Custom Millwork & Display has the kind of problem a lot of shops would love- rapid growth. At the end of their first full year, the shop had sales of $683,000 and it registered a loss. By the end of the second year, however, sales almost tripled to $1.8 million.
This South Bend, Ind., shop got its start when Jerrel Mead, the co-owner of CM&D and the company's president, was working for another shop. When that shop was asked to do a custom millwork job and the owner wasn't interested, Mead along with Joe Welker, another employee, jumped at the opportunity. They decided to split from the company and start their own shop and took four skilled craftsmen with them.
That first job didn't guarantee success, but it did set the stage for it. From the beginning Mead and his partners, Joe and Dave Welker (a silent partner), decided that the shop would specialize in custom millwork and focus on what they saw as a real need in the market. But, they didn't stop there.
First they worked hard to build on relationships they already had with general contractors to get more jobs. Then the partners looked for other niche markets and ways to set the shop apart. At the same time they had to get the space, equipment and certification to go after those markets.
The company's efforts paid off with rapid growth. The kind of growth CM&D has been experiencing, though enviable, affects everything to do with the business from management and machine purchases to shop flow and cash flow.
Focus, focus, focus
Right from the beginning, the partners knew what their market would be custom millwork and they have made a point of sticking to what they do best. "If we have a job with a bunch of plastic laminate cabinetry, we'll outsource that, because we are not a production shop."
Although the company does 90 percent commercial work, it recently joined the Home Builders Association, with the intention of eventually building the high-end residential market. With Mead being the only salesman, that part of the business is very small and not expected to grow until the business levels off.
When the company does venture in new directions, they clearly define their focus. For example, the partners believe 'green' building is the future, so the shop has become FSC certified (see sidebar, Becoming FSC certified), a move that has already won a job.
Mead works hard to build on the relationships he has with general contractors, especially the one that gave him that first job. He found that his focus has paid off. Some of his general contractor customers know and depend on his work so much that they sometimes bypass the bidding process. While most jobs initially come from general contractors, many times the client of the GCs will deal with CM&D directly for smaller jobs after the initial project.
Employee relations are also important, especially with the quick growth the shop has had. It's important that employees feel that they're part of the team and that growth of the company will be good for everyone, says Kelle Welker, co-owner in charge of the administrative and office functions of the shop. To promote team work and to improve attendance, Dustin Mead was brought in to manage the shop. He put together a policies and procedures manual as well as an incentive program for employees that was designed to do just that (see sidebar Employee initiatives pay off).
The first year the budget was tight and cash was long in coming. It was a struggle to get vendors to work with them and the shop was too new to get loans. The owners found the best way to get vendors to work with them was to be honest with the vendors, presenting them with facts about the jobs the shop was doing and following up with updates about payments.
It took a year to get the C.R. Onsrud CNC router that they knew they would need to reach their ultimate objectives. And the loan to pay for the machine required all the partners to use their homes as collateral.
"The CNC machine was going to be an absolute necessity and the bigger, the better," says Mead. "We just knew we needed it for the overall scheme we had to build the business."
The machine they chose is for panel processing and is set up with pods and the wiring for a fifth axis, which is scheduled to be added when the operating-expense credit line the shop applied for is finalized. The shop primarily uses AlpahCAM software for shop drawings and the CNC machine code.
More equipment needed
The shop is constantly buying equipment and continues to add space to build capacity. The shop paid cash for all the purchases, except the CNC router.
The most recent machine purchased is the Mikron curved radius machine, another machine critical to doing the curved radius trim the shop makes that's hard to find.
Some equipment the shop bought include a Kaesar screw compressor and a box truck bought from auctions. A Kremlin sprayer was recently purchased from a cabinet shop going out of business.
For finishing CM&D uses M.L. Campbell for stains and paints, and Sayerlack topcoats and sealers. The shop's finishing supplier introduced them to the Sayerlack product, which works well for the trim.
Have something to say? Share your thoughts with us in the comments below.