Woodworking....Leaving Money on the Table
Hey friends!
I know not a majority of our clientele dibble dabble in woodworking, which is why they come to us. However, I wanted to share some tips about "leaving money on the table," that relate to our business but also anyone else's small business.
I am a full time accountant M-F, I earned a Master's in Accounting & Finance in 2020 from Oklahoma Christian University. I purposely took extra accounting courses in school in undergrad because I thought they would be easy electives. So needless to say I am a woman who always is seeking ways to keep money in the business as much as possible. I do my best to assist other small business owners as well with tax filings, deductions and overall money saving tips.
In our field our main inventory item is wood. We make every single item out of this. Signs, crosses, games, chairs, desks, tables, patio furniture ... so of course the number one thing to do when running your business is:
IDENTIFYING YOUR MAIN BREAD AND BUTTER ITEM - and finding it at a lower price or cost.
Starting out I would buy wood from anywhere, no matter the cost. I just knew I had something to make, that would sell and mark it up from there. Over the years when our demand increased and my financial brain got wiser I starting keeping journals. These journals contained every lumber mill in our city, local and big box stores even Amazon. They listed the wood types that we most commonly use, the variations of sizing for each type and the price they sold for.
Meaning my list keeps changing, however I like to see where it started to where it is now. Sadly with the pricing increases it is causing inflation across pricing to our customers as well. These are things you must be transparent about with your clients.
Another way to keep your pennies off the table, ORDER IN BULK with BULK DISCOUNTS. Many suppliers and stores will offer discount pricing if items are bought in bulk. Open up an Amazon business account if you qualify for one. The Amazon business account will allow you to negotiate pricing with merchants if perhaps you need a specific item, need it in bulk but don't like the MSRP listed. You can request a discount if you purchase a said amount.
Many merchants will actually offer it in bulk discount for you without being asked. Big box stores like Home Depot and Lowe's will offer "rewards" programs such as Pro Members which allows discounts based on the dollar amount spent in a year. They also offer bulk discounts when applicable. It is important to sign up and utilize these options as they save you money! Local mills in my area allow businesses or frequent customers to set up "cash accounts or credit accounts.
A cash account is where you will pay for your items at the time of service but with the company's discount program which includes lumber or supplies. A credit account is where you will be build or charge in a lump sum for your purchases - extending a line of credit to you or your business. This helps build business credit if this is an option you can do, if not use those cash accounts and save 3-10% on lumber.
So we've covered keeping lists of pricing at more than one supplier, and signing up for business accounts, rewards programs and buying in bulk! These simple steps alone can save $$ especially with the direction our economy is in. Where else can we save pennies?
As a woodworker after you make a build, you generally will have some scrap leftover from that build, most clients won't ask for those scraps back as they have nothing they can do with them. We generally give our clients 2 weeks to request scraps from their build, because technically it is does belong to them, they purchased the lumber and supplies. If after two weeks we do not get a response to the scraps, we add it to the scrap piles and flip it.
FLIP SCRAP WOOD into profitable items. Even if your a novice to woodworking- and you have accumulated scrap wood somehow, you could be sitting on a couple hundred dollars extra if flipped right! We take our scrap wood and make home décor signs, wooden board games, coasters, mini shelves, children chairs, children stools, picture frames, and so many other ideas that come into my head. Let me give you a break down...
Sally purchases a custom made 6ft bookshelf from you, after completion of Sally's shelf you have a 2ft by 4ft plywood sheet 3/4 thick left over from her build. You also have about four 24in 2x4 boards. Sally doesn't request her scraps- you already made your 40-45% profit on Sally's shelf.
Now you take the scraps and decide to make a small children's table with the plywood sheet, and the 2x4 boards will make great kid stool legs if cut down to 2x2's. You cut them down and get enough to make two stools- you find more scrap plywood to use as the seat to their stools; and purchase foam, batting, and fabric to upholster the seat. Take the plywood sheet cut it down to a nice 2ftx2ft and make a table top, make or purchase legs for the table and add a scrap trim.
Wahlah! You have now flipped your scraps into another profitable item that you can sell at an affordable pricing for buyers who may not be able to afford a custom build price, but still earning 80% profit on this flip. This is only one example but there are several ways to flip scrap wood. We normally always notate to our buyers if their build is scrap flip, which many are excited about cause it also saves them $$ and able to support local!!!
We participate in many craft show, expo shows and festivals as a vendor and sell our scrap flips at these events. We typically attend one day show events with low vendor fees and a good show we can leave with over $300+ of profit on those scrap signs and décor that are sold. We use those funds to fund supplies and materials for our woodworking classes we offer.
The last item we want to highlight when leaving money on the table with your business or woodworking is ensuring you are properly tracking and claiming your mileage on trips to and from a business related trip. Doesn't matter if you sell clothes, food, magnets or wood. If you are making trips to Hobby Lobby, Lowes, delivering items to clients, going to shows etc. Anything that relates back to your business entity that you used gas and drove miles for - CLAIM IT.
This is the most common left behind pennies small business owners leave on the table. I help friends with their taxes who are doing their business taxes for the first time and I always ask, "How many miles are we claiming or did you track your mileage for deliveries and business related trips?" I normally am met with a blank stare or a confused response. When I show them how much money in deductions they left behind they are shocked and are quick to download a mileage tracking asap. CLAIM IT!