S-corps, and lawyers and wood...OH MY!


Derekkest

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I am absolutely new to this forum so I apologize if I am stepping on anybody’s feet. Anyways, I took that plunge of going Pro six years ago. It was in the real estate industry; however business is business no matter what you are doing.

Some of the things I learned along the way are relevant to any startup business be it woodworking or not. The first and foremost important thing I did before starting my company was to write-up a business plan.Yes a business plan! You don’t build tables and such without a plan do you? You never saw that grey haired guy from the “A-Team” work without a plan did ya? So what’s in a business plan or business model?

Well for starters, it doesn’t have to be a 10 volume encyclopedia type plan. Begin by sitting down one night and seriously list out all the things you will need as far as tools, space, basic inventory and the like. Keep refining that list as more and more things will pop into your head.

Once you are happy with that list your plan will evolve around it. Do you have the capital to purchase the “must have” equipment? Do you have the space you need or do you need to rent some? When I first started this company, I sub leased a desk in an existing office and worked from there. I paid minimal rent, utilities etc. I worked with what I had at my disposal. Yes in my business plan office space was listed, but down the line as for starting up, I didn’t need a lot of room.

Set a timeline to your model, make it like a goal. “In three weeks find office space for X amount a month”. Make the model obtainable and it will build confidence! Do NOT make a model stating “Bank my first million in one year”….More power to ya if ya can, but let’s keep it real.

Don’t forget to think about the unknowns in your business either. How will you ship your product? How will I advertise my services? If renting space, do I need renters Insurance to cover my tools? Do you have an attorney for any legal disputes? Do you have standard contracts to use? I cannot tell you how many times when I first started I had the “oh crap” thoughts run through my head. Why didn’t I get this, why didn’t I look at that.

The biggie for some of you may be do I incorporate or not? Well, that’s your call….Obviously my Title Company has to be incorporated and I did it as an S-corp. But, when I make toys or sell pens and little knick knacks, do I claim those on my taxes?…well…..uh…..sure I do (wink). The point being is when you get busy and the work starts coming in, you’re going to need to tackle this dilemma. There are a lot of ways of starting a corporation, make sure you look into ALL the options before deciding on one.

Ok, you have your model, you have a timeline, and you are ready to roll. The first mistake made by a lot of small companies is to sit in their office/shop and admire their machines, tools etc. Just because you have all the stuff to do the work, doesn’t mean anything with nobody busting your down for the work!!

You need to advertise and get your name out! Now for me, that involves a sales team, printed material, making office visits, luncheons, networking etc. But is it really different for a woodworking business? Sure you won’t find yourself sitting in the middle of 50 women at the Womens Council of Realtors or as I call them “The nags”. But talking to people such as interior decorators, going to shows, placing ad’s in your local paper are all things to consider. The hardest thing for me to get started was to get my customer base. I cannot tell you how many days I was thrown out of offices over and over again. You MUST be persistent and expect nothing to happen overnight. That being said, 6 years later, I am STILL getting thrown out of offices because even though I have a sales staff, even though I own the company, I still look for more and more work.

The point I am trying to make is be proactive and search out your clients!! Network in your area with Decorators, home remodelers, hell even realtors wouldn’t hurt now that I think about it. Talk to them, listen to them!

The power of listening to someone face to face is worth all the money in the world. Let the customer decide the way the meeting/talk will go, let them decide what course of action they should take. You will find that as you listen to someone, you are starting to build a mental picture of what they will want. Once that person is done, do your thing, explain to them that you know exactly what they are looking for and use your experience to help them make a final decision on what will be nice, and what will get you referrals.

The worst thing you can do is to keep cutting off a customer and interjecting. By listening you are empowering that person to tell you their needs. It seems simple enough, but you’ll be surprised at how much practice this can take.

Ok, so you have your plan, your shop, and now your first customer (I omitted a thing on pricing as it can vary WAY too much person to person, that’s for you to decide and price). Servicing your customer is the ultimate key to return business and referrals. Never lie to a customer, if the job is over your head, be honest and tell them that. Maybe you have someone you can refer business to for jobs that are, at this time, over your head. They can repay the favor by sending you jobs that are not cost effective for them.

Always go into any new job remembering one thing “If this were going in my house, would I be happy with it?” In other words, your name and reputation are what you put into the piece. Make ABSOLUTELY sure that what you make is what the customer ordered and it is of good quality. I am sure there are customers that will give you “some” design leeway, but you are asking for trouble if you just “assume” the customer wouldn’t mind a deviation or two.

Once the piece is done, and you either deliver or have the customer pick it up, take the time to go over it. Take the time to show the customer the grain, the finish, the joinery and the craftsmanship that went into the piece. It is one thing to sell someone on examples of your work; this is the time to talk yourself WAY up!!! You now have something to back it up with that the customer can relate to, use it.

