Reorganization Helps Idaho Shop Survive and Prosper
Ketchum Kustom Woodworks invested in new machinery and a good book to help it stay on a profitable track.
By Helen Kuhl
Rich and Juli Evans found themselves at somewhat of a crossroads a little over two years ago. Their cabinet shop, Ketchum Kustom Woodworks Inc., in the resort town of Ketchum, ID, was hopping with brisk sales and very rapid growth, including a move into a larger building, the purchase of new equipment, plus an increase from three employees to 14 in just one year.
But the couple realized that they weren't making any money and, during a slow winter season when meeting their huge overhead became tough, they decided they had to do some restructuring or they couldn't survive. "We had a little heart-to-heart and decided that if we didn't make a big change in the next six months, we weren't going to continue the business any more," Rich says. "So we totally reorganized.
"We had been doing about $250,000 a year when we first moved into the new building, and in one year we went to almost $675,000," he adds. "But we had tripled our expenses. And we realized that just because you are busy doesn't mean you are making money."
As part of their reorganization, the Evanses realized that they could not continue with 15 employees. They let go of three or four people in the shop, plus a computer designer/draftsman. Rich then took over all design and drawing duties himself.
"We also had to look at what makes us money. For example, we were doing close to a hundred upper-end interior doors a month. But when we figured it out, we were only making $20 a door," Rich says. "We decided that we had to get a lot more out of our doors."
"We increased our door prices and we are not getting as many door orders now," Juli says, "which is fine."
The Evanses also learned to toughen up their stance on pricing in general. "I had always been a 'nice guy,'" Rich says. "When a customer used to say to me, 'Can't you come down $500 or $1,000?' I would say, 'OK, I'll come down $1,000.' But that was my profit. I had to learn not to do that and how to run my business."
Interestingly, it was the purchase of a book Juli had seen advertised in CWB -- The Business of Woodwork by Bill Norlin -- that helped the couple become better business managers, she says.
"The book confirmed that we are in a very difficult position because, as a custom shop, we are always building something that we have never built before. So how do you know what it costs to build?" Juli says. "But that book gave us the hope that we could do this. It helped us get more analytical and find out what our costs are. It gave us work sheets and helped us develop the skills to get us to the next level of being a business."
"It helped us figure in the hidden costs like dust removal, deliveries, design time, meetings with clients, samples GÃÆÃâ¡ÃâÃÂª the list goes on. It was our bible," Rich adds. "It was something that we were missing. We were close, but we weren't taking things as far as the author told us to take it. You have to take that next step."
Since the restructuring, the business has continued to grow and be profitable, Rich says. "We are doing just shy of $1 million a year now, with 5,000 square feet. We have fewer employees and more and better machinery. It makes everything so much easier."
Rich Evans started his woodworking career building log furniture in his garage in 1988, after he and Juli got married and went to Ketchum to ski for a season -- and never left. Evans had previously worked as a construction superintendent in California, doing a little furniture on the side. He worked construction when he arrived in Ketchum, but built a log bed for himself because they couldn't afford one from a local furniture store. He ended up with word-of-mouth sales for all types of log furniture.
His switch to cabinets came after about three years of building furniture, when a customer asked him to build her kitchen. Evans did the job, and his word-of-mouth cabinet sales "snowballed," he says. "Work continued to come in and I outgrew the 900-square-foot shop where I was with one part-time employee. Then we found this place."
The current 5,000-square-foot shop is located in Ketchum, a small, upscale town with around 6,000 inhabitants, many of whom are "second-homers." The shop space is very costly, Evans says. But the expense is more than justified by the edge it gives the company as the only full-service shop of its kind in town, he adds.
"Even when we were doing the furniture, I remember how decorators had to order things out, and they would be crated and shipped and arrive with a 'ding' in them or not be the right size," Juli adds. "When they found Rich, who could build what they needed to their specs, right on the spot, they were thrilled. And it's the same with cabinets. Customers don't have to wait 20 weeks like they do with a large cabinet company. We provide great service and do just what they want here, within five miles of their homes."
Most of the shop's work is in new construction on homes that range from $400,000 and up. The kitchens average around $30,000, Rich says. He works with general contractors, interior designers and the homeowners themselves and does the design work on about 80 percent of their projects, using Cabinet Vision software. Work often expands beyond the kitchen to include bathrooms, laundry rooms, libraries, entertainment centers, closets, base and case, crown moulding, flooring, general millwork and interior doors. "We have positioned ourselves into a 'one-stop shop,'" he says.
"There is a lot of furniture design that goes into our kitchens," Rich adds. "It's kind of furniture-look cabinetry, even though it's all built on the 32mm system. We do very little inset or face-frame applications."
Distressed looks are very popular in their area, and Ketchum Kustom Woodworks has specialized in that type of style for the past eight years. About 90 percent of its cabinets and other projects are done in alder, which distresses and takes stains really well, he says.
