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The Plan We Use for Running Our Woodworking Business

25. September 2019 10:58

By: John Lindsay, New Breed Furniture LLC
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.

Let's 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%

We're on the letter M of the AMORI system. Hopefully, through these concrete examples showing how the system plays out in a real-world woodworking business, you may find specific ideas could even work for your company.

M - Coupon Design and Distribution

New Breed Furniture just finished paying off a Printa Systems Screen Printer (www.printa.com) and more in an early effort to make possible in house promotional materials and merchandise. The first projects will be shirts, postcards, flyers, and smaller posters. We have been working on a great stylebook for all these printing projects and more, including patches, buttons, stickers, and pins, but it was when I was working on new business card designs that this whole discount policy I previously discussed found a cool new expression and marketing idea. (Click for larger view of image.)Our first business cards were a bi-fold design (2” x 7”) with the front featuring a close up of our Petalply joint illustrated with black lines, four shades of white, and a cut out of wood grain where the dowel ends are. The inside of the card features what we called the “Galleria” in which our custom font spelling New Breed Furniture Network diminishes in perspective with line illustrations of a selection of furniture in the foreground.

With this new design, the line illustrated products will be on the front side, with the inside of the cards dedicated to a personalized cards for the list of the New Breed family described above on the right side, and the left card with tear away center being a New Breed coupon complete with the dedicated discount code also described before.

So imagine getting a box of these business cards that contain coded coupon cards that you can share with anyone you may know that may be interested in New Breed Furniture, and as the sales are placed, your New Breed Bucks accrue, allowing you to obtain more and more furniture for less and less. I consider this type of marketing a pre-emptive sales representative recruitment strategy.

Without even asking strategic enthusiasts will be giving an opportunity to fill the role left by the former retailers. This approach is in line with a continuum of business plans we are developing that blur the lines between consumers and producers, customers and salespeople, employees and owner-operators, but more on this in later episodes.

O - Dynamic Shop Design (D.S.D.)

Currently, New Breed operates out of a 4,000 square foot building with a full 4,000 square foot basement, and an added 2,000 square feet of combined garage and driveway. If we were to set up our machines and production with a traditional approach, dedicating space to permanent setups, we would quickly have a space shortage problem when larger orders or multiple orders are in progress.

Thanks to a conscious effort to offer solid wood furniture that relied on lower-tech manufacturing, we have been able to produce our work with-out cumbersome CNC machines and space-hogging equipment. This allows us to have all the machines and workbenches on wheels, in fact an effort has been made to develop storage solutions for our hand equipment and supplies to also be made mobile, thus we are able to increase our production space by an order of magnitude.

We have dedicated a small percentage of our floor space to be an area to consolidate inactive machines/benches/storage, freeing up the main production space to be organized daily for the tasks at hand. Also, by organizing the work into monthly batches, we are able to get the most out of each setup. The difference is amazing. Just from a material handling perspective, the efficiencies are stunning. Instead of the lumber going from one dedicated machine to the next, often ping-ponging back and for, zigzagging all over the shop, the lumber gets centrally placed, and the machines come to it, saving both our backs and our sanity.

The best part is how with each breakdown, the area gets a more thorough emptying out the area, cleaning out of the inevitable junk that collects in any workspace. The production space takes on the feeling of a Dojo, and the work enjoys a more serious concentration thanks to the lack of distracting clutter.

R - Abacus Desks

Often our new product development is born out of opportunity and necessity. When we were offered a chance to collaborate with AH Interiors out of Bozeman MT, on an exciting commercial project, Jelt HQ, we jumped at the chance to throw our hat in the ring and design a new line of desks and tables to go with a custom credenza that spanned close to 20 feet.

Liking what AH Interiors had first presented us, we used some of their details to inspire a new take on the Petalply system, and so we are now in production on a new line of desks we call the Abacus Desks, inspired by the classic trestle table. These desks have horizontal 2” dowels that serve as both the trestle like structure, holding the legs solidly square, while also facilitating sliding file cabinets that can run along the dowels like an abacus. The lower dowel will also make for a unique kind of footrest, and for the first time we will be offering motorized adjustable height desks that incorporate the Abacus file cabinets.

I - Retail Work Space and First Friday Furniture Festivals

Currently, we are converting a 2,000 square foot garage and enclosed driveway to what will be a finished show room space, along with another 1,200 square feet currently inside the shop. Once this remodeling is complete, and we have the floor pieces ready we will be advertising a regular monthly event, the First Friday Furniture Festival showcasing our work, other merchandise we create with our screen printing facility, fresh sushi and fruit, wood themed locally crafted beer and coffee, and eclectic live music.

Thanks to our Dynamic Shop Design mentioned previously, we are able to convert our work space into a disco palace, facilitating both furniture shows and dance parties. These events will be targeting an exclusive class of designers, industry professionals, and enthusiasts. The goal is to host a regular gathering that will be sinked with our monthly productions, allowing us to share our work fresh out of the oven, while gathering a concentration of design rock stars and influencers. I will definitely be sharing more on this in upcoming episodes.

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

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