Pricing work correctly is one of the most important and misunderstood challenges of any woodworking business today. Prices between shops for the same project vary drastically, yet costs and rates are really not much different. How can this be?

Someone once said, “The automotive business is a high volume, no profit business. So we got out of it.” If you aren’t pricing to make a profit, then why are you in business today?

Basic pricing strategies

• By the foot

Although bidding jobs using a price-per-measurement makes estimates a breeze, it can often be inaccurate and raise the potential for missing hidden costs.

• Materials multiplier

Popular with some furniture makers, it’s likely to be highly inaccurate.

• Time and materials

These should be key components of all pricing, but using this method has many shops overlooking crucial considerations such as overhead, profit, R&D.

• Components

Pricing all components individually can be highly accurate, but it requires constant updating. This can be used as both a pricing and selling strategy.

• Software pricing programs

Even the best computer program is no better than the information submitted.

Four pricing essentials

• Labor

All time invested in production. Base estimates on history.

• Materials

All the things needed for the job. Don’t forget to make it up!

• Overhead

Everything it takes to open the door, such as utilities, transportation, trash disposal, insurance, phones, Internet, Sales/reception staff, marketing, advertising, consumables, etc.

• Profit

If you don’t add it, you won’t get it!

Creating a loaded hourly rate

T = hours available for work

O = total costs unrelated to production

O/T = minimum hourly income

Add profit and employee costs

Add project/product costs

How it works:

Total expenses for a year:                           $50,000

Total hours 50 weeks at 30 hours:                    1500

Per hour loaded shop rate:                            $33.00

• Using the loaded rate to price a job

Number of hours                                             40

Multiple times loaded rate                               x33

                                                                 $1320

Add project materials                                      500

                                                                  $1820

Add profit percentage (15%)                            273

                                                                  $2093

Where pricing goes wrong

• Bad estimates
• Outdated calculations
• Poor knowledge of the market
• Attempting unfamiliar work

Pricing for the marketplace

• Know the market

Sometimes the biggest pressure on prices is what the other guy is charging, but do you really know what that is?

• What is your product worth in the eyes of potential customers?

That’s the ONLY measure that counts?

• Pricing reconnaissance

Value of follow-ups

Networking for knowledge

Bid success reality check

• Know your market

There’s a difference between what your best market is and the market as a whole. You may be competing in the wrong market.

Effective competition

Overhead in the marketplace, “My prices are set by my dumbest competitor.”

• Dealing with lowball bidders

The best tool you have is knowing what your bottom line is and refusing to dip below it. You can’t make money on unprofitable jobs!

• Compete on value, not price

Make sure your customers know and value what you are providing. If it’s not worth it to them, they won’t pay your price!

• Don’t just work to work

Make sure every job counts toward your bottom line. Every lowball job you do costs you in opportunity!

• Don’t bid to open doors

Pricing low to get in a new market seldom works long term. If they hired you on price, they will just as soon dump you on price!

Mark Karkos, president of Cut-To-Size Technology, gets it. He says, “For the most part we try to stick with our prices, because we have an excellent reputation as far as quality goes. That’s how I build the business. I don’t want to jeopardize quality to undercut someone.”

To learn more about how to price for profitability, attend Sean Benetin’s seminar during IWF.

By: David Jackson, Gemini Industries

Two component polyurethanes are replacing conversion varnishes in high end kitchens and other woodwork.
 
The popularity of two component polyurethanes (2K PU) is increasing. This is due to the improved durability and look versus other traditional finishes. 2K PU can have durability that surpasses conversion varnish. Some 2K PU coatings even have exterior resistance properties.  Couple this with the ability of 2K PU finishes to achieve a “natural look” (only 2-3 degrees of gloss) where the finished wood still looks unfinished or “natural”, but has the protection of a high end finish. And the ability to have a “wet look” full gloss makes them very functional for finishing wood kitchen and batch cabinets.
Conversion varnishes have been known as one of the most durable finishes used on interior woodwork, now progressive companies are switching to 2K PU for the improved durability and aesthetics.

