It is my sincere hope that you are enjoying “Ask Tony” – the Q&A feature we launched earlier this year as part of “Management Strategies” – as much as I’m enjoying doing it.

The experience has borne out a truism which some of us learned a long time ago, others are still working to accept, and still others probably never will: Quality Sells.

Many (many) moons ago, this column discussed the “PDQ Rule,” which holds that the success of a custom manufacturing business – woodworking or otherwise – is entirely dependent upon three things: Price, Quality and Delivery. Specifically, the rule says that you can give the customer what they want on any two of those things, but if you don’t stick to your guns on the last one, you can’t make any money.

While I’m sure there are shops out there being paid handsomely for poor-quality work (sure because I’ve been shown such work, most often by a complaining customer who proceeds to tell me what they paid for it), I’m equally certain that such shops don’t stay around very long.

One reader recently wrote in, convinced that it is his “too-high” pricing (which, he said, is normally 25 percent higher than that of his competitors) that keeps him from being more successful. But it’s not. What’s keeping him from getting more work is not his numbers, but his failure to sell his work.

We’ve all heard it so often that it’s practically an adage at this point: Anybody can throw out a number. And boy, will they.

The problem is, many of us think of the quote as the end of the process, when it is really just the beginning. If you’re simply cranking out quotes, you’re that guy: Anybody, throwing out a number

Why do we resort to this?

Maybe we’ve sold them before.
Maybe they were in a hurry.
Maybe we’re just lazy.

Few people have the patience, will and drive to help customers understand what distinguishes their work from that of others, let alone to remind them of it again and again, whenever a sale is on the line. But doing so, in this business my friends, is the difference between success and failure.

Quality sells, but only when you focus on quality. If you’re focused on the number, your customers will be too, and they’ll never know the quality they’re missing out on.

Distinguishing yourself from your competition is not especially tricky. All it takes is knowing your product inside and out (which you do) and a willingness to show a few features of your product to your prospective customer. A faxed or e-mailed quote is just a piece of paper. A product (or project) presentation is the crucial first step on the way to getting the job.

But selling doesn’t mean just selling jobs. When was the last time you visited a customer you haven’t talked to in a while, with no sale on the line, and showed them a new product you’ve incorporated into your work and are just wild about?

Or a new style of finish?
Or pictures of a recent project of which you’re especially proud?
Or anything that shows how profoundly excited you get about doing top-quality work?

That kind of interaction – when you’re not selling anything at all, just sharing news – builds relationships and is infectious in nature. When you are genuinely excited, you will excite whomever you are talking to, no matter what the subject.
When you leave, the customer may very well shake his head and say, “Wow. He sure is excited about what he does.”
There’s nothing wrong with that. The next time they need someone to do what you do, whom do you think they’ll call?

Anthony Noel owned and operated Noel Custom Woodworking for 15 years. He is now a consultant, helping custom shops with the business of woodworking. He has written for the magazine since 1994. Past articles are available at www.iswonline.com.

‘Ask Tony’

Tony,
We have a cabinet shop of normally three to five employees, with myself as a working manager.
Over the past several months we have run into many of the problems addressed in your articles. The owner complains, “We are not making any money,” “We should be doing better,” and “Why can’t we compete with others?” Our shop is part of a construction company and, for most of its 20-plus years, all of the millwork and casework was produced for our parent company only.
Our company has built some quality high-end homes and produced excellent millwork and casework. But with the current economy and the changes in the industry I have been tasked with finding alternate work outside of our own-built homes and ways to produce work faster without sacrificing quality.
We currently complete all work on a time-and-materials basis, and our owner refuses to mark up the cost of materials, which I see as a problem. We do not have estimators or salespeople and do not advertise anywhere. We are a high-end shop and have talented personnel, but we have no computer or computer programs at our disposal.
Furthermore, we do not own any production equipment, such as CNC, moulder, point-to-point, etc., and we do not have the capability of completing our own finish work. We do not have the resources, so I’m told, to add help, advertise or update.
I enjoy woodworking and want to give our clients what they are paying for and make my company money. What can I do or suggest to bring our shop to another level?

