How do you do it? Your business

[ian33a]

This worked for us - we are now retired.

When we were in business, not the woodworking industry, we were beholden to the general public for work. They could be fickle, unreasonable and very guarded with their money.

It's all too easy to propagate prices toward the bottom so as to get work.

It's much harder to increase them and maintain the work.

Guess which one we chose? :

In the beginning the prices had to be competitive so as to gain market share and to learn. For every job we made sure we did it efficiently but, and this was the big bit, with exemplary customer service and we properly learned a lesson or two from each job. Customer service: not playing at it, doing it well, making the customers feel like they got it, we really cared about them and not just about finishing the job and leaving with a smile.
Gradually, as one of our employees said, "we started to build a fan base". With these fans, many came with us on the journey and, gradually, we were able to raise our prices. Most of them didn't notice, they simply agreed to the quotes because they trusted us , had the work done and, on the rare occasions we screwed up, we made sure we fixed it and left them happy. We seldom lost money on a job - if we had to take a hit, we learned from it and didn't repeat it. So, over time, our sales revenue increased without a need to do more work. More work wears people out and causes mistakes.

In parallel with this we learned about cost control and efficiency. We partnered reasonable cost suppliers, we targeted our advertising spend so as to maximise revenue for money spent (every order could be related to marketing source reasonably accurately). We worked on efficient van routing so as to minimise dead time and reduce fuel costs and wear and tear. We bought inventory and equipment that we knew would add value to the business, even if it appeared to add an up front cost - everything had to pay its way.

I could see that competitors and colleagues doing similar work in other areas were paying almost no attention to running the business. They didn't enjoy the paperwork and they couldn't get their heads around cost control. It was always something that needed to be thought about over the weekend - and never was. I could see them chasing ever more sales and with ever more costs and running themselves ragged and still making almost no profit. With us, were were just doing the same and gradually making more money and having less stress.
We didn't take profits, we paid ourselves and our staff fairly and the rest was saved for a rainy day. Making more money would have attracted more Corporation Tax until I realised that it was better channelled into pension funds. These now help to fund our retirement .

So, for us, morals of the story -

1) differentiate yourself from the competition with some unique selling point allowing you to maximise your prices, even in a competitive market.
2) minimise your costs with careful cost control of the whole business - use the delta (profit) as tax efficiently as possible
3) always, always, always, make sure you have a strong understanding of the running of your business, especially the financial side. If you hate doing that, either learn to enjoy doing it or employ somebody who does and can help you to understand your business properly.
4) whatever you learn, implement it straight away, don't wait for tomorrow, because there is always another tomorrow the day after that.

 

[baldkev]

Thank you for taking the time to reply everyone, hopefully others will gain from this thread too

 

[TominDales]

This worked for us - we are now retired.

When we were in business, not the woodworking industry, we were beholden to the general public for work. They could be fickle, unreasonable and very guarded with their money.


So, for us, morals of the story -

1) differentiate yourself from the competition with some unique selling point allowing you to maximise your prices, even in a competitive market.
2) minimise your costs with careful cost control of the whole business - use the delta (profit) as tax efficiently as possible
3) always, always, always, make sure you have a strong understanding of the running of your business, especially the financial side. If you hate doing that, either learn to enjoy doing it or employ somebody who does and can help you to understand your business properly.
4) whatever you learn, implement it straight away, don't wait for tomorrow, because there is always another tomorrow the day after that.

This is a very good reply and sums up a lot about consultancy/service business. I'm in consultancy (in science and lab based technology, so a bit different), and found a very similar set of principles, work with our clients and 'market' over 40 years.

1. To start with you have to quote a cost + price to get the trade and build a reputation. But don't stop there. you can find ways to up your margins.

2. Spend part of every week working to improve your own business, some people call it 'working on your business' get to know your business model and trade really well and then think of ways to do it better, not by working harder but changing the way things are done. By business model, think of why your clients pay you what they do and why your costs are what they are.

3. As mentioned by others @ian33a and @AdamW, work to understand your particular market as well as you possibly can. You can then start to price things based on the value to the client, and not the cost to do the job. It maybe that your USP is a particular skills such as Adams, but it maybe customer service, your speed, or your attention to detail. Ask for feedback to help understand why people buy. You will probably find some jobs are more profitable than others, ask why and see if that can be applied elsewhere. You mentioned working through architects, some will be creative and come up with gems of nice things to do for a client, and would value a chippy/cabinet maker/joiner who can put these into practice.

