*
I have no business background, and see 2 different approaches for determining the feasibility of a furniture business. 1) Decide what you will build, and determine all related costs (materials, marketing, shop rate, etc.). This will set the price of your goods, and you can see how your prices compare to any close competition.
2) Start by looking at your competition, and try to work backwards from their products and prices.
I see the pros and cons of both, and maybe you should do both and see the differences. Any suggestions?
Also, does anyone out there have general guidelines for the major cost breakdown of average quality furniture (not high end custom pieces, and not particle board laminates).
Thanks
Replies
*
Chris,
I began my business thinking I could make good quality pieces that could compete with what was
considered the best of the manufactured furniture.
Continuing with that business plan would have lead me
back to a 9 to 5 job. I found that I did much better
income wise by producing a product that was so superior to manufactured pieces that the difference in quality was obvious and there are people that are willing to pay for the difference. This also puts me
in a position to operate on their money and not money that I have had to borrow to build speculative
pieces. To compete with furniture retailers you will
have to set up more of an manufacturing type system
and come up with a way to showroom your pieces. All
this leads to more overhead expense and headaches.
In a custom furniture business you and your customer
have input on what you build. The biggest difference
is, you can work out of a portfolio and the pieces
that you make are already sold.
I think there is a market for middle level pieces and
a dedicated person could set up an operation that produces better than manufactured pieces with much
less overhead than conventional manufacturers. But
keep in mind you will have to prove the difference in
quality and it will take a while to build a reputation based on that idea.
*Chris,Go look under the Homebuilding site. There is a topic "Are you ready to go into business" or something like that. That may be of some help.Just in general, you need to determine if there is even a market for what you want to do. You will never compete with a furniture factory. Unless you know how to run a business, it will be hard to be sucessful no matter what you do. Just being able to build something won't pay the bills unless that product can be sold. There must be a demand for any product. All the rest comes later. Not to sound discouraging but do some research first.
*William, I agree with your pessimistic attitude. I'm not plannning on anything soon. But, your comment about "you'll never compete with a furniture factory" is exactly what I'm trying to figure out. I'd like to know what factors set their prices. Is there labor cost 50%? Is their material cost 10%? Even general rules of thumb would be great to know.
*Chris,I do not mean to hurt your feelings. I simply responded to your question in hopes of providing some info that is pertinent to your question. And I assure you that I am not pessimistic. Realistic, yes. At least a little informed, yes. Pessimistic, hardly.An established manufacturer has such an advantage in experience, material costs, distribution, etc. that you could never overtake them. Call a supplier to ask for material costs or try to get a major store to stock your product. See what your answer is. Icould go on. But there is no need. And just as people win lotteries, anything is possible. Probable is another question.Your first question should be, can I run a business? What product is in demand in the market? Not is what I want to make marketable. Although that would at least allow for an informed answer.I am not arguing with you. I am not being pessimistic. I am not trying to destroy your dream. You asked the question. I am only telling you from my own experiences some of the issues involved. Good luck. I'm sure that you will get additional responses.
*Chris,I may have misread your reply. You say that you agree with my pessimistic view. I'm sorry. I only focussed on "pessimistic" and not that you agreed. Since I am not pessimistic (use a word easier to spell and type) I only responded to that. Sorry.Now, price is determined by supply and demand. That is a major business concept. Even exact figures for one company would be of little use since all of the factors are not the same for each company. Controlling those costs is what competition is all about.From that factor alone you could never compete with them. To have a chance, you must identify a niche, in demand, that you can enter and be better than any competition. I won't go on but you get the picture.
*William, No offense taken. I think your second reading of my post was more accurate. By nature, I tend to be pessimistic of starting a woodworking business. That's to temper my "what a great idea" moments. Hopefully the two will put me somewhere near reality.All of your points are well taken, but I am still looking for some sources which give general numbers for the furniture business. I know that eventually, all that matters is my costs, but, for example: If there is a furniture company near me that sells a coffee table for $250, and they use cherry and it uses good quality joinery. If I want to make a very similar product, but think that I can use less expensive wood, and less expensive manufacturing techniques, I'd like to figure out where that might put my costs (ballpark). If their material costs are so low due to larger volume, then my advantage of choosing a cheaper material will be lost.So my first goal, is to get a small picture of the finances in the furniture world, before deciding on whether or not I would have a shot.
