So what does it take to be an owner in this business? I have seen it posted many times on this forum - it takes more than technical skills to run a successful shop. I have an opportunity to accept an offer; essentially to be mentored and groomed for buying a business. I have about a dozen years in the trade, so I feel my tech skills are there or can be more developed.
My main concern comes when I evaluate the overall personality type of most shop owners I've known. I am far from the type A personality. Not what you would call a mover and shaker... more the laid back, methodical and calculated sort, with a hint of introversion, quite frankly. Is it a must to be type A in order to run a successful woodshop?
(Business and Management Forum)
From contributor P:
To have a business you must have customers. You have to learn about organizing and control. Controlling a piece of wood is relatively easy; controlling people, not so much. If you treat people like the type A person would, you are not going to have very good control. The thing about employees is, the only thing you have is willingness. Abuse the willingness and you got nothing.
When I say type A, I suppose I'm referring to the hyper, micro-managing, pain in the butt type management style - which leads to a neurotic need for control. I'm not particularly motivated by money, status, etc. When I read about the politics, economics, and corporate tactics for amalgamation and capitol, etc., my eyes involuntarily roll into the back of my head. Bottom line - it bores me silly.
I guess I'm concerned that my aversion to the business of running a business would be a major drawback. But I love what I do and am highly motivated to improve my and my family's situation by planning for longterm.
All that said, owning your own business is totally worth it. As far as the personality type, if a successful business person approached you and you were wise enough to ask the question here, then you are the type. Which type? Whoever is viewing you gets to decide and there is nothing you can do about it. When the shoe is on the other foot, you will change the way you now think of all the bosses you have ever had. I am not saying you will like and respect them suddenly, just that you will see them differently.
The above statement has very little to do with the successful running of a business... In fact, it is the opposite. I'm surprised contributor J said this. Those who serve others find themselves in the best position to experience success, whether they are employee or employer.
One of the running themes on WOODWEB is business. Typically, an employee does what they need to get by to provide for their family (80/20 rule applies here). This does not cut it when you own your business. You take on the role of not only providing for your family, but for your business, which also provides for your employees. This is the opposite of "laid back" or "introverted." You must be proactive in business, and I think it wise that you question your inclinations. There's a reason a high percentage of people striking out on their own fail. Having an aversion to the aspects of running a business is a huge red flag, and you are right to question it.
Someone working for someone else often has a real misconception of how a business runs, what it takes to keep it running, from a capital, sales and management position. Lots of times, they look at their employer, have an idea of what they charge for their project, and in most cases, falsely believe that they could easily make money charging that.
They don't understand the costs of marketing, sales, taxes, payroll, COGS, insurance, overhead, schedule over-runs, etc. that a business must deal with, and this is all on top of what you need to manage without even taking into consideration the actual project itself.
Capital Reserves are a very important aspect of owning a business. To get it, you need profit. A lot of guys just starting out think that profit is what their pay comes from. It is not.
If you are truly the methodical and calculated sort, you are best served (and your family, employees and customers) by having a much better understanding of what you are getting ready to embark upon. I could be totally off base, but the impression I get from your initial post is that you have someone who is trying to sell you a business, you have some cash you can invest, and they will mentor you on getting started.
Your 12 years of technical skills have very little to do with the operation of a business. To open your eyes to the reality of running a business, I would suggest you put together a detailed business plan. If you don't know how, contact your local S.C.O.R.E. rep. This is one of those things that will make your eyes roll back into your head if you have an aversion to the business aspect, but without a business plan, it is almost a guarantee you will be robbing Peter to pay Paul within a very short period.
This process will open your eyes to the deep reality that is running a business, and it all hinges on and is supported by your ability to bring in business. How do you plan on doing this logistically and financially? It takes more than an ad campaign, and your business plan will put all this into focus.
I don't ever discourage someone from striking out on their own, but you have to be ready to go from passive participant to proactive leader. One thing that encourages me is that you have the wisdom to ask and question yourself before jumping in.
Because of a knee injury, I became an unlikely kitchen designer and loved it until the economy moved me back into cabinet installation. But I never would have thought I would like it. Point is, opportunities like this are few. Don't write it off based on what you think it will be like; at least pursue some training with the owner.
One caution to pass on: I was once asked to be the youngest partner with 2 other established shop owners in a new venture. A wise friend pointed out that as he saw it, the one partner was looking for a place to invest and make more money, the other was older and looking to slide into retirement easily, and I was the one to make it all work. Well, we all ended up going our separate ways. Just make sure this is a good investment for you and not a good deal for the current owner. Also remember, most small businesses are only worth the price of buildings and tools. Don't overpay for perceived market value beyond that. And finally remember, everything carries some risk. You never can know for certain that everything will turn out okay. Do your research, ask trusted friends, and get your wife's input to make the decision.
So if you don't think you can be a micro-manager or you don't want to put yourself and your family before your employees or customers, and if you don't want to get out of bed at 3 a.m. to bail out one of your employees or pay their mortgage for them, etc., or maybe even remove a job or 2 and refund the client because it is the right thing for you to do... Then you should rethink the whole thing.