Learn more about “How to Reduce Problems and Maximize Profits Using Two-Component Polyurethane and Waterborne Finishes” at the IWF2018 Education Conference.

By: Jamison Scott, Air Handling Systems

Dealing with combustible dust is no easy task.  However there are ways to mitigate fugitive dust.  One of the simplest, easiest and most logical is housekeeping.  It is much easier to keep a clean surface clean.  If you cannot tell the surface color of the machine your work area is too dirty.  For example, if the original color of the machine is blue and it appears to be brown, the color change is due to fugitive dust that escaped somewhere, somehow.  This means not only cleaning up but also finding the source of the fugitive dust.  Once the work area is clean and the source or sources are dealt with, your fugitive dust issue becomes that much easier to manager.

To learn more about his topic, check out the "Combustible Dust...an Explosive Issue" session at the IWF 2018 Education Conference.

By: Whitney Pyle, COO/Co-Owner: JG Bowers, Inc. and Advanced Cabinet Systems

It’s important to understand diverse cultures, perspectives and people both in your work life and in your personal life. In a previously published article I stated, “Together, the dimensions of diversity give definition and meaning to people’s lives and allow people to connect with others. Connecting with others is one of the best ways to ensure the long-term success of your workforce and your business as a whole.”

To dive further into this topic, let’s discuss the importance of connecting with others. It’s important for your success, both in your work life and in your personal life to connect with others and leave a positive impression. To leave a positive impression with people you must have a positive interaction. One way to ensure a positive interaction with people is to try your best to understand why someone might think or feel the way they do. For example, in your work life, purchasing choices are most likely shaped by a person’s environment, their needs, and their values. Consider dimensions of diversity such as gender, religion, and age in the context of purchasing. Purchasing is a key component of work-life and business. Having a deep understanding of what motivates people’s buying habits will differentiate you from others. It also allows you to really connect with the purchasers of your product. So, you must think about what is motivating a person. Understanding the diverse make-up of people will allow you to gain understanding.

Thinking about and understanding the dimensions of diversity also help you connect with people in your personal life. Being aware of the cultural norms and expectations from others allows you to understand other’s expectations and avoid unintentionally offending others. For example, western cultures are often more informal, where people often refer to each other by first names. In eastern countries, like Japan, this is frowned upon as it indicates disrespect. Being aware of the cultural differences is important, as you could unintentionally make someone feel as though you are not respectful, and that can hurt relationships in your personal life as well as your professional life.

If you remain aware of all the dimensions of diversity that make up a whole person you’re more likely to be more successful in your work life and your personal life. Connecting with people must be intentional, especially in business. As technology continues to grow and people become more connected, the opportunity to interact with people grows exponentially. In order to succeed in business and in your personal life your interactions need to leave as positive of an impression as possible. Understanding all the dimensions of diversity will allow you to have more positive interactions with others.

Are you looking for ways to start or expand a business selling urban wood products? Would you like to tap into an existing urban wood network or start one?

Then become a member of the Urban Wood Network and tap into the expertise of groups established in Illinois, Michigan, Missouri and Wisconsin.

Urban Wood Network partners have been dedicated to building urban wood businesses since the early 2000s and united to promote and demonstrate urban wood utilization. Our mission is to inform, collaborate, and connect to build business and consumer confidence in the urban wood industry. Firstly, joining the urban wood movement means becoming a valuable link in the urban wood supply chain. And secondly, it means connecting with other efforts around the country. The more we position the industry as a cohesive group, the greater awareness we can bring to urban wood utilization and the better access we can provide to those who want to grow with it.

The Urban Wood Network is committed to work in partnership with the full diversity of industry stakeholders to build a common understanding, language, commitment, and eventually, brand for the urban wood marketplace.

If you currently belong to another organization whose primary goal is promoting urban wood utilization, we are interested in that organization partnering with us and becoming an UWN member. You would then be a part of UWN through that organization. If there isn’t such an organization in your state, then we welcome you as an UWN member and will assist you in building an organization in your state.

