New Business questions

[bsw]

I am looking for advise from anyone who struggled through the start up phase of their

business. I am also looking for contacts in the San Diego Area to hopefully correspond

with. I have many questions, but here is a couple: How do you charge? Size, design,

complication? parts count? by the hour, or job or both or what?
Like I said, I have so many questions, I don't know what to ask at this point.
Thanks
Jim

[bleeth]

Jim: From your site it appears that you have decided to try to step up your business. I can tell you that everyone struggles through the start-up phases and taking the dive into enough space to accomodate more equipment usually means you have to book enough business to have employees. There is an old rule (not always hard and fast) that it takes 5 employees to make a decent profit. Having help in the shop allows you to market more and that is always the key to business growth. Flexibility in your plan can be key as what sounds great to you may not work with enough customers to make it worthwhile. I have found that directing my marketing at other businesses (designers, architects, contractors, etc) leads to much more repeat business than private client sales. How to charge is always a loaded question, but in my end I do everything by the linear foot and adjust up for options. Due to the difficulty in getting the true worth and skilled help in my custom wood shop, I ended up re-inventing it into a company that deals only in commercial clients and projects. I wish I had done that years ago. Developing of any particular line takes time and investment. That is the tough part when you have ongoing upkeep to support as most commercial contracts require you to wait for payment 30 to 60 days. They also understand that the cost of doing so is in your pricing although never referred to.

[jhicks]

Selling and presentation style must exhibit your commitment, uniqueness, value, customer sensitivity, and understanding of their personal vision to create that unique relationship and trust before you price or build anything.
When that happens, the price is only a small part of the personal relationship, collaborative nature of the design, and final implementation working between you and your client/new friend.
As that happens, the value of your work grows, the creativity and inspiration rise to another level and whatever you charge within reason but at the higher end is justified and will make you and your customer happy.
Trying to compete with large or production shops based on price is just not in the cards for small shops. So the key is to differentiate yourself from them by doing things they don't, won't, or can't do.
Exceptionally high customer communication level, an enthusiastic attitude, passion about their project, and well excecuted fabrication will build a great reputation, word of mouth referrals, and establish your works worth/value.
don't try to get down in the mud with others at the low end. You will just beat yourself up, get frustrated, and spin your wheels trying to keep up with expenses.
Not very much fun in that scenerio and there is plenty of high value work and custom clients in So.Cal.

go get em and best of luck

[ckurak]

James,

Re-read what Jerry said over and over until you can recite it in your sleep. I am very serious. Then determine how you can apply it to your business.

It has taken me a while to realize how important the emotional aspect of marketing and selling a product/service really is. The personal/business relationship is extremely important. Now that I am incorporating these ideas into my business, my business is growing. More importantly, it is attracting the type of work and clients that I want (profitable).

Treat each and every client and potential client with lots of consideration and respect. (Note: I did NOT say cave in and do unreasonable things.) Be professional at all times. Do the extra things that will set you apart from your competition, and charge for them. The better clients will be very willing to pay for the added service and value.

Finally, re-read Jerry's post again.

Jerry,

Thanks for taking the time to put those thoughts in writing and sharing them.

Charles

[bsw]

I would like to thank Dave, Jerry and Charles for responding to my questions and giving what I consider sound advice.
I have been in the wood working business for a few years now and have a large customer base and regularly get repeat business and many referrals. I know how to keep customers happy, especially with my communications and follow through. I usually send email picture attachments of their cabinets or entertainment units so they can see that it is progressing and they haven't fallen by the wayside for someone else's project. They really appreciate it and it's so simple to do, yet it works wonders for customer communication. Most people comment about it all the time. It's easy here in So. Ca. It seems that most contractors out here are really bad in terms of customer satisfaction, service and communication. These guys make it easy for a person doing just the opposite to their actions to succeed. I think I know how to get and keep my customers loyal.
If I get this Bot, I need to justify it. To do that, I need to get a whole new customer base, probably the very same cabinet shops that I am competing with on the first level. So, if I don't get the initial bid, maybe I will end up building parts of their cabinets or ENT units anyway. What I really need to know is how does one get new customers...probably other cabinet or speciallity shops, and how do you charge. I see that some charge by the linear inch, others by the complexity, still others by the lot, there are many ways. It all comes down to the fact that any customer needs to know the cost of these parts before awarding the job to me. I need to pay for the machine, rent, ins etc and still charge a competitave price. I don't want to be the lowest price in the neighborhood, but I feel that I will have a big advantage over the guy that doen't have the means to generate several exact duplicates of a complex routing pattern. Can anyone offer that kind of advice for a established shop, wanting to branch out in a new direction?
Again, thanks, Dave, Jerry and Charles

[jhicks]

James, Ok, the question is how to get NEW customers and how to BID the jobs.
1) New customers = selling time and leveraging the customers / relationships you already have. So assuming you have a target market to attack, attack it on a systematic basis. Say every Friday morning make 10 phone calls, send confirming e-mails or make appointments to visit them.

