Maintaining Sound Business Practices

A person running a very small business is often tempted to shortcut the formalities of good business practices, especially in certain situations.

As I’ve mentioned in previous articles, restoring antique furniture had been a large part of my business for a long time.  This niche encouraged a unique relationship between my customers and me.  Almost all of my customers came to me through references from their friends.  Because of this, my customers had some trust in me before I even met them.  I also tended to trust them because I knew at least one of their friends. Antique collectors were a group of people with a distinct personality and working with them required a certain sensitivity.

As a result, my business had been conducted using the following procedure:

  • A potential customer called me with a request for my furniture restoration services.
  • I made an appointment, went to his or her home, inspected the furniture, and gave my advice on what needed to be done in order to restore it properly.
  • I didn’t charge for this service.
  • I gave them a time frame necessary to complete the work; with repeat customers I didn’t always give an estimate of the cost.
  • I took some or all of the furniture back to the shop with me.
  • I delivered the furniture back to the customer when I finished the work and collected the payment in full.
  • Often, I took more of their furniture back to the shop on the return trip and repeated the process.

This idyllic relationship worked out well for over forty years. Rarely did I have a problem with a customer. Only occasionally did I not get paid the full amount of money owed to me at the time of delivery. I always got paid within a reasonable amount of time.

As a model for conducting business in general, however, it bordered on the insane. I can’t imagine another sector of the woodworking business where this would work. Having this type of relationship with my furniture restoration customers lulled me into a sense of security that got me into trouble in other situations.

One time a man came into my shop with a sample door from a cabinet in his home that he planned to modify.  He wanted two duplicates of the sample door made at a specific size and he wanted the color and finish to match the sample. Since he was an acquaintance of one of my existing customers, I assumed he was honorable so I fabricated the doors for him. When I finished, I repeatedly attempted to reach him by phone. He never returned my calls. Years later, I got through to him. He remembered and admitted to commissioning me to fabricate the doors but said he had long since gotten rid of the cabinet. He felt no obligation to pay me for my time. It wasn’t worth pursuing the matter.

Part of the problem was that he didn’t take me seriously because he had nothing at stake. I hadn’t made him sign anything or taken a deposit. Unlike the situation with my restoration customers, I didn’t have any of his furniture in my possession, only a door. Apparently, the cabinet he was modifying didn’t work out and so the doors became worthless to him. They were certainly worthless to me, as well. That’s when I realized that I had to use a different strategy for custom fabrication work.

With custom fabrication work, protecting your interests is a challenge right from the beginning. When you first consult with a customer, it can be considered part of the selling process and you really can’t charge them for that. At some point, however, you need to determine where the selling ends and where the design process begins. You need to be diplomatic but you can’t spend endless hours guiding a potential customer through the process of figuring out what it is that he or she wants. You can end up being used and lose money before you get started. This, to me, is the hardest part of custom design work.

Hopefully, you’ll get to the point of creating a design based on the selling process with your customer and then it’s time to create a contract and collect a deposit. Sometimes, it’s best to create one contract for the design work and another for the fabrication. The design phase contract will often need to incorporate a price for the initial design and then an hourly rate for inevitable but often unquantifiable hours required to develop the design beyond what at first seems obvious. The deposit you require up front will need to cover your preliminary design work. Additional deposits need to be collected before revisions begin.

Once the design phase is complete, the fabrication contract must be signed before ordering materials. The amount of deposit is variable but 50 percent of the total value of the contract is not unreasonable.

Danger lurks when you encounter very small custom jobs. The amount of effort involved in drawing up a contract and collecting deposits for each and every phase becomes a burden, sometimes even ridiculous. So the tendency is to shortcut the process described above. In reality, this is often the only practical way to proceed.  The real danger comes when the scope of work gradually increases and your investment in time and materials becomes far greater than you originally planned. When the signed contracts and collected deposits fall too far behind, you can get burned badly.

Other segments of the woodworking industry dictate alternate types of payment schedules and some of the generally accepted protocols do leave you vulnerable. You just need to protect yourself as best you can with documentation and deposits.

Another way to protect yourself is to check out any new client as thoroughly as possible.  Take the effort to obtain references before extending yourself too far financially.

Woodworking, like any other business, will expose you to some risk. There’s no way around it. Each segment of the woodworking industry has its protocols and it’s important to protect yourself as best as you can within those protocols.