Boss Life (9 page)

Do you know any wealthy woodworkers? I didn't think so. If they exist, nobody is talking about them. I'd really like to know how to convert my business into one that does great work, and pays its people well, and makes its owners rich. I haven't figured out how to do this on my own. I need to look elsewhere for guidance.

Where can I get good advice? This has been a problem for me from the start. I opened my doors when I was fresh out of college, back in 1986. I didn't even know anyone in the business. And there was no Internet back then, no magic universal library that answered every question. My nature is to try to figure things out on my own, which, in retrospect, has been bad for me. I stumbled on the most basic business problems: Where do I buy materials? How do I keep records? How do I pay taxes for my employees? How do I advertise? It was very hard to find answers. There were books about running a business, but none about
my
business. I never imagined that anyone would be interested in helping me, so I never asked for help. And I was always so strapped for time that I would implement the first idea I found, even if it was bad practice. I just muddled along for years and years.

When you get right down to it, nobody cares how I run my business, or whether I am competent or not. As long as I pay my taxes, my workers, and my bills, I am free to be as good or bad at business as I wish. This is the main reason that I took the risk of entering a partnership in 2002. I was desperate for some guidance. I presumed that The Partner, since he had money, knew a lot about business. It didn't turn out that way. He had been successful with previous companies, but we found out the hard way that what had worked for him previously would not necessarily work for my business.

The Partner was my sole source of advice for many years. He taught me a lot, and also led me astray. Not because he was malicious, or dumb, but because his experience didn't match the problems we were having. He was not good at identifying situations where the old ways wouldn't work. And we never found a way to identify the issues he had overlooked entirely—if he didn't focus on a problem, I would not do anything about it. This caused a lot of cash flow issues and management problems on the shop floor.

Fortunately, The Partner is an honorable and reasonable man, so our relationship did not descend into personal animosity. But our ideas as to how to proceed diverged, particularly in the fall of 2008. He wanted to shut us down, take his losses, and move on. Without telling me, he used most of our operating cash to pay down a line of credit in order to limit his liability. The company owed him a lot of money, and from his point of view it made sense. But I was counting on those funds to keep the doors open. Without my company, what would I do? We came to an irreconcilable difference in opinion. After that, I stopped listening to him.

During the years that I was getting advice from The Partner, the world was changing. With the arrival of the Internet, barriers to finding basic information disappeared. Now we are drowning in content. Unfortunately, quantity does not imply quality or relevance. I have found the business press to be useless. Pick up a magazine or paper, or read a blog, and you see one story repeated ad nauseam. Success! How this guy got it, how that gal got it, how this huge corporation got it, how you can get it. These stories are long on results and short on techniques, and almost always omit the really interesting details. There's an overemphasis on software start-ups and way too much emphasis on outliers, like Steve Jobs or Mark Zuckerberg. I've read a lot about those two, but never anything that stated the obvious: they were really, really lucky.

I have never seen a thorough, detailed account of a small business like mine. I'm looking for specific techniques for dealing with my particular problems. Many of those are complicated and technical and revolve around the personalities of the people involved. Given the format limitations that confront business reporters, and their own lack of technical knowledge, it's not surprising that everything we get is brief and vague. Nobody wants to write about the multitude of challenges that a boss faces every day, in a way that captures the difficulty of dealing with everything at once.

My biggest problem is finding numbers. I have to make most of my financial decisions without a good idea of what's normal. My competitors, like me, are all small, privately held companies. There is no single place where I can find any information on the size of my market, who the largest players are, or even what my competitors charge. We produce roughly $140,000 per employee each year. Is that good or bad? Is my second-best bench cabinetmaker worth $18 an hour or $21 an hour? What would this person be worth to another shop? The difference is substantial, both for me and for the employee. My AdWords campaign costs me $10,000 or more a month. Is that too much or too little? I'm paying a 2 percent sales commission to Dan and Nick, on top of a decent salary. I decided on that arrangement because it seemed reasonable. Was I wise or not? Would a different split be better? The cumulative cost of this uncertainty is hundreds of thousands of dollars each year—far more than I have ever taken out of the business. I'd love to know whether my spending decisions are high, low, or on target. For most of these issues, no information is available. For some, like the AdWords question, I can get vague answers from sources of questionable objectivity (Google itself, or consultants whose answer is always self-serving).

I miss The Partner because he was always willing to listen, and he knew the people who I was talking about, and his advice, even though flawed, was intended to help. It's been lonely since he left. Sure, my employees and I discuss the technical issues that arise every hour in a small factory—materials, jobs, broken machines, whatever. But on the larger issues, particularly the thorny intersection between the particular personalities of my workers and money, I have nobody within the company who would understand my perspective.

There are certainly small business owners out there whom I would enjoy knowing, but I haven't made their acquaintance in social settings. My wife arranges our social life. We go out regularly, but Nancy is an artist, so the vast majority of people we meet are in the art world. And from a business and manufacturing perspective, nothing they do makes sense.

At the end of 2011, I found a possible solution to my problem. It came in the mail: an invitation to join a group of business peers, organized by Vistage. They arrange regular meetings for groups of small company owners. Each group is vetted so that there is a similarity in company size but some disparity in business type—manufacturers, retailers, professionals like architects and accountants, software guys—enough variety to bring a broad viewpoint and avoid direct competitors in the group. Some of the members of each group are start-ups, some are multi-generational family firms, and some are like me—in business a long time, but stuck. A minimum yearly revenue requirement ensures that every member is a viable business. Each group is led by a trained leader. There's a group meeting and an individual session each month. I could bring up my own plans and problems for analysis by the leader and the other members, and I would hear about their companies in return.