What does membership involve? To become a member simply sign and return the agreement located on the Urban Wood Network’s website. With the valued input of its members, the Urban Wood Network will continue to work on developing our network, organizational structure, dues structure, sponsorships, and member benefits. Learn more at www.urbanwoodnetwork.com.

If you are attending IWF 2018, be sure to attend the free seminar, “The Urban Wood Revolution is NOW! Come Join the Movement,” 1:00 p.m. to 2:30 p.m. Friday, August 24 at the Georgia World Congress Center.  Click here to register and learn more.

By: Bill Boxer, Modern Finishing Products, Inc.
 
Last month we explored turbine/turbospray HVLP. There is a second HVLP format that utilizes a modified spray gun that complies with codes that define HVLP (less than 10psi at the air cap/nozzle) allowing these spray guns the title HVLP. These spray guns came about soon after HVLP was defined as a compliant technology initially based on the turbine/turbospray technology.
 
Spray gun manufacturers not ready to immediately commit to turbine/turbospray technology along with early limitations of turbine/turbospray systems found ways to modify conventional compressed air spray guns to comply with the 10psi limitation rule. Early entries into the marketplace left a bit to be desired along with continuous and numerous modifications. As time progressed, design improvements removed the issues and resistance to HVLP spray guns utilizing compressed air with consistent performance and desired atomization. Today, they are an accepted format and compliance with HVLP spray finishing codes. These spray guns are also known as HVLP Conversion Spray Guns.
 
Unlike turbine/turbospray technology which is fairly standard between manufacturers other than appearance, spray gun features and market philosophy, HVLP conversion spray guns come in all shapes and sizes, all designed to meet compliance rules. Internal and external design of these spray guns vary widely depending on the manufacturer.
 
While this article is not a commentary on conversion spray gun design or what is right or wrong or is it “actually” HVLP, I would rather comment on a few features and the positives and negatives of HVLP utilizing compressed air as opposed to the alternative HVLP turbine/turbospray systems. At the end of the day it is all about higher transfer efficiency and where mandated, air quality compliance.
 
In visiting many spray finishing shops over the years one of the things I consistently noted was the spray finisher trying to utilize HVLP conversion spray guns like they used their conventional compressed air spray guns and here in lies one of the issues. Most often I found the spray finishing technician exceeding the recommended inlet pressure settings to keep the HVLP spray gun at the designated 10psi or less thereby operating the spray gun out of compliance and defeating the primary goal of higher transfer efficiency, paint savings and reduced VOC’s in the environment. What is the answer? Better education in using HVLP Conversion Spray Guns.
 
Another question that comes up regarding HVLP Conversion Spray Guns: “Are they equally efficient as the alternative turbine/turbospray technology?” In the early 2000’s I was involved in a program to evaluate HVLP tubine/turbospray technology and HVLP spray guns for compressed air. Turbine/turbospray technology proved to be the most consistent and highest overall transfer efficiency. HVLP Conversion Spray Guns utilizing compressed air were more efficient than conventional compressed air spray guns but not quite as efficient than turbine/turbospray systems. I should note that the HVLP Conversion Spray Guns were operated within compliance guidelines.
 
There are a few additional points to note regarding HVLP Conversion Spray Guns for compressed air.

1. Oil/water in the air lines are still an issue and require efficient oil and water filters to avoid contamination issues.
2. Internal spray gun design is critical to achieving efficient atomization at the reduced air cap/nozzle pressure.
3. Most, if not all HVLP Conversion Spray Guns for compressed air require a significant size air compressor (3hp/20gal tank is minimum) with adequate air storage to ensure not running out of air and the need to wait for the compressor restore air.

 
The last question that comes up: How do I select an efficient HVLP Conversion Spray Gun to utilize your own compressor?
 
Here is my personal guideline: If a spray gun can operate on both a turbine/turbospray system and an air compressor, the utilized air is being converted in a similar manner thereby producing the highest efficiency possible assuming the operator keeps within the recommended compliance guidelines. This is not to say that other HVLP spray gun design will not provide efficient results. They absolutely will. It’s on the operator to utilize the spray gun to its maximum efficiency.
 
