if outsourcing could help a small shop like yours. Let me share a current example. A shop came to me with plans, and after making some quick drawings, the nest showed approximately 27 sheets of materials. This will cost approximately $1,000 to cut, drill, and machine all these parts. If a shop had a rate of $50/hr, I doubt that they could go from 27 sheets to machined parts in 20 hours. Outsourcing with a competent shop is a great resource.
It sounds like you are fortunate that you have a customer base that will wait for you to produce all the parts yourself, and will allow you to charge enough to make a reasonable profit. This is certainly a niche that many of us wish for. I call this market the .5%'ers. If you can break into this section, and sustain your business, you are blessed indeed. For the rest of us, we need to find processes that will increase effectiveness without compromising quality.
To all: It seems like there is a discussion on the boundaries of outsourcing, with the extreme of becoming a dealer. This may be a profitable solution for some, but this seems to turn too much control over to others. To me, you have become an installer, not a cabinetmaker. When you become a dealer, you are limited to what the company you rep for has to offer. I realize that you can offer product from more than one manufacturer, but you are still limited. As for me, I want to be more involved in the process, not just flopping out a couple of catalogs and taking orders.
At the same time, I'm a one man shop, and prefer it that way, so I have to find ways of boosting my output and cash flow, which has led me to outsourcing. Making all my own parts is fine, and I know many people who would wait. It does take great skill to perform that way.
I don't have a problem building my own cases - that's the easy part and would save me money. Actually, by the time the doors/drawers/hardware arrives, I could have the cases done and save some money which might be a better way to go. The only problem with that is making sure I'm dead on the measurements for drawers, which have no adjustment. This would also put more spotlight on my business.
