In part one, we went over the first five of 10 things I wish I knew before starting my cabinet shop. Here's the second half.
As I said before, if I've learned anything over the past 15 years, it's that business is a continual learning process. I know that these lessons are just the beginning and that there will surely be many more ahead, but I hope this list gives you something to chew on and something to hopefully improve your operation.
I wish I would have researched more about our industry before starting my cabinet shop.
I wish I would have looked into things like where the industry was headed or how people were currently doing things. I wish I would have read anything I could get my hands on. Anything from how to build cabinets, to how to manufacture correctly, to flows and processes etc. I wish I would have delved into our industry and learned what has historically worked for people and what hasn't.
I was the owner that just jumped in with both feet and did trial by fire on everything and looking back that was honestly pretty stupid because there are so many resources out there that can help you get through those initial learning curves.
7. How hard it would be to make money
Before starting my cabinet shop, I wish I would have known that it is actually incredibly hard to make money in business.
There are so many things in a new business that you have to watch just to be able to turn a profit at the end of the year. That was probably that single most difficult thing I can remember going through. It may show on paper you are making money but at the end of the day you are always having cash flow problems, barely making your payroll requirements, barely making bills, and growing at this breakneck speed.
“That was probably that single most difficult thing I can remember going through. ”
8. The true cost of owning a business
I wish I would have known the true cost of owning a business before I started my shop.
The cost of owning a vehicle is not just the price tag in the window. It also includes the insurance and maintenance and all these other associated costs that you don’t necessarily run the numbers on when you purchase a new vehicle. A business is no different.
When you start your business there is no handbook. You don’t truly know what it's going to cost. To keep a business going you have these perpetual costs of insurance (all kinds of insurance - general liability, vehicle, health), labor burden and taxes, worker’s comp, etc. It seems like at every turn someone else is dipping their hand in the pot. But when you first start a business you’re blind to all these associated costs simply because you’ve never been through this before.
I would encourage anyone who is starting a shop or business to talk to their insurance people to get a really good idea of not how much things will cost you only today, but also how much things will cost you when you cross each threshold ($200,000 a yr, 1 million a year, 2 million a year, etc). Reverse engineer your numbers and see how much those overhead costs really are to run your business.
9. How to work ON my business, not just IN it
I wish I would have learned how to work on my business and not just in it before starting the shop.
This is something I just started doing within the last couple of years. I have not mastered this by any means, but I do work every day to make more time for myself to work on my business. It’s now my primary focus.
Looking back on the early years, even the first 10 years of business, I never really made time to improve the business. We made the jobs as they came in the door, sold when we needed sales, billed when we needed money etc. We did all the things a business does without ever making any effort to improve the business itself. We didn’t make processes, or standards, or anything necessary to get better.
The importance of working on your business instead of in it is completely underestimated. Wherever you are in business, start right now working on the business instead of only in it. Even if it starts with committing 2 hours every Friday morning to solely work on your business that is progress. Identify something your business needs improvement on and then start hacking away at it in that time every Friday. Dedicate some small amount of time now, and then every quarter or six months or year, increase that amount of time as much as you possibly can.
As you start working on your business you will start seeing the wild effects of it and you will want to work on the business more and more. Once you start, you will not be able to get enough of it. It truly changes everything. It will start to feel like you own a business instead of just a job.
10. Reverse engineer numbers
I wish I would have been in the habit of reverse engineering our numbers before starting the business.
I’ll probably get some pushback on this and that’s ok. If you can start with a profit in mind and work back towards the number of sales it will take to achieve that problem, then you can have such an amazing base to begin with. If you want a profit of x dollars or x percentage and you know what the market will bear as far as price, then just ask, "What is it going to take to achieve that?"
How many sales do you need to have?
What kind of overhead can you have?
What kind of expenses will be allowed?
What kind of debt service can you have on capital improvements?
If you start with profit in mind first, you have something to work towards rather than just this pie in the sky that never comes to fruition. It will drive your focus. Too often as business owners we work our tails off and we get down to the end of the quarter or the end of the year and there’s nothing left. If you start with profit first, I assure you that you will work within the box you confine yourself to on operating expenses. You’re going to keep your job materials in check and your labor where it needs to be to produce the amount of product you’ve laid out.
While this seems contrary to the way accountants and bankers do it, it needs to be the way business owners do it because business owners are in it to make a profit. We are, of course, in business to impact people and make our community a better place but if at the end of the day, if we aren’t profitable, we aren’t really a business.
Start with profit in mind, reverse engineer your numbers, and build yourself a box for operating expenses. Then, operate from that box alone. This means you don’t rob from other accounts. You’ll know what kind of sales you need to do, what kind of labor you need to have, what kind of job materials you can buy, etc. Then you can just use that model and build upon it. You want more profit so you need this many sales etc. and you just keep going down the line.
I can only imagine if I would have done this year two or three of my business where I would be today. I would be on a whole different level, there’s no doubt in my mind.
What do you wish you would have known?
Thanks for reading! I hope you’ve enjoyed this series on what I would have liked to have known before going into business, but I’d love to know more about what it is that you wish you would have known before going into business.
Ultimate Cabinet Components Founder Jeff Finney is a 2018 40 Under 40 honoree.
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