To conclude: We all desire the highest possible finishing results for our spraying applications. Who doesn’t want a cleaner working environment, higher efficiency, paint savings and the ensuing financial savings. Each paint shop and applications are different. For many an HVLP spray gun for compressed air is a wise choice and for others an HVLP turbine/turbospray finishing systems is right. Speaking with a knowledgeable source with valued information can help you make the best choice.
 
 Learn more about this topic during Bill's session "HLVP Turbospray Technology, Past-Present-Future" at the IWF 2018 Education Conference.

By:  Terrance K. Resnick and Leon B. Resnick

                                                                           (Part 3 of 6)

Bill and Will, two lifelong friends started a woodworking company together. Bill’s strengths were on the entrepreneurial side and Will brought blue collar talents to the team. They determined that company ownership would be held 55% by Bill and 45% by Will.

Although Bill and Will remained the closest of friends and business associates, neither was particularly close with the other’s wife as neither wife was actively involved in the business. Furthermore in the 25 years that Bill and Will owned the company, there weren’t more than a few times per year that the spouses stopped by the business. One day that all changed. Bill was in a fatal accident and because there wasn’t a properly structured and funded buy-sell agreement, Bill’s wife became the owner of his 55% interest. 

Bill’s wife and Will, now co-owners, talked and Will assured her that he would be able to keep the company profitable as it always had been. Even though Bill’s wife wanted to believe in Will she was not comfortable putting her financial future in the hands of someone she couldn’t know for certain could keep the business successful without Bill’s input. Bill’s wife decided to immediately sell…….during a down economy and for a sales price much less than what the company would have garnered during a more normal economic time.

Protect yourself and your business – Properly structured and funded Buy-Sell Agreements are a must!

Learn more about this topic during the Survive and Thrive - Assuring the Long-Term Success of your Company at IWF 2018.

By: Gary Vitale, GFV Business Advisory

Building a team is much more than putting individuals together and identifying a common cause.  To be successful, there are a number of steps necessary to ensure team members understand what they are going to be doing and the importance of the task or challenge they are addressing.  We explored Trust and Understanding Yourself and Your Teammates in past articles so now we get to the part where you are actually building your team and the components that make up high performing teams.

Roles and Rules

For teams to operate efficiently and be successful, each member of the team must understand their role and be willing to perform at the highest level to continue to be on the team.  Sports teams have plenty of role players.  They are called on to perform specific functions and are expected to be ready and willing to fill their role whenever necessary.  Business teams need to have the same diversity of talent to be successful.  Without this diversity, one or more competencies necessary for the team to excel will be missing and present challenges to the overall success of the company.

For a team to function successfully, four types of individuals should be participating.  We can give them names which I will later but, the primary indicator of if you have all four necessary components can be determined by the questions they ask.

• Type I asks: Why are we doing this?
• Type II asks: How are we going to do it?
• Type III asks: Who will be involved?
• Type IV asks: What do you want me to do and how do you want me to do it?

Type I people are the Visionaries.  They are the champions who can act as politicians, communicators, and persuaders.  They want to know who they need to talk to get this thing moving.

Type II people are the Strategic Thinkers.  They are creators that can take the information available, assess risk, and put together the action plan to move the project forward.

Type III people are the Peacekeepers.  They are the facilitators that take the plan, identify the best individuals to perform the tasks, and build consensus for the group.  They also try to promote a harmonious team atmosphere.

Type IV people are the Producers.  These are the implementers that take action and focus on tasks and productivity.    

The ideal team has all four of these types of people available but, as we all know, we sometimes don’t get everything we hope for.  This does not mean the team cannot function at a high level.  If you know which component is missing you can compensate by identifying the area where there is a deficiency and address it openly with the team.