*I would recommend you first ask yourself the question "Why do I want my own business?" What goals have you set for yourself? Put your dreams and your method to reach them down on paper, but first of all, make sure the dreams are worth while; when you reach them, what will you have accomplished? Also, make sure you are capable of reaching them. Your local college will probably have evening courses on business management, and working with the other people in the classes is always interesting. You may even make some connections there to help get your business started. This is a main element for success in a small woodworking business; working at getting the right connections, and keeping customers. Typically, profits from small woodshops are not very high. Don't let this mislead you; they should be high, but most craftsman price their work too low for one simple reason; the competition. There are many woodshops, and most people will feel that they have to have a cutrate price to get the job; work at developing a quality product, and selling it for what it's worth. I think a very ambitious person could soon have a large successful business with the right connections. The percentage that you spend on materials and labor will vary greatly depending on how you market your product. Taking the coffee table as an example, you might use soft maple instead of cherry to build it cheaper. These figures will vary greatly, but I'll give you a starting point at the risk of getting my head chopped off becasue my experience is different from others. If I was buying an end table, and could get a cherry table for $250, I might decide I didn't want to spend that much. How much would I spend on a soft maple table with metal corner brackets instead of mortice & tenons, and a slightly blotchy finish, or a painted finish? Perhaps $100 less would make a difference, but anything less, I would just save my money and buy the nicer one. So, you would need to retail the table at $150. If you are selling direct to the customer, your materials would probably cost about 15%, and labor 15%, or $22.50 in materials, and $22.50 in labor. You might say, well where do I spend the rest of that money? Out of $150, you've spent $45, leaving $105. This will be spent on equipment, shop space, transportation ,advertising and etc. Once you start running a business you go through $100 bills pretty fast, and advertising is very expensive. However, if you are wholesaling these to a store at 1/2 retail price, or $75, your labor is 30%, and materials 30%, but you don't have as much overhead, and you can sell more because they are doing the selling for you. Out of $75 you have $30 left over, but only your overhead to pay for, and you will sell more tables when you get all the stores in the nation to start selling your tables.Many books have been written about business startups, and most of them mention the fact that about 80% of businesses don't make it. The reason for not making it is usually given as not enough capital; in other words, not enough understanding of all the miscellaneous costs involved in running a business to make sure there is enough money there to accomplish the goals.
*There are few things more exiting than starting your own business. I think it's fantastic that you are considering it. I am in the process of setting up my own furniture manufacturing business now. I have managed other manufacturing companies while enjoying wood working as a hobby. Two years ago I took a job with one of the largest cabinet manufacturers in the state to learn more about the industry that I will be entering. I took a 50% pay cut to do so. I have been writing a business plan for the last 11 months. I have set up a shop and will start manufacturing within the next month. I will spend 3 to 4 months testing the market with a narrow range of products. That's enough to get the idea across. Successful business ventures are well planned.As far as the information that you were looking for: There are national and global financial reports that give monthly and annual data of the type you are looking for. Labor and material ratios, overhead breakdowns, etc... Mcgraw Hill publishes something called the Standard & Poor's compustat. This should list all of the information that you are looking for relating to your question. I belive the web address is http://www.standardpoors.com. Good luck!
*You, gentlemen, all have extremely valid points. I have also had the dream of starting such a business. One thing that I didn't see mentioned though when considering overhead was health insurance. We woodworkers are a bunch that have on occasion lost a digit or two (knock on wood I still have all of my original equipment)and health insurance costs are through the roof. I don't know if you have a family, but you should seriously consider the impact on them as far as that goes. other than that I wish you all of the success in the world. it brings me great pleasure to see people who say "screw the corporate world" and do it their way.
*One of South Africa's most succesful high-end cabinetmakers reckons he works on 15% for materials, and 40% for labour when calculating the value of a piece. If that's any help. But if you're making something no-one else is, and doing it better than they could, I don't see why you can't skin the market. I think I'm quite lucky with my product: though it's full of compound angles and requires several jigs, I charge 600% mark-up at craft markets, and 300% to retailers. (Of course, once they add their 100% mark-up to my 300%, a customer would be a fool to buy from them - much better to come straight to me).
*Just curious Scott,What's your test product line going to be? What are you using for startup capital? Loan? are you purchasing any nifty shop machines (computer controlled router, line boring machine, shaper) or are you doing it with what you've already got? Are you going to buy big bundles of lumber and make big bundles of product and have a retailer move it for you?I ask because I'm getting ready to move my family back to the north country and am looking at starting my business all over again. I've been studying the business plan books and am deciding on a strategy. I've been reasonably successful in the past six years, but not nearly successful enough for my new family to really thrive. I'd love to hear someone else's take on it -- especially since you've been planning it for a year or so.Good Luck,Dan
This forum post is now archived. Commenting has been disabled