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A Systematic Approach to Running a Small Furniture Operation: How I Use A.M.O.R.I.

13. September 2019 11:35

By: John Lindsay, New Breed Furniture LLC

 Here's a quick review of the management system acronym that I have been featuring in this blog: A.M.O.R.I. 
As readers who have been following me so far know, I find this home-grown, five-part business organizational tool essential in managing my growing wood manufacturing business. The system is called "A.M.O.R.I." - A is for administration, M is for marketing and sales, O is for operations, R is for research and development, and I is for Investments and Intellectual Property.

In the next series of five blogs, we'll run through an update on of how New Breed Furniture’s current business development projects fit under this system, one letter at a time. Hopefully, you will find some insights into the AMORI system through these concrete examples showing how the system plays out in a real-world woodworking business. And maybe some of these specific ideas could even work for your company. 

So let's start with A for Administration, and look at the development of New Breed Furniture's Discount Policy for Volume Purchases.

A - Discount Policy

When New Breed first broke into the furniture world, we were a very small fish in a large and red ocean. More on red and blue oceans later (see Blue Ocean Strategy by W Chan Kim and Renee Mauborgne, published by Harvard Business Review), but let’s just say there was and still is a lot of competition, which we were and are ready for.

What we weren’t ready for and aware of was the vast network of middlemen/women we would have to cater to. What we had to master was our wholesale and retail pricing.

If we wanted to place our brand new New Breed Furniture into high-quality chic furniture stores, we would have to be good little wholesalers and offer our work at 40%-50% off (sometimes as much as 55% off for floor models) the final sale price (M.S.R.P.). So we did it for the first few years, always at a loss because the orders were always small.

We believed, rightly so, that this was key to getting our products out in front of the right people, helping us to gain traction as a brand, opening other doors in hospitality and commercial commissions. In short, I wouldn’t do anything different, and that includes eventually doing everything differently when I decided to pull focus away from our original wholesale offerings and launch our own online store.

This second phase allows us to keep our prices down for the end user while increasing our RPT (revenues per transaction). So, now the name of the game is crafting the right discount policy, one that incentivizes the right kind of customers while protecting our RPT. The truth is that we just don’t have that much of a discount to offer, maxing out at a third off MSRP, rather than 50%, 

for the rare client that can deliver massive annual sales. Our new strategy is to go after direct sales, leaving the middlemen/women behind.

So here’s New Breed Furniture’s new discounting policy: a long list of the New Breed family, including repeat customers, designers, a  few supportive retailers, industry professionals, and makers will be issued their own representative code, that when used will offer a two-fold discount/credit, starting at 8%-16%, in which the user of the code gets an immediate 8% discount, while the representative get the same amount in future credit.

This percentage increases with the amount of purchases made under any given representative. Now, for example, if a client like our beloved repeat customer Cortney Bishop Design places the order themselves, using her own representative code, then she gets to enjoy both the discount and the credit for future purchases, making for a more conventional wholesale experience, but not quite totally the same. 

Level annual sales discount

  1.  $0-$24 →8%-16%
  2.  $24G →9%-18%
  3.  $48G →10%-20%
  4. $96G →11%-22%
  5. $192G →12%-24%
  6. $384G →13%-26% 
  7. $768G →14%-28% 
  8. $1,536G →15%-30% 
  9. $3,072G →16%-32%

Next time we'll look at the M in AMORI, Marketing and Sales - and talk about New Breed Furniture's approach to coupon design and distribution. 

The Cure For Jack of All Trades Mania Broken Down

7. August 2019 21:47

By: John Lindsay, New Breed Furniture LLC
In my last entry I shared an acronym I came up with that helps simplify what any kind of business owner needs to focus on, and here it is: 

Administration

M  Marketing and Sales

O  Operations

R  Research and Development

Investment and Intellectual Property

But before I give an in-depth explanation, my editor suggests I explain a little about
my own woodworking history. 

