With the presidential election decided and an uptick of activity in the housing market, cabinet makers and custom woodworkers are heading into 2013 more bullish on their prospects for growth. We reported top line results in our last column. Here's more detail from the full study, including software and hardware brand preferences, to be issued next month.
Two-thirds (67.4%) of respondents to the second annual Cabinet Maker Association’s Benchmarking Survey reporting optimism for 2013. And that’s coming off a year in which over half (54.7%) of cabinet makers reported higher sales – with 61.8 percent charting growth of over 10 percent in 2012, including 22.5 percent who saw a sales increase of over 20 percent.
Those looking at a glass half-full cite the housing recovery and continued economic growth as reasons for their optimism while those expecting business declines overwhelmingly citing uncertainty over the impact of government policies such as healthcare implementation, the tax environment and other potential regulations as clouding their outlook.
These are the top findings of the second annual CMA Cabinet Industry Benchmarking Survey, which was fielded to CMA members and non-members during the month of November 2012. The goal of this study is to document industry practices and provide better understanding of what is (and is not) driving business growth among professional woodworkers.
Following are some of the primary findings of the survey. More complete data, including charts and graphs and a detailed set of insights, and regional analysis will be provided in early February after cross-tabulations are complete.
About the Respondents
Survey participants were predominantly from smaller shops, with two-thirds (67.9%) representing shops with revenues of less than $1 million; and nearly half (46.8%) working out of 5,000 s.f. or less of space. Most (66.8%) employed fewer than 8 workers. Most respondents (70.7%) are the owners or senior officers of their companies; have over 15 years of experience (77.0%) and founded their businesses (80.6%).
Respondents are as likely as not to have a showroom, with half (50.0%) percent reporting dedicated showroom space and most of those (90.7%) placing their showroom in the same location as their shop.
Respondents were split on the presence of CNC equipment, with nearly half (48.4%) representing CNC shops.
Responding shops handle both residential and commercial work. On the residential side, the most common projects include (in order of work volume) kitchen cabinets, bathroom cabinets/vanities, built-ins, laundry/mudroom cabinets, and libraries. On the commercial side, it’s (in order) general cabinetry, reception desks, interior millwork, medical/professional offices, and store fixtures that see the bulk of production activity.
Sales and Marketing Strategies
Most (76.6%) shops have no dedicated marketing budget, instead relying on referrals from customers and business associates such as contractors and designers as their top source of qualified leads, mentioned by 95.3 percent of respondents. The next most-mentioned source of leads -- a distant second -- was “My Website” , mentioned by 47.7 percent of shop owners. These data are consistent with last year’s findings. In addition, only one in four respondents reports having a full or part-time resource dedicated to sales.
Design and Manufacturing Preferences
The top choices for cabinet design software were (in order) Cabinet Vision, Autocad, KCD, CabnetWare, and Google Sketchup; for manufacturing the, respondents preferred Cabinet Vision, CabnetWare, Alpha Cam, and KCD.
Among those who outsource various components, doors are the most common outsourced item (58.0%); followed by ornamental embellishments (44.2%); drawers (36.5%); finishing (22.0%); and millwork (20.4%).
This year’s survey delved deeper into preferences for cabinet accessories. Rev-A-Shelf was the clear winner for base and wall cabinet inserts and organizers; followed by Hafele and Blum; while Blum was the preferred choice for cabinet hinges by 70.1 percent of respondents; followed by Salice (21.1%) and Grass (10.4%). Blum also commanded the drawer slides category, mentioned as the preferred choice by two-thirds of respondents (65.1%); followed by Accuride (28.3%); and K&V (25.6%).
With the expansion of this year’s survey to more respondents, we are able to dive deeper into some of the critical areas that professional cabinet makers often struggle with, such as the potential return on investments in new equipment, sales and marketing resources, showrooms and other areas that require upfront or ongoing cash resources.
Sales Resources Correlate to Higher Sales
Only one in four respondents (24.9%) reported having a full or part-time resource dedicated to sales, with 15.7 percent employing a full-time person (or persons); and the balance split between part-time sales staff (4.5%) and independent sales reps (4.7%). Perhaps not surprisingly, the bigger shops tend to employ dedicated sales staffs, with those reporting revenues of between $2.5 million to $4 million being the sweet spot for dedicated staff (accounting for 22.9% of full-time staff reported), while those with revenues below $1 million tending to use part-timers or outside reps.
As one might expect, there appears to be a correlation between those shops with dedicated sales resources and business growth. But the impact charted in the survey is striking. While the general survey found that just over half (54.7%) of all respondents claimed higher sales in 2012, crosstab analysis reveals that 70 percent of those with full or part-time sales resources saw growth last year, and their share of growth appears larger. In fact, in the general survey those reporting growth of over 20 percent accounted for 22.5 percent of the respondents; while those with dedicated sales resources claiming 20-plus percent growth accounted for 36.7% of respondents. Not surprisingly, these same companies are the most bullish on 2013, with 77.1 percent feeling more optimistic compared to 67.4 percent among those without dedicated sales resources. Perhaps the reason for their optimism is greater visibility into their sales pipelines, mentioned by 57.4 of those with sales resources (compared to 49.9% by those without).