The company manufactures everything in-house. "We use solid boxes. We don't use stretchers on the top of our boxes," Rich says. "We use 3/4-inch sides and 1/2-inch backs. Everything is screwed together using Confirmats. I have looked at doweling, but this works for now. The nice thing is that we can tear apart a box really easily without having to redo it.
"We also do very thick doors; 7/8-inch is the thinnest door that we do," he adds. "That's just the look I like. I'm into solid."
Most of the cabinetry has melamine interiors. However, cabinets with glass doors are veneered. Drawers are 3/4-inch wood and are usually dovetailed, unless the client wants something else. The shop also builds many inserts and accessories, such as tray dividers. "People like accessories," Rich says. They use Hafele and Rev-A-Shelf accessory products, he adds.
For functional hardware, the shop uses Salice hinges and Blum drawer slides, as well as some products from Knape & Vogt and Accuride.
The company has two full-time installers and does all its own installation. "We don't let anyone else install our products," Rich says. "Because of the way our cabinetry goes together, putting the filler in the wrong place or doing something wrong would totally ruin the whole design. Customers have to pay my price to install my cabinetry, but the product in the end is worth it. They are happy."
Finishing is the one area that is no longer handled in-house. Rich says he considered adding a spray booth to the shop, but he couldn't exhaust what he needs to spray and he says the fire restriction guidelines for the city of Ketchum are very strict. So for the past several years, he has subcontracted all his work to Wood River Finishes in nearby Bellevue, which works out very well, he says.
"We also felt that we needed someone else to be in charge of our finishing, for management reasons," Juli adds. "Our finisher has enough experience that we feel more than comfortable handing it to him. And it allows Rich to focus on other areas."
Rich is very involved in the finishing process, however, and approves every job. "Everything is what I consider a furniture finish," he says. "We do everything from regular stain lacquer to stain/lacquer/glaze to crackle to paint/paint/paint/glaze. We make it so that when you walk into a house, you want to touch the finish. That's what I pride myself on.
"It has to be nice because it's got my name on it," he adds. "And our area is small, just 5,500 to 6,000 people. If people hear you don't do things right, you don't get work."
To save time and money, the shop prefinishes the tape for all its boxes, so they can go directly to the job site instead of being transported back and forth to the finisher. "I made a jig that prefinishes our tape," Rich says. "By doing it in-house and eliminating the previous downtime and labor required to send it to the finisher, we reduced costs for that operation from about $10 to seven cents a box."
Prefinishing the tape in-house was facilitated by the company's purchase of a new edgebander last year, a Holz-Her Genesis 1402HF. It is one of the newest machines in the shop, complementing the sizeable equipment purchase made almost three years ago.
That major outlay began with Rich's desire to buy a moulder. "We wanted to have a full-service woodworking shop," Juli says. "If someone is building a house, they need more than just kitchen cabinetry."
To fulfill this desire they consulted with distributor David Spencer from Willow Creek Tool in Willow Creek, MT. He was very instrumental in guiding them on how to handle their growing production needs, Juli says. The couple ended up buying a Weinig Profimat 23E moulder, a Weinig Rondamat 925 grinder, a Holz-Her 1243 sliding table saw, a James L. Taylor clamp rack and a Murphy-Rodgers dust collector at one time.
"What was tricky was that when we bought the moulder, we also had to spend money for all the things that go with it," Juli says. "We bought the knife grinder, and we had to do a complete electrical upgrade on the building. With that, the shop was down for at least two weeks. We also had to upgrade our lighting and our dust collection."
While the couple knew that the moulder was a necessity to their business and would bring more work in, the payback was not instantaneous, she adds. They produced a moulding booklet to offer various profiles and began actively marketing their moulding capabilities.
Today, there are six very qualified shop employees, who the Evanses say are a major factor in the company's success. There also are two highly skilled installers who carry out the finishing touches of the quality product. "We get nothing but compliments on our install," Rich says.
He handles design work and sales, while Juli manages the financial end. There is one employee who functions as production/shop manager and the liaison between the shop and the office, which is located in a separate building next door.
All lumber is purchased rough and put through the moulder. The production area also houses two Delta shapers and one Powermatic shaper, an SCMI Uno 37 widebelt sander from SCM GROUP USA, a Powermatic table saw and a Ritter 43 double-head line boring machine.
Rich says his next purchase will be a Timesavers 43-inch orbital sander and, eventually, he hopes to add a CNC router or machining center.
"We basically started from nothing, just a $10,000 loan, and have done really well for ourselves," Rich says. "We should pat ourselves on the back sometimes for what we have done. But it has been a lot of work, a lot of hours."
Even though it added a lot of overhead, the machinery upgrade was a good investment, he adds. "A machine doesn't come to work sick and it doesn't argue. And your help gets better with better machinery, too. They think, 'This guy is taking care of me. He bought me a new machine,'" he says.
"We also learned that a business will not get better on its own, you have to take steps to make it better," Juli adds. "And I think you also have to ask for help. We went to our tax accountant and to another business friend for advice. Those people, plus reading that book, helped us turn things around."
(Note: Bill Norlin's The Business of Woodwork is available at the ISW Bookstore, in association with Amazon.com.)
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