Good Organization and ‘Watching the Numbers’ Fuel Montana Shop’s Success
Dovetail Designs built its business by doing excellent work, but became more profitable with better organization and keeping a close watch on its financial reports.
By Helen Kuhl
Like many custom woodworkers, Mark Sevier wanted to focus on high-end furniture when he started his own business. But he says he quickly learned that it was more profitable to build whatever customers wanted to buy, so he kept “his ears open and his mouth shut” to figure out what they needed, and then gave it to them.
Sevier’s “listening skills” have paid off. Since Dovetail Designs was founded in Billings, MT, in 1979, the company has grown from annual sales of about $15,000 that first year to $1.16 million in 2000. Its portfolio bulges with examples of high-end work ranging from kitchen cabinets to commercial projects to a “once-in-a-lifetime job” — renovation of the State Capitol building in Helena, MT — with some custom furniture in the mix, too.
The common thread in all Dovetail Design’s work is that it is high-end. Pretty much since starting in his 400-square-foot garage, Sevier has worked with architects and designers who brought him upper-scale projects, and the company gained a reputation as one of only two shops in town that can handle the top jobs.
“My company does not do middle-of-the-road work well. We don’t make a profit on it — we actually do it too well for the average person to afford,” Sevier says. “I believe in craftsmanship and producing a product that has lasting value. And I am extremely grateful that there are people with the taste and the desire to pay for our work.”
Although Sevier has enjoyed steady success and growth, there was a point about four years ago at which he realized that rapid growth was actually causing him to struggle and he needed to make some adjustments. “We had years of growing 15 to 20 percent, but if you are only making a 1 or 2 percent margin on that, it’s not enough to cover the costs of your growth. I didn’t have the finances to fund that rapid expansion,” he says.
Sevier brought in a business consultant to advise him, who also helped him get a $150,000 loan from the Small Business Administration. The money covered expenses for new equipment, new employees, training and increased cash flow.
“The consultant said that when we got our sales up to the $1 million mark, if we did everything right we should be able to show a profit of $65,000, on top of my salary,” Sevier says. “Right now, we have almost a 10 percent margin, so we have done that.
“My attitude about salary has always been that I pay myself at the same time that I pay everybody else,” he adds. “If you don’t do that, you aren’t treating your own family right. I made a pledge to my wife that I wouldn’t miss a paycheck, and I haven’t.”
What has helped Dovetail Designs succeed the most is organization, Sevier says. When he brought in the business consultant, he also began to generate job costing reports and profit-and-loss statements using Quick Books Pro, and he checks them regularly. In this way, he knows exactly where he is on a weekly basis, and he makes day-to-day decisions based on that knowledge.
“One of the most difficult things for people in our industry to do is to stop and look at a profit & loss, or do a job cost. As a result, they are always flying by the seat of their pants. Until you do an honest appraisal of where you are, you are flying blind,” he says. “Every Monday morning after the payroll checks are written, I get job costing reports for every job, as well as a report on open invoices showing how much money we owe and how much money people owe us. I’ll only spend maybe 20 or 30 minutes looking at them, but I’ll be able to see if something is going crazy.
“These reports help me make decisions, because I never want to cheapen a job, but I also want to make money,” he adds. “Jobs are fluid. If we are trying to decide whether to add a bit of moulding to a job, if it looks good and I’ve got the money to do it, I’ll do it. But if I don’t have the money, I’m not going to give away something that I’m not getting paid for. I know what I can afford to do by knowing my numbers.”
Sevier is equally careful about creating good paperwork throughout the bidding, contract and approval processes. “Good paper means a good job,” he says. “If you come to agreement with the customer on paper — in the shop drawings, bidding, budgets and change orders — then the rest of it can follow. If your paper is bad, you are in trouble.”
That focus on organization extends into the shop as well as the office. Sevier credits his office manager, Dan Hugelen, for doing an excellent job preparing cutlists and paperwork for the shop, so that employees do not have to waste their time figuring projects out.
Keeping up with new technology in the shop also is important to Sevier. In contrast to the SBA loan, which he calls “reactive borrowing,” he says that he is in favor of “proactive borrowing” to acquire new equipment that helps the business expand.
