Going Your Own Way
Further proof that forgetting about what other shops are doing is the first step to success, courtesy of an Ohio cabinetmaker.
By Anthony Noel
A few months ago in this space I complained pretty loudly about a particular type of e-mail message some readers send me. By way of refreshing your memory, the column was called "Still the Letters Come!" and it described e-mails that go something like this:
"Please, provide me with some average prices [or budgets, or profit margins, or whatever] of other shops like mine."
As I explained back then, what makes me crazy is the notion that there are other shops "like mine." The only similarities I've found among shops are in the mistakes that the unprofitable ones make. But a letter from Ernie Rottinger of Timberdoodle Inc., in response to all my complaining, proved heartening.
"I am embarrassed to say that I waited 'til today to read your column in the July 2003 issue of CWB," Ernie's letter begins. "I've been too busy working to take the time to read. I can't help but wonder if you have a spy working in my shop."
I do, Ernie! His name is Hard-Won Experience.
Lest you think I'm tooting my own horn here, let me assure you that's not my intent. Rather, it is to reinforce some of the claims I've made about how shops develop bad habits early. I also hope, with Ernie's help, to prove that it's never too late to right the ship. Please, Ernie — continue.
"Almost all of your column has an all-too-familiar ring to it. My brother-in-law and I started a custom cabinet shop in 1994 in a suburb of Cleveland, OH. Financially, we run a conservative shop. We only buy new tools when we have the money to pay for it. When we first started, we underbid jobs to get the work while providing a high-quality product.
"About half of our work went to one commercial contractor on a per-bid basis. As we picked up more customers, mostly through word-of-mouth, we were able to slowly increase our prices."
Now THAT'S what I'm talkin' about!
"In a three-month period, we bid over $2 million of work for this contractor, and the only job we got was one I made a mistake on. We then realized it was time to concentrate on the more profitable jobs. As more customers found us and presented us with new challenges, our business grew."
We've just put our finger on the precise point where Ernie's shop and thousands of other successful ones diverge from those which limp along the borders of profitability. It begins with the realization that having plenty of work isn't the objective. The objective is making money — good money — on every job. He continues:
"In 2000, when doom and gloom was all over Wall Street and our vendors were telling us how slow things were getting, we were making plans to lower our expenses and [possibly make] layoffs when the time came. Our customers had other plans, it seemed the worse the news, the greater our workload.
"That's when we stopped listening to Wall Street and started listening to Main Street. Our 2500 s.f. shop became maxed out. In an effort to control the workload we began to raise the prices 10 percent, then 15 percent. To our surprise, our sales increased also."
Remember, by this time, Ernie and his brother-in-law have about six years invested in their venture. Their reputation is beginning to precede them, allowing them to see a real return on that investment. Think about how they did it: simply by knowing the difference between profitable jobs and unprofitable ones. Or put another way, knowing what their particular shop does most profitably. But it gets even better.
"At the end of last year, one nice couple wanted us to do their kitchen. I came up with a design, priced it, and thought there was no way we had the time to do it. I added 50 percent to the job and sent off the quote, never expecting the deposit check that came in the mail later that week. Go figure.
"In January this year, we took over the space next door to double our shop space. This move also gave us showroom space which is still empty because the shop is too busy with paying jobs to worry about our displays.
"We currently have six employees with sales last year of $528K. This year we expect around $600K in sales. I think this is our limit, and [we] will need to refuse good jobs in order to maintain our quality standards. Our employees have been with us for a long time and have been trained in all parts of the shop so [any]one can jump in where needed.
"I hate to admit it, I am one of the lazy cabinetmakers in your article."
I doubt it, Ernie.
"I use Quickbooks to give me an idea of how my business has done in the previous three to four months, then make adjustments using this information. The three- to four-month history is to average out the large swings in the P&L each month. Using this average, we have been in the black since we opened shop.
"I know this seat-of-the-pants management style goes against your July '03 article, but other things I've mentioned here have been from previous articles."
I'll admit, I can see where you might think I'm a bit of stickler. I guess anybody who writes columns with titles like "Do the Work!" and who calls his readers lazy on a fairly regular basis could get that reputation. But the truth is, if every shop would follow your "seat-of-the-pants" lead, they'd be making good money. The point is to care enough to do something, because once you become interested in how you make (and lose) money, you can't help but stay interested.
It doesn't take hours of bean counting or micro-management. All it takes is confidence in what you're doing, the independence to do it your way, and an undaunted determination to understand what your shop — YOUR shop, not anybody else's — does best and most profitability.
Thanks for writing, Ernie!
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