Companies with sales staffs are twice as likely (42.9% vs. 22.7%) to use network marketing through groups and associations as their primary tactic for generating business than their colleagues – probably due to the time constraints of running the business. When asked to select the top three sources of new business inquiries, those with sales teams mentioned referrals (90%), my sales force (68.6%), and my website (50%) as their top performers. Among those without sales resources, referrals were even more important (97.9%), followed by my website (46.1%) and traditional marketing programs (16.5%).
Those with sales resources are nearly four times more likely than their counterparts to have a dedicated budget for marketing and business development, with over half (55.7%) of those with sales teams reporting budgeting funds for marketing vs. 13.5 percent of those without sales help. Among sales-oriented shops that budget for marketing, most set aside 1-3% of gross revenue (24.3% of respondents in this group, compared with 9.9% of the survey average) to spend on marketing.
Impact of CNC equipment
As with last year’s survey, respondents were split on the presence of CNC equipment in their shops (48.4% with, and 51.5% without). Asked how automating processes with CNC equipment has impacted their operations, most respondents (61.9%) selected “We have added significant manufacturing capacity that we routinely use”. When asked how CNC has impacted the financial side of their business, most respondents said it has made them more profitable, with nearly half (49.5%) saying they are “much more” profitable; a third (33.5%) saying they are “a little more” profitable and 10.6 percent saying their profits are about the same.
Respondents were invited to include comments on their views of CNC impact. Among those with CNC-equipped shops, the following was a typical viewpoint: “CNC has made us more profitable in the fact that it has helped decrease our labor force. With the downturn in the economy we could use more work to use it to its full potential.” Another respondent noted: “I struggled to purchase the CNC equipment but I’m glad I have it.”
Interestingly, CNC equipment is not just present in big operations, although larger shops are more likely to be automated. Four out of five shops (81.0%) billing over $1 million report having CNC equipment; compared to only one third (34.5%) of smaller shops. There was no significant difference in outlook for 2013 between CNC and non-CNC shops, with two-thirds (68.5% CNC and 66.4% non-CNC) of respondents feeling more optimistic about 2013.
Smaller shops – those under $1 million – were twice as likely to report sales declines in 2012 compared to their larger colleagues, with 13.2 percent of smaller shops reporting lower sales last year vs. 7.9 percent among larger shops. The good news is that both groups had a better year last year than the year before, with the larger shops doing a bit better -- 62.7 percent of larger shops reported sales increases, compared to 51.3 percent of smaller shops.
Shops billing under $1 million typically employ 7 or fewer workers, with the smallest shops – those under $250,000 -- most likely to be one-person operations (46.5% of these shops report being single-person operations and 49.1% employ 2-3). Those billing between $250,000 to $500,000 are more likely to employ from 2-3 (49.5%) to 4-7 (39.8%) workers; and those billing between $500,000 and $1 million are more likely to employ 4-7 workers .
As with CNC investments, assessing investments in showroom space are a common area of discussion among cabinet makers. In 2012, shops with showrooms outperformed their counterparts slightly, with 58.0 percent of showroom shops indicating sales increases vs. 51.3 percent of non-showroom operations. Those with showrooms are somewhat more optimistic about 2013 compared to those without showrooms (71.4% vs. 63.4%). When asked why they are more optimistic, those with showrooms were more likely to cite “more forward bookings” (54.7% vs. 44.9%), “more leads” (51.2% vs. 43.7%), and “bigger projects” (36.6% vs. 32.3%) than those without showrooms. Those with showrooms host them in the same location as their shops (90.7%) rather than in remote locations.
Except for the smallest of shops, those with showrooms outpaced their counterparts by nearly double among those with revenues above $1 million in 2012. In fact, among shops claiming $1 million to $1.5 million in revenue, those with showrooms accounted for 13.8 percent of respondents compared with 7.1 percent among those without. For those doing between $1.5 million and $2.5 million, 9.4 percent had showrooms vs. 3.6 percent that did not. And for those billing between $2.5 million and $ 4 million, 8.9 percent had showrooms and 4.0 percent did not.
We are delighted to release the executive summary of our 2013 Benchmark Study. The full report will be available in early February, and you are welcome to request a copy of the report after it is released. To get your copy, e-mail the CMA office at email@example.com and put 2013 Benchmark Study Report in the subject line of your e-mail.
About the Survey
Completed surveys were received from 567 qualified woodworking professionals representing a cross section of business sizes, a significant increase over the 112 respondents in last year’s survey. The increase in responses can be attributed to greater awareness of the study and promotion of it via media partners. CMA members represented 12.5 percent of survey respondents.
About the CMA
The Cabinet Makers Association (www.cabinetmakers.org) is a professional organization for cabinetmakers and woodworkers from both the residential and commercial markets. CMA’s mission is to help members grow their businesses profitably by providing networking and professional education opportunities.
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