How typical is your shop? Are you staying ahead of the pack or just barely keeping up? Are your resources and skills comparable to other shops or lagging behind? Those are some of the questions you can better answer by comparing your shop to the new data collected in CabinetMaker's annual Small Shop Survey.
We surveyed shops by mail and online in January and February to compile a statistically significant portrait of today's small cabinet shop. The results show some wide variances in a number of areas and offer sometimes startling contradictions that point to both the challenges and strengths that characterize today's small shop.
Follow the money
Some of the most intriguing responses in the survey involve sales numbers and profitability. Most shops (51 percent) report gross sales of at least $80,000 per employee, with nearly one third (31 percent) listing gross sales between $100,000 and $500,000 per employee. On the high end of the scale, nearly 3 percent report sales higher than $500,000 per employee.
But a significant number of shops are way below those thresholds. Some 17 percent say they have sales of less than $40,000 per employee. About 16 percent fall in the range of $40,000 to $60,000 in sales per employee, and some 13 percent have sales of $60,000 to $80,000 per employee.
Of course, gross sales are one thing but what really counts is the profit. Unfortunately, when it comes to figuring profit in today's shops, there appears to be a disconnect between figuring profit on individual jobs and the profit owners recover at the end of the year.
On the good side, respondents report that a typical job includes about 17.5 percent profit. Other factors are 31 percent for materials, 36 percent for labor and 17 percent for overhead.
But then compare that to what shops reported as their end-of-year profit for 2007. Nearly two-thirds (61 percent) reported making less than 16 percent profit. Some 10 percent reported making no profit at all in 2007. If the 17-percent profit number carried through to annual totals, one would expect to see the biggest number of shops falling in the 16 to 20 percent profit range, but instead only 12.5 percent of the shops fit there.
Up the scale, about 9 percent of the shops report annual profits of 21 to 25 percent, 9 percent report profits of 26 to 30 percent, and another 9 percent report making profit in excess of 30 percent at year's end.
If both the project breakdown numbers and the annual figures for profit are correct, it likely points to shops not truly accounting for all of their costs. Experts say that is a common problem in many small businesses and recommend paying closer attention to overhead costs that may not be fully accounted for in job estimates.
Profit and sales numbers reported in this year's survey are remarkably similar to those turned in last year. In the breakdown of a typical job, profit, overhead and labor numbers are all up just one percentage point over last year, while materials are down by less than one point. Looking at the annual profits reported, there appears to be a slight shift higher across the board, with fewer shops showing up in the lower profit ranges.
That corresponds with how shops view their own trends, as more than 35 percent of shops, reported sales slightly up in 2007 over the previous year. About 30 percent said sales were the same in 2007 as they were in 2006. Some 13 percent reported sales way up over the previous year, and only 22 percent reported sales down.
Recent talk of a down economy does not seem to be dampening the optimism of small cabinet shops. More than 39 percent predict sales in 2008 will be slightly up over 2007, and another 11 percent predict sales will be way up. About 30 percent predict sales will be about the same, and on the down side, about one in five shops is predicting sales to be lower.
What do shops look like?
We've seen the money numbers but let's get a better picture of the kinds of shops that are reporting those numbers. When we talk about small shops, that applies to both size and staffing. The biggest segment in the survey, some 46 percent report having between two and five employees, and 39 percent are one-person shops. Some 10.5 percent report having six to 10 employees. Slightly less than 2 percent have 11 to 15 employees, and the same percentage have 16 to 20 employees.
With 85 percent of the shops having five or fewer employees it's no surprise that more than half (53.5 percent) have less than 2,500 square feet. Some 22.5 percent have shops between 2,500 and 5,000 square feet, and 10 percent have shops between 5,000 and 7,500 square feet. About 8 percent have between 7,500 and 10,000 square feet, and only 6 percent have shops that exceed 10,000 square feet.
What do they make?
Kitchen and bath cabinets dominate the products built by these shops with 46.5 percent reporting that as their primary product. Residential built-ins follow at 13 percent and custom furniture at 12.5 percent. Less than 5 percent of the shops emphasize commercial cabinets and less than 3 percent list store fixtures, a furniture line or components for resale as their primary products.
The vast majority of shops (68 percent) say their products target mid-range to high-end customers. About 15 percent target only high-end customers. Nearly one in five of the shops target the low to mid-range segments of the market.
As has been the case in previous surveys, face-frame construction dominates, with 46 percent reporting they use that method exclusively and only 15 percent using frameless. Some 39 percent of the shops say they build both frameless and face-frame cabinets, but of those, 53 percent are face-frame cabinets and 47 percent frameless.
When it comes to deciding what to build and what to buy out, some 59 percent of the shops outsource doors. About 34 percent outsource drawers, and 48 percent don't build their own countertops. One in five outsources other components for their projects.
Who runs these shops?
Virtually all of the survey respondents are in senior management positions. Only 3.4 percent are female. They average more than 21 years of experience in the industry. Their shops have been in business on average 17 years, and they have worked in those shops for an average of 13 years.
Most of these owners and managers are middle aged, with the biggest segment (30 percent) falling in the 46 to 55 age range. About 24 percent are between 36 and 45 and the same numbers are between 56 and 65. About one in 10 are over 65, and the same number are between 26 and 35. Only about 1.5 percent are 25 or younger.
These are generally well educated people with only 6 percent not having completed high school. About half (49 percent) have a high school education, a third have college degree and 11.5 percent have advanced degrees.
Still, that education isn't necessarily in business or woodworking. Two-thirds say their business skills are self-taught, and 48 percent say their cabinetmaking skills are self-taught. Only about 12 percent have any formal training in woodworking. More have formal business training, with about 16 percent reporting they've taken business classes in college or vocational schools and 10 percent actually having a business degree.
Making up for the lack of formal education is a lot of on-the-job training. About 40 percent say that's how they learned their cabinetmaking skills and about a third say the same for business skills.
Shop owners and managers certainly put in enough time on the job to learn, with more than three-quarters (77 percent) saying they work more than a 40-hour work week. The largest segment (38 percent) work between 41 and 50 hours a week. About 29 percent work from 51 to 60 hours a week, and an amazing one out of every 10 say they work in excess of 60 hours a week.
At the low end of the scale, only about 15 percent work between 31 and 40 hours a week. Less than 8 percent of those responding to the survey work fewer than 30 hours a week.
So, what do they get for all of those hours? Only a bare majority of 53 percent say they pay themselves a salary, and profits or financial rewards are not listed high on their motivating factors, with only 15 percent saying that's what drives them.
The biggest segment, 31 percent, said that pride in making things of lasting value is what motivates them most in business. Following right behind that at 29 percent was a sense of accomplishment.
While monetary rewards might not be high on owners' list of motivating factors, it is the most common incentive or extra benefit they offer to employees. Some 44 percent of shops offer bonuses to employees. Other popular benefits are paid vacation (37 percent), medical/dental insurance (17 percent) and profit sharing (9 percent). But 36 percent of the shops responding offer no benefits or incentives beyond wages.