The State Capitol job, which was just completed in December, is a good example of a proactive borrowing situation, Sevier says. Because the project involved a huge amount of mouldings and doors, Dovetail Designs tooled up by buying a new Profimat 23 moulder and a Rondamat 925 grinder from Weinig and set up a separate door center, including a shop-built door clamp with a 48-ton press that can do 12 doors at a time, a 16-foot JLT clamp rack that allows the shop to scarf 16-foot lengths for mouldings, and two Powermatic shapers placed back-to-back, with a tremendous investment in Freeborn cutters. The new equipment pretty much paid for itself with the one job, Sevier says.
In addition, with the new grinder, moulder and clamp rack, the company has developed a mouldings catalog, emphasizing its capabilities at doing historical reproductions, thanks to its experience with the State Capitol. Mouldings have become a good profit center, Sevier says. “When the moulder is running, it’s the sound of money.”
To help him in his proactive spending, Sevier has a line of credit with his bank (currently $200,000) to obtain working capital for large projects. “I can borrow up to 70 percent of a contract. When the progress payments come in, I’m paying back 78 percent of them to the bank,” he says. “I’m constantly paying back and catching up. To learn the discipline of managing your cash is a wonderful thing.”
Other recent purchases are a mortiser from Laguna Tools, (“everything we do is mortise and tenons,” Sevier says), a used Diehl straight line ripsaw and a Rout-R-Lift from Jessem Tool Co. Other shop equipment includes an Uno widebelt sander and SI16 sliding table saw from SCMI, a Vacuum Pressing Systems bag press, a Delta Unisaw, a Holz-Her 1619 line boring machine, and a hydraulic hot press, veneer trimmer and downdraft dust table — all shop-made.
Sevier also highly values his skilled workers. There are 14 employees, including five journeymen, in the 12,000-square-foot shop. He says that his company is at the right size for the moment, with one manager for every five employees, and adds that shop foreman Mark Davies, who manages all production, is a critical part of Dovetail Design’s success.
Sevier says that the “secret” to retaining high-quality employees is to pay them well and treat them well. “In our mission statement, our first goal is to provide a superior product for good value for our customers,” he says. “Our second goal is to provide a healthy workplace where the individual can achieve his maximum potential. And that means integrating family and personal needs with work.”
Dovetail Designs’ employees have built-in flex time. Employees normally work 4-1/2 nine-hour days, with each worker expected to put in 40 hours a week. If someone has to take off during regular hours, they can make up the time on Friday afternoons or Saturdays. The company has a health plan, a pension plan and profit sharing, which begin immediately upon hiring.
“Our profit sharing agreement is worth talking about,” Sevier says. “Each quarter, 15 percent of the profit is split among the crew as a percentage of their wages. For example, if my foreman’s wage is 8 percent of the entire payroll, he gets 8 percent of that 15 percent profit. We split $19,000 over the first three quarters of 2000. It was about a week’s worth of wages.
“Profit sharing is the cheapest form of compensation that you can give your employees,” he adds, “because you only pay it when it’s there. I started profit sharing four years ago when I didn’t have any profits to share, and sometimes it was just a $50 bill. But it is a statement by the management that says, ‘Profits are important to me and I want them to be important to you. If we make money, you make money directly related to that.’”
Employees also are allowed to do side work after-hours, using the building and equipment without paying overhead. They take on smaller jobs that the shop can’t afford to do and make some extra money.
In looking to the future, Sevier says some day he would like to buy the 10,000-square-foot building next door and purchase panel processing equipment, which would enable him to branch out into larger school and hospital jobs. But he is happy staying at his current level for the moment. “Let’s see if we can maintain our numbers without the State Capitol project,” he says.
He also wants to maintain the diversity of his projects, keeping his ears open and building whatever customers want. “I would get bored with specialization,” says Sevier. “I enjoy going from one client to the next. In fact, my bosses change everyday.”
Doing custom work will always be a challenge, he adds. “The trick is to do the best possible work and get paid for it. I’m still learning how to do that.”
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