The construction industry overall appears to be on the path to recovery with upticks in both the residential and commercial sectors. Good news for woodworking companies that managed to weather the storm during the darkest depths of the Great Recession, which left a path of heartbreak and wreckage throughout the entire industry.
Those turbulent economic times during 2008-2009 when credit was tight and orders stalled forced many woodworking manufacturers, including wood components companies to rip up their business plans and search for new ways to keep their businesses afloat and their doors open. Although it was a difficult period, some companies not only managed to survive — they thrived.
Using a success-at-all-costs approach, Jonesboro, AR-based Architectural Concepts Inc. (ACI), an in-house custom cabinet and millwork shop and division of Construction Network Inc. (CNI), made a commitment to implement a more proactive sales method. As a result it has experienced consecutive years of doubling its sales growth.
According to CEO George Stem, ACI went from sales of $1.5 million to $3 million in one year. The company is currently on pace to reach nearly $6 million this year.
“We did about $1.5 million a year for about eight years,” he says. “About two years ago we made the commitment to really go after business — to go after contractors from Tennessee and Mississippi,” as well as all of Arkansas.
ACI has been in business for approximately 10 years, and was started as a way to provide quality cabinets, millwork and casework not only for its parent division but other area contractors as well.
“About 10 years ago we had some pretty good trim carpenters and we decided, let’s just build our own millwork,” Stem says. But “what we realized is that we didn’t have enough business to keep them busy.”
By creating ACI as a separate millwork shop they are able to secure work from competitors of CNI.
“Now we do work for all contractors except for two here in Jonesboro, and they do their own cabinets,” Stem says.
Initially ACI and CNI were split, working out of separate locations. But three years ago, Stem says that the company decided to consolidate operations. ACI has two shops — a 17,000-square-foot production area for volume cabinets and casework with 16 employees and a 12,000-square-foot work area for custom pieces with six employees.
“When we put it all together and were here full time, that is when we made the commitment to grow. We put the companies together, and a year later we doubled our business,” he says.
Ninety percent of ACI’s work is manufactured with pre-laminated material and nearly 80 percent of the commercial projects are contracted for hospitals, doctors offices and dental offices as well as educational facilities.
According to Stem, there has been a trend over the last several years to include solid surface in commercial projects.
“Everybody wants solid surface,” he says. “It’s nice and permanent.”
A large percentage of ACI’s jobs now include solid surface, which it does in-house. Solid surface is especially popular for projects that are in full view of customers, such as reception desks and main office/retail counters,” he says.
“It used to be a specialty. Now it’s become more than 80 percent of the jobs we do,” Stem says. “Almost everyone is doing solid surface unless they have a limited budget.”
Closing the Sale
For about six months after the recession hit, Stem says that there was a noticeable drop-off in business. However, he maintains commercial construction was not as hard-hit as residential, especially in the Northeast Arkansas corridor, which has an unemployment rate below the national average. Stem credits the oasis in the Jonesboro area to the number of medical facilities and educational institutions, including Arkansas State University.
According to Stem, most people in the region involved in commercial construction were still building and planning — it was more a question of how big people were building rather than whether or not to build. “If the [recession] affected them it was that the plans were not as big,” he says.
Confident that the region could support the business, Stem says that ACI decided to commit itself to expansion and growth, even as the industry was still in the throes of a recession. That commitment involved not only plant and machinery upgrades but a commitment to a more aggressive sales mind-set.
Part of that process was using online services and cold bidding. But Stem also credits the company’s increased tenaciousness in closing a sale.
“Instead of just bidding jobs and waiting for them to call, we call them and just hammer away,” he says. “We try to talk them into hiring us. We call until they finally tell us to leave them alone or they hire us.”
The theory behind that aggressive sales approach is that once a contractor becomes a client, they will become a repeat customers, increasing volume and providing referrals.
“We had to make up our mind that instead of taking orders we were going to go create business,” he says. “You have to commit to grow — it’s the nature of the beast. You’re either growing or going backwards and we can’t afford to go backwards.
“You’re not being responsible to any business if you don’t decide to go out and to try to sell it,” Stem adds.
Investment in Automation
Once ACI committed itself to increase sales and volume, it then became necessary to increase the company’s manufacturing capacity. That was achieved through plant expansion and investing nearly $500,000 in new equipment.
The key was increasing automation in the shop, resulting in greater efficiency and productivity. Equipment purchases included: a Biesse America Eko 902, a vertical batch one drilling machine; a Sektor 430 panel saw; an Elix horizontal drill, glue and dowel machine and a Cosmo case clamp. Additional machinery in the shop includes a Holz-Her edgebander; a Multicam CNC machining center and Porter-Cable power tools.
After analyzing the equipment on the market, going to trade shows like the International Woodworking Machinery & Furniture Supply Fair and to open houses by machinery manufacturers, “we found the equipment we needed,” Stem says. A decision was made to purchase the equipment now instead of waiting until the economy was in full recovery because much of the machinery was already competitively priced, he adds.
Stem also says that it has been a good time to grow because of the available tax credit incentives from the federal government for capital equipment expenditures.
He expects continued improvement in the economy based on the pent-up demand in the industry. “Right now people are anticipating that something’s going to turn because the economy can’t stay down,” he says.
ACI’s investment doesn’t just end with its recent machinery purchases; Stem says the company has invested in the three empty acres nearby with the goal of further expanding the plant if necessary to reach a manufacturing capacity of 50,000 square feet and sales of approximately $25-$30 million dollars.
Stem is working with the City of Jonesboro to make land improvements and he made “a commitment that over the next three years I will add 20 employees at an average of $14 an hour.”
Stem reiterates that ACI’s success is not only attributable to its sales strategy but also to its investment in automation, which allowed the company to become more competitive and increase its market share and its investment in a vision for expansion. “If you want to grow your business,” he says, “You have to go sell it.”
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