As the owner and principal designer of New Breed Furniture LLC, I have been developing for the last ten years a complete line of furniture including chairs, stools, benches, side tables, coffee tables, dining tables, conference tables, desks, dressers, credenzas, consoles, shelving systems and more all based on one beautiful innovation, the Petalply knuckle joint.

This discovery came after close to a year of research and development working with hundreds of 1/10th scale models and full-scale prototypes, searching for a wood-centric manufacturing system that also made for a great design language. Happily, something truly original and beautiful was realized. Structural components such as legs, arms, and stretchers combine and rotate around a structural dowel/tenon, maximizing glue surface while stabilizing each component, eliminating cupping or bowing of the wood. 

The tabletops defy the norm by not merely sitting over a base, but rather by spanning between component parts, resulting in a fully integrated monolithic structure. Add to that the creative use of penetrations in each piece that both allow for seasonal wood movement while freeing light and space to travel through and around each piece, creating a highly sculptural experience.

The effect is an amazingly strong structure that proves to be eye-catching, truly an example of beautiful forms defined by function. The shapes of the different components resemble the petal of a flower, and the layered glued components with alternating grain act like a muscular alpha plywood, thus its name “Petalply”. 

Of course my work includes other joinery techniques, each chosen because they are the best solution to the varied challenges of building furniture for so many situations, such as tongue and groove as the principle joint for all the case work, for both boxes and drawers. And then there is also my fascination with thick alternating solid wood veneers that are pressed and engineered to be both stable and durable, combining three, five, and seven veneers for different applications like doors and table slabs.

But it has been the Petalply joint that has been my main interest for this many years, so much so that it is almost embarrassing. I’m kidding when I say that, but there is a strange relationship in which I feel I am more its apprentice than I its inventor. Please forgive me if I belabor and gush about this work, but its been truly pleasurable pleasing customers employing it for so long.

The truth is, I’m yet to get sick of the process, I’m talking after tens of thousands of hours later, and it keeps proving a reliable technique for so many situations. Anyway, when you find a process that you love that offers great results, hang on to it, and double down on it, that’s what I’ve done with this. So, if you get a chance to search through my website, www.newbreedfurniture.com, and follow my social media you can judge for yourself if you think I’ve invested in something worth while, and if so then maybe what I will be continuing to write here might be worth reading, or not? 

To circle back around, in my last entry I proposed five questions: 

A Whether furniture, cabinetry, and millwork companies ever go back and analyze what parts of their initial estimates and systems for bidding were accurate?

M How to spend marketing dollars and time?

O How to use the shop floor in concert with the available storage to get best performances and build the best products?

 R How should a smaller to medium scale artisanal manufacturer continue developing their product line’s design languages while filling orders, collecting money, packaging and shipping, etc?

 I  Can you imagine being a venture capital fund that made strategic investments in parts of your business, expecting to see real return on investment?

Sadly I will have to tackle these questions in the coming editions, for now I must get a material order placed for my next exciting new commission, a new series of desks, a large wall console, custom conference and lounge tables for a company located in Bozeman, MT, Jelt HQ. In fact plan on reading about this too in the next installment. 

John Lindsay is President of New Breed Furniture LLC. Reach him at john@newbreedfurniture.com 847-946-7867. www.newbreedfurniture.com

Overwhelmed Being a Jack of All Trades/Master of None? Then Try Breaking It Into Manageable Parts

9. July 2019 16:01

By: John Lindsay, New Breed Furniture LLC

Editor's Note: This is the first blog in a series by design/builder/entrepreneur John Lindsay. 

After years of being an owner/operator of a small furniture company that offers more than two hundred solid wood products developed and manufactured in house, I determined I had to understand all my roles and responsibilities to help mitigate the anxiety that comes with having to wear so many hats. I began by going back to school - in this case, self-education through reading and listening to audiobooks - in pursuit of my own Masters of Business Administration degree.