Mentor? Maybe... Get the whole picture.
Be a jerk or selfish? No - that's the last thing. But you need to make sure everyone understands they are there for producing a product, and fast. Make damn sure they understand to put things back where they go. You will lose more money on disorganization than anything.
Learn to buy in bulk and keep control of the inventory, teach (or lead), no wasting of time or materials.
If you are one of the few that actually gets to the point where you can pay yourself more as an owner than you are making as an employee, you still have to think about the 10+ years it will take to get you to that point. Compare that to what you could make by investing the cash you would be spending buying the business, all while keeping the steady income you are receiving at your current job. You might think it is better to hold out for the better pay as an owner, but even with a small return compounded every year you might be better off just investing that cash in real estate or something other than starting a woodworking business.
Take into consideration as well that wages for the top 10% in our industry have been stagnant for the last 30 years. This is generally not because owners are trying to rip off their most experienced employees, it is because they are having a hard time squeezing out a profit. Oh yeah, and remember too: no overtime pay for owners, not that you will ever need to work over 40 hours/week.
Twenty five years ago when I started in this trade a guy came to our small shop from France. He was better trained and more competent than the rest of us. Seven years later the company went under and we both struck out on separate independent paths. He built a solid small business founded on a few key relationships with architects doing both residential and commercial work. His capability and standards were very high. He’s never spent a penny on advertising and still doesn’t have a website. He owns all his equipment and building. He’s now a US citizen with a family and two teenage sons, and provides the sole income for his family. But he’s a Type-A workaholic and has worked every Saturday and many Sundays all along in order to achieve that. And he’s taken a few hard knocks from the commercial market.
In contrast, I bounced around a little, moved to a publishing job, then ten years ago back to a self-employed woodworker. I do a limited range of residential only, struggle to get customers (especially of late), spend a lot on various advertising, and earn way less than my good friend—not nearly enough to be the sole support of my family. Two small shops, two very different experiences. Similarities include starting slow, staying fairly small, avoiding debt, and maintaining resourceful relationships with fellow shops. In some ways you choose your path; in other ways the path chooses you.
That said, your only value is in your ability to manage a group of people used to doing it their own way. You must be there before everyone arrives and be the last one to turn off the lights for the first five years. If you are a great cabinetmaker, spend 2 months in the shop and immediately replace yourself. It is a position you can do easily with your background, so you can jump in whenever the foreman needs your help.
Here is your test to see if you can be an owner - at least an involved owner, not one that leaves the business parts to those "other people."
Spend most of your time in the estimating department. See if you can figure out how to take off a difficult project.
Once you have accomplished that, do not consider purchasing the business until you have gone out and personally sold a small to mid-size project with at least a minimum profit. Try to make it a quick turnaround project. Follow the costing closely. Drafting, purchasing, fabrication. Don't help build it because that will skew the data. You can offer suggestions but not workmanship.
Were you over your head in estimating? Did the drafters ask you questions you couldn't answer? That's okay. Were you able to find your answer through a vendor or on the shop floor? Do not ask the former owner - he won't be there.
Did the sale make you feel exhilarated? Did you feel like a fish out of water and find that the client was annoying, asked too many questions, and you were irritable thinking they should just purchase it already?
You sit with purchasing as an observer. Did you sense they were aggressively looking for the best deal? Or did they only make one call to a fishing buddy who counts on the business through a relationship rather than rock and roll pricing? Uh-oh. The purchasing agent was the selling owner. Okay - no worries. Pick two items on the purchasing list and try to find them at a 20% savings. Screws and wood glue are okay, but try to find a lower lumber or plywood number. Negotiate the price yourself. Take out the frustrations of your lengthy sales process on your potential vendors. This time you are the client. Make them earn your business.
Quick overview with the shop, then it is off to accounting. Prepare the invoice, ask for and pick up the deposits yourself.
Attend the installation. Try to upsell into another area on the project while on site. Don't know how? Bring an interior designer with you to give you some talking points. A call to a local Art Institute and $50 should get you a senior student for the afternoon.
Do any of the above sound like it would ruin your day? If there is no way you are going to do it, or if these things sound like someone else's job, you are not ready to own your own business.
As a 17 year millwork shop owner that started with 4 people and now has over 100, trust me when I tell you that this will be your new day. You must be able to run your business. Oh and by the way, there is no 40 hour 5 day work week for owners. We work 6 days averaging 60 to 70 hours a week.
Now if you love what you do and find excitement and challenge in running your business, you will surprise yourself when you look down at your watch and see it is 7 pm and you're taking an estimate home for the weekend. After all, the saying "love what you do and you will never work another day in your life" is true.
There will always be one aspect of the business that you will not be great at performing and you should make sure you have a great person there. For me it's AutoCAD drafting. However, you should be able to perform most of your business functions to step in, should someone leave or be terminated.
That said, I wouldn't trade it for anything and it's great going to work every day knowing that I am a manufacturer in the United States successfully competing against Ikea and China. My team counts on me to create a business model that provides a livelihood for their families.