By Bernadette Freund
2002 was anything but a banner year for most woodworking businesses and the economy at large.
Jarred by the aftershocks of the 9/11 terrorist attacks, many companies experienced cancelled and/or postponed orders. Backlogs shrunk and sales sank; businesses tightened their belts.
As bad as things got, there existed wood products companies that managed to grow their businesses when their competitors stagnated or fell. One hundred of these exceptions are included in Wood & Wood Products 14th Annual WOOD 100 Report of fast- growing firms.
Paced by Distinctive Creations with 171.8% sales growth between 2001 and 2002, the 100 companies included in this year's report combined for nearly $2.2 billion in sales in 2002 and posted an average sales gain of 19% last year. Eighty-two of the WOOD 100 companies enjoyed at least 10% growth in 2002; 43 of them grew their sales by more than 25%.
Despite competition-induced downward pressures on pricing, 54% of the WOOD 100 companies said their profit margins are higher than three years ago, with only 13% saying their margins are lower.
The 14th Annual WOOD 100 Report ushers in 50 first-time companies, 12 of which were established between 1998 and 2000. Of the 50 firms that have been in the WOOD 100 previously, 19 of them are marking at least their fourth appearance. Lexington Mfg. (No. 91) and Wooden Mallet (No. 63) are each participating for the 11th time; Appalachian Wood Products (No. 71) and WW Wood Products (No. 95) are each included for the 10th time.
Success Amid Challenges
“Succeeding in a down economy really takes two things: flexibility and forecasting,” says the senior project manager of a Canada-based company. “Companies have to just keep planning contingencies for a poor economy and must have a willingness to reinvest in a different direction.”
“In a challenging economy, we have continued to pursue business in different markets,” says a CEO of a Wisconsin-based company. “We understand the importance of diversification while continuing to work closely with our core customers. We will continue to rely heavily on our experienced sales staff to assist customers during the preconstruction and design process with millwork consulting and value engineering services. By getting involved in the process early, we can offer valuable cost-saving recommendations to our customers.”
A Kentucky furniture manufacturer agrees that diversification and marketing are the keys to combating a bad economy. “We will continue to diversify our process and to market to a wider range of medical/dental industries.”
Understandably several companies feel powerless and believe all they can do is continue to push forward. One Texas cabinet manufacturer’s response corroborates this view. “Unfortunately, as an individual and small business owner there isn’t much I feel I can do about the local or national economy except continue to push ahead with business.”
Service Brings the Numbers
“For our company it has actually been a combination of things that have contributed to our improved customers service,” says Darren Hayward, vice president of RS Cabinet Doors Ltd. (No. 46) of Saskatoon, Canada. “We have long-term employees dedicated to company growth; an in-house design team working with scheduling software for improved delivery times; personal relationships with our customers and have recently purchased a number of machines.”
Many companies state that they try to offer customers more options and allow customers to get a first-hand look at products. Evan Kruger, owner of SolidTops (No. 30) of Easton, MD, says, “We built a showroom to showcase our products. This has allowed us to do more retail business with customers and now 40% of our business is done in retail.”
According to Michael Cohan, owner of Construction Service Associates (No. 42), San Diego, CA, “With our continued machinery upgrades, we are able to provide high quality custom products to our clients while maintaining the short lead times that they require.”
“We have invested in new technology to increase our productivity per man hour and reduce our wood waste,” says Dennis McCahan, president of Appalachian Wood Products (No. 71), Clearfield, PA.
He continues, “In today’s global economy you must offer a superior product with the shortest lead time at the best possible price. To accomplish that you must constantly improve quality control, increase productivity and continually increase employee skills.”
Other companies say they updated equipment or software to become more competitive and increased efficiency. While a few remaining companies believe tweaking shop efficiency has been the key to increased productivity.
Working with the Code
Eighty-four percent of company executives say 2003 will exceed 2002. Looking ahead further, companies remain optimistic about 2004 sales. Thirty-seven percent predict next year will be their “Best Ever.” Another 55% predict it will be “Good.” No one predicted a “Poor” or “Terrible” year.
“If the economy does not improve, we, like many other companies, will have to look into new markets,” says the owner of a Maine-based manufacturer.
The vice president of a Georgia-based manufacturer shares the same belief with many companies, “We will down-size if required to adjust to the economy. We will continue to attempt to increase productivity by having the latest technology, eliminate unnecessary overhead and cut profit margins on a short-term basis to maintain volume.”
Some companies turn to the old-fashioned “pray for wisdom” approach. While a general manager of a Tennessee millwork and cabinet company states what many may feel, “All I can say to how we are addressing our top concerns is: ‘Live with it.’”
Bernadette Freund and Susan Lorimor authored this report. Rich Christianson, Karen Koenig and Jennifer Gazdziak helped edit it. Jill Smith and Blanca Hernandez assisted in soliciting information upon which this report is based.
Diversification Grows a Company
A year and a half after Rafael and Amal Bernal acquired Distinctive Creations, a high-end cabinet and furniture manufacturing shop in Utah, floor space and revenues have doubled. It is no wonder it is No. 1 in the 2003 WOOD 100.
How does it feel to reach the top spot?
“It’s great to hear! That’s exciting.” says Rafael Bernal from inside the 40,000 square-foot shop.
Bernal and his wife moved into the building in 2001, armed with confidence and three mortgages. They had started Changes by Design, also a custom cabinetry and furniture manufacturer, in their garage in 2000. But when Amal landed the business of a large contractor, the Bernals knew they had to find a building for production.
“The stipulation (of the contractor) was I get a factory,” Rafael Bernal says with a laugh. “We started looking to acquire a small shop and mix equipment.” The couple found and bought a building that was in foreclosure. They also acquired Distinctive Creations, which is now a 28-year-old business.
A name change and an expanded product line later, the Bernals are on top. They went from a small cabinetry and furniture shop to a larger one that also makes dining room tables and chairs, entertainment centers, occasional tables and entry doors.
“We’re kind of a one-stop shop for contractors,” says Rafael Bernal. “We started making (entry) doors in the last four months. We’ve made 150 of them now. We had to diversify when the war came on. Diversification is what helped us weather the economy.”
The Bernals began with about $300,000 worth of equipment. The converyorized system, three glue applicators, 13 shapers for doors, plus moulders, radial arm saws, an edgebander and a horizontal panel saw help the Bernals meet a demanding production schedule.
“We have been able to marry the machinery and skilled craftsmanship with high volume, just-in-time manufacturing processes,” Amal Bernal says.
Now Rafael Bernal oversees manufacturing and money collections, and his wife does the business plan. They both help with marketing, and have a sales team. “You have to have a sales-driven company,” Rafael Bernal says.
He says there were tough times that came when building the company. “There were some times we looked at exit plans.” But they never gave up.
The Bernals moved to Utah shortly before they bought Distinctive Creations. They had lived in California, where Rafael was vice president of operations and production at Martin Furniture and Whalen Furniture. He draws on those 20 years of experience to drive his own business.
“I made it work for two other companies, so why wouldn’t it work (for me)?”
Now, the Bernals have a catalog for their furniture, which goes out to retail stores, and will soon have a Web site to market their cabinets.
— Susan Lorimor
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