a) Spend one day a week making phone calls to as many as you can find in phone books, web searches, chamber of commerce listings, and other resources.
b) Once you call them direct them to your web site or e-mail them photos and web links as reference.
c) Try to exhibit several ranges of work and price levels so you can say, that style/cabinet, finish, etc runs about $XXX.XX but this other one has premium finish and hardware, while that 3rd one is ONE WE DESIGNED WITH CUSTOM CORBELS, CUSTOM DIMENSIONAL MEDALLIONS, A CUSTOM MANTLE RELIEF,and exotic material, hardware, finish and slides to get a range in their budget and target desires.
d)Leverage your past clients, ask if they know anyone who might need your services, give them extra business cards, work with them and cross link web sites, talk to and develop relationships at the designers, lumber yards,hign end appliance dealers,wood workers clubs/guilds, and hand out printed color photo fliers featuring your higher end capabilities and services.
e) Think about who you want to sell to and who they talk to or ask for references from before they think about their cabinets for example. Their architect, builder, lumber yard, appliance salespeople, flooring people, banker, friends,realators, home inspectors, door and window dealers, etc.
GO There and get your name out to them and network with them. Exchange cards, calls and leads whenever you can. Tell that appliance sales person with sub zeroes that you have a client with a new kitchen going in and gave them his business card. What goes around comes around.

PRICING. Consider how you price things today using conventional methods. The shop bot will not only improve your fabrication time and quality and enable you to be running parts on your robotic employee while doing more design etc but will enable you to do things you either couldn't do at all or couldn't do repetitively, or couldn't do as efficiently so.... make some cool CUSTOM high end parts to show off in person and with photos on your web site and literature.
a) Consider pricing them the old fashioned way (assuming your ok with those methods) weather its time and material, lineal foot, or batch and still use those numbers for your costs knowing you'll be able to (or should be able to)improve with the SB. Then keep the extra $ you have saved in time or whatever operation and it will automatically raise your margin plus pay for some of those improvements, bits, vacuum systems, you will eventually want to add.
As you become more familiar with actual benefits always consider them but don't give them away unless absoultely necessary.

They are part of your competitive advantage but THAT DOESN'T MEAN YOU NEED TO GIVE THEM AWAY TO WIN.
Maybe response time you can meet is far more important that the price or the design you can create and cut is the icing on the cake.

b)We like to analyze our projects from 3 perspectives. Estimated Time and material including design, travel, selling time, set up, clean up, fixtures, bit costs, change overs, fabrication, finishing, and assembly based on our burdened shop rate.
Then compare that to what we like to use as a square foot average say $100.00 / sq ft.
We compare that to past projects and any competitive pricing we can find on the web or elsewhere. All done fairly quickly on a spreadsheet.
c)When we have those numbers and compare our burdened rate plus materials and mark up we see which one feels best based on any customer communications and how much we feel we will need to factor as risk, scrap, customer design revisions, and load that factor or cost in.
From that we establish our minimum and maximum price we would accept or like to achieve.
NEXT STEP....
PROPER PREPARATION PREVENTS POOR PERFORMANCE
We float a BALLPARK RANGE price to the customer in a conversation that will achieve the higher premium but not send them away while soliciting feedback.
ie: "based on a preliminary review we would ballpark your concept at between $100.00 and $125.00 per sq ft depending on which options, finish, and design you choose".

"We would love to help with this project and meet to discuss the details and show you some material choices, to find the best design we can provide to achieve your vision".
CRITICAL QUESTION...#1
How does that sound?
CRITICAL QUESTION ....#2
Before we meet, can you help me understand what you have budgeted for this so I can bring suitable samples and ideas to the table for discussion?
Always bring what they want plus what will add value in terms of margin, design enhancements, finish, or special finishing touches.
ALWAYS BE 5 MINUTES EARLY AND BRING YOUR ENTHUSIASM! YOU ARE ABOUT MAKE A NEW FRIEND AND FUTURE REFERENCE!

After all what's the difference between a HIGH END and BUDGET Entertainment center? Material, Finish, trim, architectural embellishments, and the relationship with "the artist" who designed and made it the unique one of a kind custom(er) piece it is.

As this relationship develops both you and the client can make choices together while still maximizing your time and margin to create a win/win situation.
The next step is to CLOSE THE DEAL. The most common shortcoming for any salesperson (especially less experienced ) is
THEY DON'T ASK FOR THE ORDER!

CRITICAL STEP ....#3
CONFIRM YOU KNOW WHAT THEY WANT AND WANT TO PROVIDE IT.
We understand your vision and budget goals for this and would love to get started working on a design WITH YOU.

CRITICAL CLOSED END QUESTION/ step #4
ONLY 2 POSSIBLE ANSWERS YES OR NO.

WOULD YOU LIKE TO GET THE BALL ROLLING TODAY WITH A X% OR $y,xxx.00) DESIGN DEPOSIT?


WAIT FOR THE ANSWER. REPEAT, WAIT FOR THE ANSWER.


We will deliver 1 or 2 basic concepts for your consideration in a week or 2. Your design deposit can be applied to the final price when you place the order and we receive your 50% deposit to proceed.

Know where you stand and don't waste time of yours or theirs.

Hope this helps and best of luck.

[dewey_dog]

This is excelent information ,very well put and to the point. Thanks for sharing your 2c Jerry.

[jhicks]

No problem Tim but it was 2 cents for the 1st consultation and 4 cents for the second since it was custom tailored to your unique vision.
Would you like to send a deposit to move forward.
:-)
good luck and meet some locals or attend a camp. you wont regret it.

[jhicks]

Oops guess its James I need to invoice but looks like another potential with Tim.
Just kidding have fun. Nobody said it would be easy though.