I liken the process to reading about the latest research on aerodynamics while building a flying machine while flying said flying machine, while hurling down to the unforgiving ground at breakneck speed. What I was in search of were systems, philosophies, best practices, and heuristics that could help me structure my efforts building my business. 

What I came up with was a simple to learn acronym: A.M.O.R.I. which both represents the five distinct categories or departments that all business need to have to be able to scale while having its own business philosophy built into the name. This philosophy is that to be a successful owner/operator/entrepreneur you have to resist the natural desire to favor certain parts of your business over the others and learn to LOVE every aspect of your business, which means taking an active role in mastering all the differing roles. Here’s how it works:

A    Administration
M   Marketing and Sales
O   Operations
R    Research and Development
I    Investment and Intellectual Property

This is what I plan to share with you in this series of articles about owning your own woodworking business. However, discretion demands that I be transparent about when these ideas I share are more hypothetical, and when they have been practiced and hard-earned. In short, I am far from having mastered any of these categories, and in some cases have yet to have any real experience leading teams in the trenches, but rather, I am projecting forward standards I hope to one day prove essential to my success.

I’ll get right into it with the first letter of the acronym.

A  for Administration:

A question that has long plagued me was whether furniture, cabinetry, and millwork companies ever go back and analyze what parts of their initial estimates and systems for bidding were accurate? From my experience, it is very difficult to go back over a project, sift out all the necessary numbers, separating out the different activities and costs into the same categories, all in an effort to compare apples to apples. Then once the analysis is complete, be able to identify which unit costs or algorithmic heuristics are off and change them.

Next, keep a record of the changes with descriptions of the decision processes that lead to the change, so that they can be confirmed or denied time and time again. Finally, learn over time which systems are reliable, how reliable, and why? Instead, I imagine many companies skip these crucial process’, having completed the project, needing to move onto the next. My first principle thinking mind concludes that missing these steps will keep all bad practices and estimating flaws right where you don’t want them, in the driver’s seat of your profitability. In coming articles I will break down why doing this work is so frustrating and difficult, how to set up your operations and your administrations to best capture vital information, and more importantly how to know what isn’t necessary.

 M for Marketing and Sales:

Another question that every business owner faces is how to spend marketing dollars and time? It seems to me that if you have a company who sells products made of the most beautiful material on the planet (wood) and is handled and manipulated with expert skill and craft then why not learn to apply that maker’s talent to your marketing materials? 

In coming articles, I will break down why hand made marketing combined with smart social media is the winning strategy. 

O for Operations 

A third question that I ask myself as a user of space is how to use the shop floor in concert with the available storage to get the best performances and build the best products? In coming articles I will break down why most shops have it all wrong when they let their larger machines dominate their space with permanent footprints.

R for Research and Development

My lifeblood is dependent on the quality of the designs I am offering. For my kind of business, being serious about having an ongoing design process which includes art directing, engineering, cost analysis, market research, and comp collection is essential, but not always possible. How should a smaller to medium scale artisanal manufacturer continue developing their product line’s design languages while filling orders, collecting money, packaging, and shipping, etc?

In coming articles I will break down how dedicating time to experiments and explorations in design can be balanced with the day to day deadlines and orders.

I for Investment and Intellectual Property

This is the part of the article where I let myself dream, and share ideas about how to best invest real profits back into this crazy business that I am learning to run, while running it, while hurling toward unforgiving realities. The last question in this article is can you imagine being a venture capital fund that made strategic investments in parts of your business, expecting to see real return on investment? I much enjoy ignoring my present reality, and enter a fictional world in which the business (or business’) that I have created are all wildly successful and I’m faced with the happiest problem anyone could have, where to put the piles of money that is pouring in? In coming articles, I will dream big and imagine how real estate can be both the destination and generating agent of profits.

John Lindsay is President of New Breed Furniture LLC.  Reach him at john@newbreedfurniture.com