Charles Parker
(Company Name Withheld)

Hey Charles,
Thanks for writing.
If everything you’re saying is true – and I have no reason to think otherwise, because I see this kind of thing all the time – you are in a classic no-win situation.
On the one hand, you are being asked to do things that it is generally accepted require at least some of the technologies (updated equipment), abilities (in-house finishing) and staffing you mention. On the other, you are being told you can’t have those things because the money’s not there.

Of course, it’s not a matter of money at all. It’s a matter of committing the money – and more pointedly, the time and effort – needed to grow the business. That said, when you put yourself in your owner’s place, it becomes a little easier to understand that lack of commitment.

Think about it: Here they have a shop which has always been self-supporting, a profit-producer for the construction company if for no other reason than it enabled the company to have complete control over the millwork facet of its projects. That’s hard to truly appreciate when you’ve had it for so long, and it can be even harder to invest in, because it’s functioned just fine, for its purposes, without much investment — until now. And therein lies the key.

NOW, the cabinet shop has changed. Now, in trying to compete with other shops, the company is learning first-hand about the night-and-day differences between selling to itself and selling to somebody else.

I’m not as concerned with the lack of CNC equipment as I am with the time-and-materials-only thing. When it’s done right, T&M work is hard to find. Doing it right means marking up the materials you purchase and charging more than the payroll costs of the employees contributing to jobs.

It’s only easy to find T&M work when you are not doing these things, because it means you are not charging enough. And given that you are keeping three to five employees busy and not making any money, the simple fact is that you are not – cannot be – charging enough.

But besides not charging enough for the time and materials themselves, there are likely other areas where you’re falling short:
• It may be you’re not charging enough to cover your shop’s inefficiencies.
• It may be you’re not charging enough to cover the cost of carrying customers who pay you late.
• It may be you’re not charging enough to cover your capital financial obligations.

Still, all of these are different ways of saying the same thing: Your shop doesn’t have a firm enough grip on what it’s costing to do business and therefore CANNOT be charging appropriately for the work it produces.

This is another holdover behavior from the shop’s use by the parent company. It once behooved the company’s bottom line to know exactly what it was spending on T&M for the millwork it produced, because that number impacted the total project’s (house’s) profitability.

But now that you’re competing in the larger woodworking universe (however local or regional that “universe” may be), you need to turn a PROFIT on the millwork ALONE. Keeping the shop busy with jobs that do not produce revenue will NEVER make a shop profitable. Busy, yes – profitable, no.

And – emblazon this on your forehead if you have to – forget about how your pricing compares to that of competitors. All that matters is how YOUR pricing compares to YOUR costs, because those are the only things within your control.

While your shop as you’ve described it may need some updating, frankly, the very first investment you and your owner need to make is a time investment. You need to study the jobs you are doing, classify them and consider which types you do most efficiently.

Next, look at specific operations within each type of job to see where time is being wasted. By all means, look at machines that can help you work more efficiently. But unless you’re sure that a particular piece of equipment will pay for itself within a year, odds are good that you’re not ready for it yet.

When it comes to staff, that is one of the safest investments you can make, because you pay as you go. Identify specific needs and be willing to pay the talent to meet them. At your stage, a combination estimator/project manager might be a good start, someone who can do all the quoting and oversee small jobs, and implement cost accounting.

DO NOT turn this over to a suit-and-tie accountant. It needs to be done by somebody with a clue about woodworking. It’s the lessons you learn when a job is finished which pave the way to greater profitability on the next one.

So let’s review:
(1) Stop doing T&M work and start SELLING jobs.
(2) You can only do (1) when you know what your jobs are costing you to produce. So you must meticulously track your expenses on every job, all the time, and apply the information to your estimating process.
(3) Forget what others are charging and worry about the things within your control.
Good luck!

Questions for Tony?
Got a question? An experience you’d like some feedback on? Looking for a wood working tip? Send your e-mail to [email protected]. Please put “Ask Tony” in the subject line. Even if your question is not used in the magazine, Tony will do his best to respond personally via e-mail. Because CWB reaches the desks of company owners and managers, we gladly preserve questioners’ anonymity upon request.

By Anthony Noel