4. It not wrong to do new things at a loss from time to time. This is often called new product development. Clients don't like to pay for you to learn new skills at their sole expense, so its not wrong to make a CD cabinet at a loss, once. If it enables you to extent your knowhow into new product areas. This how you learn about your business and extend your offering. Some new products will be a disaster, and some will be nice to do and make a good margin. It allows you to develop your business over time. However just don't get carried away, these ventures do sap profits.

5. The points about understanding the running costs @ian33a is crucial. It will help guard against a sudden changes in the market such as increases in costs of wood etc., you will know immediately its likely impact.

6. For many service businesses/consultancies 1/3 of the time is spent on back-office stuff. In our business we have grown from three of us in 2004 to 490 today. About 1/3 are back office people, ie sales, purchasing, accounts etc and 2/3s are in the labs doing the work. When we started I spend a good 1/3 of my time doing sales/business development. In a practical field like your, of chipp/joiner etc, its probably not bad to spend 1 day a week working on the business and 4 days dong client work. Don't think of that 1 day as lost income, use it to make the business better and more profitable. Do the quotes and send out invoices etc etc, but also spend time making your business better, learning a new technique or digesting what your clients rally value - talk to them.

7. In times of high inflation you have to raise your prices, its just a fact of like, most clients will stay, but you may find business slows and some clients just cant afford it. If you really like those clients and a very long relationship etc you could given them a one off discount. But the majority of the business should be on a good financial basis.

8. You have to learn to like the office based stuff, find ways to make it more enjoyable. I'd recommend you put stuff on a computer and have it backed up to a separate drive or to the cloud. That way it can be found later, you can then work up a system for quotes, the one mentioned above about pricesing by liner foot is clever. By keeping your past quotes you start to build a picture of what things cost you to do. Alternatively is this is really not you, try and find someone to do the books and help 'work on the business for you' otherwise you will seriously undersell you potentials. If you cant find someone to do the books etc, try and find someone who could be a business mentor, someone you get on with that you can talk business too. I mentor people at work and elsewhere in our industry. It a confidential thing to do, and help old folk talk through issues with the next generation. It their business but a confidant to talk things through with. It could be as informal as the occasional meeting in the pub, but must be with someone you trust, can keep confidences and has some skill that you don't.

Hope this helps, most of it has been said before on this thread, but I've found after nearly 40 years of work that these simple improvement steps really work. And allow you to charge a higher margin and work less hours.
Best wishes going forward Tom

 

[Jameshow]

I cannot add anything apart from don't call yourself.......

Jim will fix it......!!!!

 

[RobinBHM]

Thanks for the input everyone, an interesting thread. I'll look into the spreadsheets and accountancy software

3 months ago I started using cloud accounting system called QuickFile.

I thoroughly recommend it - if you pay for the unlimited version+ the live bank feed it’s £70 a year.

the great thing is the way it works: you enter your sales invoices, you put in your purchase receipts, then you go to your bank feed, which automatically takes collects every bank transaction on your business account (it updates every night). Then you go though your bank feed and tag each item to its sales or purchase receipt.

once you start you won’t go back.

https://www.quickfile.co.uk/

 

[blackteaonesugar]

I use similar. QuickBooks.
I can snap a photo of receipts and upload them and as if by magic, they are entered into my accounts.
I go through it all once every few weeks and categorise everything.
Car/van
Goods to sell on
Office equipment
Etc, etc.

I invite my accountant to share and they pull all the info they need off it.

Thinking of doing my return myself next year though as I seem to pay the accountant more than the amount I pay in taxes.

I'm on my own and don't earn loads so should be easy enough right?

 

[J-G]

...once you start you won’t go back.

I would never 'start' - I wrote my own Accounts program - in fact I wrote it twice, once under DOS and later under Windows. Every business is different and all the commercial Accounting Suites have to take an aproach which will never be 'ideal' for any.

My only costs are the Accountant's fee which I've more than halved over the years due to the reports my program creates which means that he can prepare my Income Tax & Accounts in a couple of hours.