This happens all the time in sports and the teams that understand their deficiencies and compensate for them typically are very competitive and capable of beating teams that, on paper, should beat them.  This was on display in the 2000 NCAA Basketball Tournament when Wisconsin played Michigan State at the Final Four in Indianapolis.  Michigan State was a much faster team and Wisconsin had to do something to slow them down.  Wisconsin was a very physical team and felt if they could control the game’s tempo and push Michigan State around they could win.  The score was 19-17 at the half.  The strategy seemed to be working.  Wisconsin eventually lost 53-41 but their strategy allowed them to compete with a team with far more talent.

The key is understanding what needs to be done and the talent you have to allocate to the task.  With all this information available, you can formulate a strategy that gives your team the best chance of success.

Once your team is picked and all four areas are covered, you can execute your plans with confidence, evaluate the results more easily, and make the necessary changes following the same process you developed when the challenge was identified and the team was selected.

The final step is to create a set of rules that will govern the team’s actions.  Successful teams have some level of autonomy but there needs to be well defined lines that cannot be compromised.  Types of reporting, frequency of reports, and overall accountability procedures must be in place.  Your team members need to be part of this exercise and buy into the importance of reporting and accountability.  With the right team, the right culture and the right attitude, your teams will succeed and ensure the organization operates more efficiently and consistently adds value for you and all stakeholders.

Learn more about this subject during Gary's session, "Building Winning Teams" at the IWF 2018 Education Conference.

By: Jim Larin, Fuji Spray

In the suburbs of Madison, WI lies a high end fine furniture production shop run by a 3^rd generation woodworker named Tom. Tom learned everything he knows from his father, who was taught by his grandfather. Over the past 30 years, Tom was able to build his father’s two man shop into a ten-person operation servicing Madison and the greater Milwaukee area. They are well known for their ability to make something out of nothing.

              One of Tom’s greatest resources outside of his company was Bill, a wise, 40 year old veteran of the local lumber yard, and Tom’s fathers first contact when building his shop. Tom and his father always seemed to joke at family reunions, “Bill’s invite must have gotten lost in the mail again”.  Despite the family’s admiration of Bill and his decades of wisdom, Tom would soon have a new-found appreciation for their family friend.

              It was the start of the busy season for Tom when he stopped by the lumber yard to speak with Bill about getting some slabs for an upcoming project, a high-end board room table for the top law firm in Milwaukee. As they spoke, Tom went over his workflow and how he planned to build & finish the table. After taking in the impressively elaborate plan of attack, Bill asked suspiciously “The plan sounds great, but what happens if something goes wrong?”. Without fully processing Bill’s concern, Tom confidently responded “Bill, you know me, and you know my father – our process is so calculated and carefully thought of, nothing can go wrong”. Together they both chuckled while reminiscing about Tom Sr. After the lightheartedness subsided, Bill couldn’t help but say, “I don’t want to be the one to say I told you so but remember what your Dad would say – “when it rains it pours”. Tom nodded, thanked Bill for his input, loaded the remaining slabs into his truck, and started the thirty-five minute drive back to his shop.

              Over the next three weeks Tom worked in his shop on perfecting every angle and profile of the table to meet the specifications of the designer. Tom was so confident in his ability to meet his deadline that he included his new apprentice, Mark, during the build to show him the ropes of what it takes to build for high end clients with premium materials. As week four approached, Tom began preparing for the delivery of the finished piece. The law firm was on the 37^th floor of a tall corporate building so Tom knew he had to plan ahead to make sure everything ran smoothly on delivery day. First, he arranged for a large rental truck as the table was far too large for Tom to transport in his truck. Since this was a corporate office, Tom was unable to secure a freight elevator during working hours and was told he must deliver on the weekend. For this reason, Tom had to pay overtime for two of his employees to come with him during transportation and installation.