Also, don’t be afraid to ask for referrals, Family members, friends etc. I know it seems awkward, but work it into a conversation. You made a piece of furniture; you didn’t close a multimillion dollar account so it doesn’t hurt to ask. Although, I suppose if I ever did close a multimillion dollar account, Id still ask for referrals…

K, so your first gig went great. On to the next one!!!! ABSOLUTELY NOT!!! Another small business mistake that a lot of companies make is “we got paid; let’s get to the next piece”. Take the time, maybe 2 weeks or so after delivery, to write up a thank you letter. Yes, dust off your pen, practice your penmanship, and write a letter. Don’t write a love note, just a simple letter thanking them for their business and that you look forward to any other needs they may have. Include a business card in there also if you wish. This seems like wasted time, but you would be surprised how far it goes.

The next important thing you want to do now is go over the last piece that you made step by step. What mistakes were made and how could they be avoided the next time? Did you price the piece right, if not, where did you go wrong? Can you make any new jigs to be more efficiant? Does the money from this piece put me at another goal in my business plan?

With that being said, I would like to take a moment and discuss business funding. Do not take the monies from your latest build and put them all back into that way cool planer with the 5.0 surround sound speakers that are just HAVE TO HAVE!!!! Be smart about it and follow your plan. If your plan stated that per each deal you were to put 5% back into the business for an upgraded tool, then follow it!!! Yes your plans are not set in concrete and can be altered at any time, but do not get crazy with it. Be sensible!!!!

Finally, have fun with it. Most of you, like me, started woodworking as a hobby. Once it becomes a chore with deadlines to meet and so on, the fun is replaced by stress. Always take some time out to work on a project that is for you.

Derek Kest

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Thank you Derek, great information and well written to boot.

I can vouch for all he stated above. I have a small company that I stared up 18 months ago (not woodworking, entirely different line of business) and I can say, He hit the nail on the head. Plan, plan and plan some more. As an old boss of mine used to say... "Plan your work and work your plan"..

I hope everyone reads this... Great information.

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Awsome info, thanks! How many employees do you have now? I heard once that every employee's salary actually costs the business twice that due to taxes, health insurance, etc. How accurate is that? What did you do before starting your business? How did you handle the (I assume) massive sudden drop on your income until your business was doing well enough to get your takehome pay similar to what you were making in your previous job? Lots of saving beforehand?

Do you have a website we can see?

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I really liked this post. I saw a lot of this first-hand with the startup I'm a part of as the CEO/founder is a spectacular salesman so the networking is in his blood.

Between this posting and several others I enjoyed in the "Going Pro" subforum, maybe I can work a plan to do commissions part-time (set allocation of hours per week, not "when i feel like it") and see where it goes.

My biggest hurdle? Pricing... :blink:

Thanks again, Derek!

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Awsome info, thanks! How many employees do you have now? I heard once that every employee's salary actually costs the business twice that due to taxes, health insurance, etc. How accurate is that? What did you do before starting your business? How did you handle the (I assume) massive sudden drop on your income until your business was doing well enough to get your takehome pay similar to what you were making in your previous job? Lots of saving beforehand?

Do you have a website we can see?

As of right now I have 5 employees, 3 sales girls, and I third party out my exams as much as possible. As far as the business income vs. employees benefits/taxes/etc.. You heard right :) Without turning this post political, thats all I am going to say about that ;)

A very smart man once told me, to start being good at what you do, you need to be doing it for 4 to 5 years. So for the prior 8 years before starting this company, I was working in the realestate industry. I started in a wee little Mortgage Broker shop as a loan officer. I rate loan officers back then as pretty much equal to a used car salesman since we both worked totally off comission. Anyways, I did that for a few years and sucked up as much information as I could. Once I hit a cap where I could learn no more, I left there and worked for one of the major banks. I did their post closing audits of mortgage loans and eventully moved into other departments such as quality control, fraud, etc. ALWAYS soaking up and learning as much as I could.

Now I am not one for business attire and I certainly resented the "corporate" mindset. So, I decided to just start out on my own and see what I could do. Yes, it was very painful at first as far as income was concerned. But, as I pointed out above, it was also written into my plan. I saved up EVERYTHING I could before starting out on my own, and when I reached the number where it was feasable, well that was part one of my business plan set in motion.

Sometimes, you just have to trust in yourself and take a leap of faith. Believe me, its not really a leap, its more of an evil kenivel jumping the grand canyon leap of faith.....But it is what it is and I wouldnt change where I am now for anything.

Oh, and the website is www.elitetitle.cc

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