I will have to admit that my business is not woodwork though - it's primarily computing

EDIT --- I've just opened my program and the first thing it tells me is that my VAT Return is [overdue] !!! - It actually isn't but if I leave it 'til tomorrow it would be

 

[peter-harrison]

I use an Ecxel spreadsheet to do my quotes.
Put in all your materials, then break the job down into chunks- machining, finishing etc. You can put in a multiplier for VAT, uplift, etc. Don't look at the bottom line until you have finished. If it seems very high or low, you might want to go through it for obvious mistakes.
The important thing is not to assume that what you think is cheap or expensive is the same for your client.
Often clients will ask for everything they can think of. The quote can be a bit of a reality check and force them to work out what it is they really want.
I always put in the best materials and practices- ie dovetailed drawers, good hinges, whatever. If the client complains that it's too much, you can then say, Ok, I'll make the drawers with lap joints, find cheaper hinges, etc. You are not losing and they are getting their price reduction.
And it's very important to give a detailed quote or estimate. Say what you will do, what you will use, and just as important, what isn't included.
I've tried to attach one of my quote sheets, but it's not allowed, so if anyone would like one just DM me and I'll email it to you. It's very basic but saves a lot of calculator time.

 

[Spectric]

If Mick came to me tomorrow and said I need £500k but I can't tell you why, I'd do my best to raise it.
Trust is the ultimate thing. Everything is 50/50.

You must have a very sucessful business with both partners pulling together with implicit trust and it makes for a great working enviroment, too many businesses have to much internal friction.

 

[doctor Bob]

You must have a very sucessful business with both partners pulling together with implicit trust and it makes for a great working enviroment, too many businesses have to much internal friction.

I'd say a happy business with moderate success. We both happen to be non ambitious which really helps, I.e. we have reached a point we are happy with and don't want risk.

 

[baldkev]

Thinking of doing my return myself next year though as I seem to pay the accountant more than the amount I pay in taxes.

A friend ( gardener ) decided to leave his accountant and fairly quickly ended up with a tax investigation...... take what you will from that, but if you give them the info in an easy to compute format, it should be dead quick. I used to do my own tax return, it is simple online.... theoretically the accountant should be saving you money....

 

[Jameshow]

I'd say a happy business with moderate success. We both happen to be non ambitious which really helps, I.e. we have reached a point we are happy with and don't want risk.

Extreme modesty methinks!!!

 

[Jim Davis]

I feel you. I also tried doing all the work by myself. Then I understood that it would be better to hire an assistant to do orders, talk to clients, etc. But my problem was that I didn't have citizenship in the UK. There is no federal or state law that prohibits an immigrant who has no legal immigration status from starting a business. However, employing a person without legal status is against the law which could result in fines, and, sometimes, criminal arrest. So, I had to pass a UK Citizenship Test (fortunately, I practiced via this site and passed it on the first try). Now I have two people who help me at work. I feel much better and have more time for my family.

 

[Thingybob]

Yep, i just made an oak unit to house a dvd unit and sky box. By the time id got the oak, sawn it to width, planed it, glued into boards, cut to length, set up a mitre lock bit, mitred the corners, trenched a shelf, cut shelf to length, glue up, following day sand back / clean up, 4 coats of stain and 2 coats of polyurethane ( over a few evenings) i must have spent over 10 hours on it.
I couldnt hit them with a big bill. No prices were asked, but its just an oak dvd box

Great question! No my accountant said if i go vat registered id better get quickbooks or zero. Im trying to avoid vat.

Yep, its interesting to see how other people do things/ view the usual problems.



I guess its partly about having the confidence to loose work. I often feel sorry for customers because its so expensive but thats not really my problem/ fault!


Youve probably nailed it, specialising can be the best paid. Ive got a side thing i started that is pretty niche, but turns out no one spends money in bats im thinking of trying to get corporate sponsors ( they'll get the 'green credentials ' bonus for supporting wildlife projects )

Before I retired up in Manchester I specialised in making /replacing sash cord boxed windows money was good and quite easy to price as it was based on size just had to keep an eye on price rises for materials and if i had done a refurb in a road neighbors saw the work and wanted the same . I dont envy anyone trying to compete now what with constant price hikes ,shortages ,and customers life changes once work agreed .

 

[KevinLycett]

The root of your problem seems to be pricing. If you priced well you could afford either to pay a book keeper/admin or take half a day off to do it yourself. It’s very hard to price properly, as you said it’s scary, but if you don’t you, at best, will be stressed and unhappy, and at worst your business won’t survive. Your example of the oak dvd box is instructive. If you’d priced realistically they’d probably have said no. Result, you wouldn’t have had to do 10 hours work you will lose money on and could spend that time on another job that’s gonna make money. So price well, in fact always price on the high side just to cover for any surprises. If by doing this you lose a lot of work you either have the wrong customers or are offering the wrong service and either way need a long hard think about your business, the sooner the better.