Despite all the preparation, delivery days were always stressful. This particular delivery would prove to be the biggest test Tom would encounter since taking control over the shop thirty years ago. To start things off, heavy traffic caused Tom to miss the drop off time. Because of this, the team had to wait for security to get off break to gain access to the building. Then came the install. While moving the table through the tight boardroom doorway they scuffed one whole side of the table’s live edge and damaged two of the legs. Despite this, Tom was confident that they could buff out the scuffs. The table leg damage was only a minor aesthetic issue, would not affect the tables structural integrity, and was hard to see unless you really looked for it. That was before Mark, carefully removing the packaging straps, lost hold of his end of the strap and let the metal claw gouge the centermost part of the table. Tom was devasted, but before he could react, one of the firm’s partners walked in and said jokingly “you had better fix that or else we’ll sue”. Tom was too upset to find the humor in the comment and immediately began moving the table back to the elevator and down to the truck. During a moment of perceived levity, Mark joked “I guess Bill was right again, eh?”.

Tom delivered the rental vehicle without gas and had to spend the rest of his weekend in the shop reworking the problem to prepare for a second delivery. Due to his frustration and anger, he felt it was necessary to let Mark go. Next, the employee time cards and the rental invoice from the weekend came in – already Tom knew he would be losing a lot of money on this job. Luckily, the firm was understanding and reserved a freight elevator during working hours. Tom was grateful until he saw the $350.00 parking ticket on his rental vehicle for parking in a fire escape. At the end of the day, the table was delivered and the client was happy, but Tom was not.

A few days passed, and Tom learned how important it is to repair and refinish on site. He decided he would purchase a portable spray finishing system. His local retailer, the lumber yard, had just what he was looking for. So, Tom went on the thirty-five minute drive to the lumber yard to pick up his new investment. As Tom arrived he noticed that Bill’s son, Jeff, was holding down the fort on that day – Tom was relieved he didn’t have to speak with Bill, tail between his legs. Tom spoke with Jeff sharing the nightmare he encountered. After finishing his lumber yard therapy session, Tom shook Jeff’s hand and thanked him for his time. Before closing the door of his truck he said to Jeff “so what are the odds this stays between you and me?” Jeff smiled and waved as Tom pulled out of the yard.

After the final payment came in from the law firm, Tom decided he deserved a long weekend and took Monday off to spend time with his children. Around noon Tom heard a knock at the door and saw that a delivery woman was waiting out front with a long and slender parcel. Tom wasn’t expecting anything and was excited to see what was inside. Upon opening the package, to his dismay, he found a large umbrella and a small hand-written note from Bill. It read:

“Hi Tom,

I spoke with Jeff. I hope this umbrella serves you well.

Sincerely Bill.

PS: I told you so…”  

By: Larry O'Keefe, LJ Okeefe Inc.

Too often we hear Lean Manufacturing (or Toyota Production System) referred to by one or more of its many technical tools. Some call it ‘kaizen’, ‘JIT’, 5S and so on, leading one to perhaps believe these tools or elements are the essence of Lean. In fact, nothing could be more incorrect.
 
The Toyota Production System, upon which Lean Manufacturing is based, is a balance of three elements. Those elements are the Philosophy, True North (perfection is the goal) and the Technical Tools. Obviously, when a company begins its lean journey applying technical tools is one part of the response to the problems being attacked. Unfortunately, the efforts that simply apply tools without also embracing the other elements will fall far short of achieving sustained results or perhaps never achieve any real improvement.
 
Some companies even go so far as to decide to avoid implementing key parts of the system and then will explain that Lean Manufacturing does not work, or does not work for their business reality.
 
For example, some efforts may attempt to implement the concepts of JIT, such as takt time, continuous flow or pull systems while deliberately avoiding the foundation tools like production leveling. Implementation of these tools is not sequential; there is not a defined step by step process of when to implement each piece. Many will be implemented simultaneously, where simply leveling by volume within some time frame is used in order to balance a line to takt time and create standardized work. Too often I have clients tell me that they cannot level production because customer demand varies daily, even though lead time for the product is weeks or even months!
 
One role of top management in leading a lean transformation is to challenge current paradigms and conventional thinking. As my first Sensei explained to me when our plant was struggling with the concepts, “TPS is a revolution against current practices”.
 
Learn more about this topic during Larry's session, Leading Change, Top Management's Role in a Lean Manufacturing Transformation at the IWF 2018 Education Conference.