I liked the concept. If it worked, I would have a chance to interact with people who are like myself. I also liked the focus on taking each business to the next level. It would cost me twelve thousand dollars a year and some hours of my time—cheaper and easier than trying to get an MBA.

I responded to the invitation, and Ed Curry, the group leader, scheduled a meeting at my shop. We met in December 2011. Ed is in his mid-sixties. He was raised in a small coal town in Pennsylvania, went to Vietnam for a year, and then worked for many years at a manufacturing company that made precision measuring equipment for auto manufacturers. That company had a couple thousand workers, and he worked his way up to a high management position. When they were bought by a German competitor, he went to Ernst & Young, the accountants. After retiring, he got involved in Vistage. For several years, he had been the leader of one group, but it had grown and he was splitting it up and putting together another. We ended up talking in my office for about an hour. Ed asked smart questions and listened carefully to the answers. A week later, I went to the introductory meeting, thought it was good, and signed the contract.

As of April, I have attended three meetings with the group. It's an interesting mix of businesses: an accountant, a software start-up, a trucking company, a coffee roaster, a house painting and repair company, a document storage company, two software firms, and three manufacturers. One does precision grinding of metal components, one makes prefabricated metal stairs, and one makes custom conference tables. The group is all male. Ages range from late twenties to seventy. Three businesses are multi-generational: the precision grinding company is run by the son of the founder, and the trucking and coffee companies date back to the nineteenth century. Every other company is run by its founder.

I'm particularly interested in learning more about the staircase manufacturer. It's owned by Sam Saxton. He is the youngest member of the group. He graduated in 2003 and then went to South Dakota to make his fortune. He bought farmland and put up tract houses, and prudently saved his profits. After the crash, he came back to the East Coast and looked for a company to purchase so that he could get richer. He purchased an outfit that manufactured prefabricated staircases, and then bought out a smaller competitor and folded both into one operation. He borrowed a couple million dollars from a bank to do all this. He needs to grow his companies quickly in order to service his debt and build equity.

Unlike me, who wanted to make things and ended up with a business, Sam wanted a business and ended up making things. He looks at the manufacturing part of his operation from a more neutral perspective. To him, it's just a cost center, like every part of his business. Administration, marketing, sales, manufacturing, shipping: they all need to pull their weight. If they don't make him money, and he can't repay his loans, the bank will foreclose.

Sam projects energy. He's a tall, strong-looking guy. He talks fast and with absolute assurance. Everything he has done since high school is aimed at business success. He studied entrepreneurship at Babson College, made his first small fortune before he was twenty-five, and since acquiring his factory, the sales have doubled. He has positive cash flow and is paying off a significant amount of debt every month. His biggest problem is operations—a couple dozen workers in a good-size factory are a challenge to manage under the best of circumstances. Sam has weak operational systems and doesn't have a complete grasp of how his product is made. He wants to get the manufacturing under control so that he can grow the company even faster. Or so he has told the group.

Since our operations are very similar, I approached Sam after our January meeting and suggested that we exchange shop visits. At the end of March, Sam and his shop foreman, Dean, came out to see my operation. They expressed polite interest as we toured the shop floor. Visitors are usually blown away by the action out there. Sam and Dean, having been in factories before, just weren't as impressed. Then I took them to the office and showed how we produce our proposals, how we make shop drawings, and how we use Google Docs for spreadsheets that we all needed to see at once. None of this elicited any comment. What got them excited was our database software, where we track our manufacturing activities from contract to delivery. Every day, my workers enter the number of hours they work on each project. We can see where each job is in our production stream and how many hours have been used at each point. And we can see all the jobs in each link of our production chain. It performs a bunch of other functions as well. It's an incredibly useful tool.

The Partner's daughter spent two years writing it for us. Her wages cost me about sixty thousand dollars, a bargain. Comparable packages from Microsoft or other vendors would cost hundreds of thousands of dollars and then require modifications to fit our processes. So I got an exceptionally well-crafted piece of software for very little money. Sam and Dean don't have anything like this, and their operations suffer as a result. They have a hard time figuring out exactly where each job is in their pipeline and how much labor they are using on each order. They're still using paper tickets to follow each job. Those get lost or damaged, and generate a lot of data entry work.

I tell them that fancy software doesn't solve all my problems. In particular, our estimates of the hours required to build each project aren't very precise, and there is a fair amount of error in entering data—my guys will often choose the wrong job from a drop-down list. Then their hours get charged to the wrong project. On a computer, bad data looks just like good data. It can be very difficult to tease out whether the numbers are a good reflection of actual operations. But I never want to go back to paper. We did that for many years, and it's much worse.

I make my visit to Sam's place in the first week of April. He's a few towns over, in the most non-descript building in a non-descript industrial park. There's no sign, just a couple of doors on a long, blank wall. The first one I try is locked. The second one opens into a small room with an unused reception desk. Behind it I see a dimly lit kitchen space, and then another door. Nobody in sight. I open the door and find myself out on the factory floor. It's very large and gloomy. There's a steady roar of machinery. A couple of guys are packing a spiral staircase in cardboard off to my right. “Sam Saxton?” I shout. One stops wrapping and leads me to a staircase. “Go up there, through that door. They'll help you.” I climb and find myself in a small room with six cubicles. Each holds a person wearing a headset, looking intently at a small screen, focused on their conversation. Eventually one of them looks up. “Sam Saxton?” “Sure, follow me,” he says, and takes me to the other end of the space. He knocks on a door, then opens without waiting for an answer. The inner sanctum, at last.