 

[TominDales]

But my problem was that I didn't have citizenship in the UK. There is no federal or state law that prohibits an immigrant who has no legal immigration status from starting a business. However, employing a person without legal status is against the law which could result in fines, and, sometimes, criminal arrest. So, I had to pass a UK Citizenship Test (fortunately, I practiced via this site and passed it on the first try). Now I have two people who help me at work. I feel much better and have more time for my family.

I feel for you. Up until 2005 there were no requirements for ' legal immigrants' or anyone to work or set up work in the UK. If you were EU or legally in UK, you just applied for a NI number and that was it. We could employ anyone. I remember French staff members being astonished at this laissez faire approach. It was one reason (amongst others) why unemployment fell in the UK over the previous 20 yrs. It was relatively easy to hire and fire workers without too much paperwork. I recall an agency in Oxford that supplied graduates telling me in 2000/2001 that allowing the accession states (Poland, Czech etc) instant rights to work (unlike in Germany where quotas were put in place to regulate emigration for the first 5 years of accession) would result in mass emigration to the UK and cause chaos. It did, and, in my view this poisoned the well for EU emigration in the UK. We have now gone to the far extreme of 'hostile environment'. At some point we will elect a sensible mid way course. Its sad that we have lost so many good workers who have gone back, disruptive for their families and us. In my industry we find it hard to recruit international specialists, so we are having to send more and more work overseas to be done. There was a district EU brain drain to the UK in the 90s and early 2000s, its now gone in reverse. Some countries such as Italy have gone out of their way to attract their talent back and we have lost world leading talent over the past 2 years. We have also lost work to Torino, the Basque country, France, Poland, Czeck and recently for EVs to Estonia as the work is following the skills.

 

[Kayen]

The first thing I do upon getting a work inquiry is to jump on Google maps and have a look at their house - if they live in a house like mine I know they're not my sort of client!

Finding the right clients is the key to getting paid properly for your work - everyone wants bespoke, custom-made furniture, but very few can afford it.

 

[Lons]

The first thing I do upon getting a work inquiry is to jump on Google maps and have a look at their house - if they live in a house like mine I know they're not my sort of client!

Finding the right clients is the key to getting paid properly for your work - everyone wants bespoke, custom-made furniture, but very few can afford it.

I'd say the opposite. I had very few instances of slow payment but those I did were from very wealthy customers, probably how they became wealthy I guess, t Three that stood out were a very senior doctor, an accountant/director and a self employed financial consultant. Usually the hard working hand to mouth older generation were very quick to pay and appreciated the effort you put in.

Different work, mine was a small building company but a lot of bespoke kitchens and bathrooms as well as the usual Howdens stuff and none of the building extensions and conversions were cheap.

 

[Kayen]

I'd say the opposite. I had very few instances of slow payment but those I did were from very wealthy customers, probably how they became wealthy I guess, t Three that stood out were a very senior doctor, an accountant/director and a self employed financial consultant. Usually the hard working hand to mouth older generation were very quick to pay and appreciated the effort you put in.

Different work, mine was a small building company but a lot of bespoke kitchens and bathrooms as well as the usual Howdens stuff and none of the building extensions and conversions were cheap.

I think it can be different if you are a mid-sized company with employees - I however do everything (with the help of my wife) from the initial consultation to the final fit - so it becomes (perhaps) a bit more personal, we often end up sitting down having lunch or dinner with our clients and have never had any issues with payment, but I am very selective who I work for, if I don't like them (I have tests), I don't work for them

 

[Lons]

I think it can be different if you are a mid-sized company with employees - I however do everything (with the help of my wife) from the initial consultation to the final fit - so it becomes (perhaps) a bit more personal, we often end up sitting down having lunch or dinner with our clients and have never had any issues with payment, but I am very selective who I work for, if I don't like them (I have tests), I don't work for them

I also was a one man band Kayen, just called in a couple of trusted people when I needed to so very similar process I did everything myself. I also was very selective, never advertised and built the business on reputation, had many repeat customers, a lot of whom remain friends though I've been retired a number of years.
Your last sentence could have been written by me as it's exactly how I evaluated potential customers and projects.