Staying Alive
The struggles of a business trying to survive.
The sudden rush of buyers I described in my last post has continued — we sold another $80,000 in the last week and sales for October total $302,129. Year to date we’re at $1,798,892. My goal at the beginning of the year was to average $150,000 a month. Mission accomplished, with two months to spare!
In the last two weeks of September and the first two weeks of October we sold $411,856 worth of tables. That’s two and a half months’ worth in four weeks. Our backlog of orders has ballooned from two weeks to 10 weeks. My problem of not enough work has suddenly morphed into a question of how to get the work done on time.
For most of this year, until the end of August, our backlog was swinging between three and five weeks. The backlog was trending downward, as the people I hired in the spring, and the machines I bought a little later, brought our monthly production up. In the first quarter, we built $418,742 worth of tables. Second quarter: $502,064. Third quarter: $508,391. Sales had also trended up a little, so our greater capacity was appropriate for that higher level — or it was until sales stopped.
The sudden drought prompted me to consider cutting capacity. The subsequent deluge has me wondering whether the increase in sales represents a permanent rise in incoming orders, or whether it’s a blip. If sales stay high, I have the opportunity to increase our production capacity, run more volume through the shop, and make more money.
Most of the new jobs we have booked have been the kind of stuff we ordinarily do: a piece or two per client, with a total value of $10,000 to $30,000. Some have been smaller, and we have had a few larger ones as well. But this year we sold two jobs of extraordinary size to the same client: the first, which came in at the end of July, was for $82,575. The second, which landed on Oct. 7, was more than twice that size: $169,369. That’s 14 percent of our sales to one customer. And that second job also accounts for half of my current backlog. Given that I don’t expect to be taking orders like that very often, I’m reluctant to consider them in planning future production capacity.
Running a larger backlog wouldn’t appear to be much of a problem. As long as we make our promised delivery dates, it just means that we know we’ll be busy for 10 weeks instead of for four or five, which is our usual situation. There is one negative effect of a bigger backlog: we cannot take orders from clients who need things in a hurry. Already this week I’ve had to turn away three prospective clients, whose jobs would have totaled more than $35,000. They all wanted delivery in four to five weeks, which I could not promise. This problem tends to correct itself: we get busy, we turn down jobs, we sell less, our backlog shrinks back to where it needs to be, and the quick-turn jobs go into the books again. Of course the jobs we turned down, and the money that went with them, are gone forever.
Last week, at our weekly meeting, we reviewed our build schedule for the next two months. The critical date is Dec. 1, when we will need to deliver the $169,000 job. It absolutely cannot be late — we got the job because we promised to deliver on time. The client wasn’t fussy about an extra dollar or two here or there as long as I hit that deadline. And just to make sure I was paying attention, they stipulated that the job would be done on a net 30 basis — no money for me until I deliver. These are not terms I would have chosen, but we just completed a successful job for them and we were paid 26 days early.
At the weekly meeting, I pointed out that in order to complete the job on time, we will have to do a lot of work in October. We will have to build $206,921 worth of tables this month, I said, when we have been averaging $169,463. But if we can process all of this work, we will be in a good cash position by the end of the year — and if I am feeling prosperous and happy, bonuses are likely to follow. I also authorized unlimited overtime.
You might think that this would be a good moment to hire more people. Unfortunately, the skilled workers we need to increase production are not readily available. Our work is so specialized that it takes months to convert ordinary woodworkers into conference-table experts. So temps can’t help me. And outsourcing doesn’t work for me, either. Remember, our specialty is delivering superior work in the shortest time. When we outsource, we give up control of quality and schedule.
If only I could temporarily hire a highly trained cabinetmaker who already knows our production methods — and then get rid of him as soon as we finish our big project! Actually, there is such a person — and he was sitting next to me in my office: Nathan, my sales engineer. I had promoted him from the bench to the office in 2010, but I recently turned him right back around. We won’t be able to take new orders for a couple of weeks anyway, so I don’t need him to write proposals. He has been back at his old bench for a week now and has already completed two projects. He’ll be out there for at least the rest of October, and perhaps some of November as well. That means I am temporarily demoted as well: I’m answering phone calls and writing proposals again.
So far, we are running ahead of schedule on the October build. I don’t know if it’s my fantastic leadership skills, the chance for a bonus, the extra worker, a run of good luck, or all of the above. But it looks like we’ll head into November in good shape.
I’m still kicking around the idea of hiring another builder on a permanent basis and even interviewed a candidate who would be a good fit. But I’m not at all certain the high level of sales will continue, particularly given that the beginning of December is usually dead, dead, dead. And that’s right when our backlog will suddenly shrink to four weeks again. Any other time of the year I would take a few quick-turn jobs to keep things busy, but I don’t expect our phones to be ringing then.
So I’m afraid I won’t be doing any more to bring down the unemployment rate this year.
Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.
Article source: http://feeds.nytimes.com/click.phdo?i=551efada5aa332584d5089c960b41280