Finding new revenue streams

There’s a little bit of a squeeze in the casework market going into fall because mortgage rates have topped 6 percent. That has affected housing starts, which in June were down 4.4 percentfrom a year ago.

Woodshops are looking for ways to pick up the slack, and one approach is to cut costs. That can be done by outsourcing more, or perhaps by upgrading the shop’s automation to shave a little off the payroll. But decreasing sales are income based, not cost related, so the key to a long-term solution is either sell more of the current lines or find new revenue sources.

Step one in either case is to affirm the business’s identity. Whatever the shop does exceptionally well should become the core message in its marketing. The idea is to be who you are and play to your strengths. That means a woodworker doesn’t accept every offer of work that comes by. Rather, it means we need to understand the value of what we do, what we can do, and who we have on staff. It also means not investing in new equipment until the shop has considered how to maximize what can be done with existing machines and processes.

The first step in firming up an identity is to decide whether, and then where, to specialize. That can happen in areas such as custom closets, kitchen islands, range hoods, floating shelves, laundry rooms, bookcases and libraries, butlers’ pantries, garage storage, wet or dry bars, outdoor entertaining, bedroom furniture, breakfast nooks, or even becoming an outsourcing supplier to smaller shops with less equipment.

Identifying strengths is macro, rather than micro, management. So, it’s important to involve the employees. People on the shop floor often see things that are just beyond the gaze of management. Asking their opinions and listening to their feedback helps management discover what the entire team sees as cumulative strengths. The results may reaffirm existing perceptions, but there’s a high probability that they’ll be surprising. Employees see bottlenecks and parts reject rates up close. They also know who’s good at what, who innovates, who solves small problems, and how. The shop’s greatest strength may be a product line, or a process such as coating or milling, or it might just be talented people.

Whatever it is, that’s where new revenue streams begin.

Brochures, showrooms and trade shows are useful marketing tools, but a comprehensive online identity is now essential for growth. It’s where people shop. And with flat-packed shipping, they’re no longer shopping locally. But that also works for the woodshop because potential customers all over the country have access to its website. And a buyer’s focus narrows if a search engine picks up on the fact that the shop does something differently or has a specialized area. So, hits online can help identify potential revenue streams because they reveal what people need or want.

Catching a search engine’s eye is done with a combination of search engine optimization (SEO) techniques and the evolution of a social media presence over several platforms. It’s tempting to explore and exploit these options in-house, but that’s probably not the smartest route. A cabinetmaker wouldn’t ask a software engineer to lay up a sheet of veneer, and it’s just as illogical to expect a woodworker to intuitively design a great online presence. It has become necessary to hire an expert in this area, rather than trying to tackle the complex task oneself. Today’s SEO has a very long learning curve.

A good rule of thumb when budgeting for an SEO expert is to spend about as much as you might on a table saw. The shop is buying a new tool here with an undetermined ROI and as with most tools, you’ll get what you pay for. A one-man outfit that runs most parts through a traditional cabinet saw should obviously spend less than a shop equipped with several CNCs and sliding table saws. But neither should skimp, because creating a new revenue stream is tied to attracting high-quality new clients.

The SEO subcontractor will want to know two things – who you are, and who your clients are. Zoning in on the shop’s strengths answers the first one, but identifying the correct marketing target can be subtle. Does the woodshop need to appeal to homeowners directly? Or should online marketing be focused more on whomever sends clients to the shop, such as contractors, developers, lumberyards, real estate agents, architects, interior designers, and so on. Those are two very different messages.

Once the base is identified, knowing the nature of its members will involve another technical acronym, CRM. A customer relationship management app keeps track of interactions (conversations, emails, etc.) with all past, present and potential clients. And that can help a shop discover new revenue streams because it reveals what customers want. They will literally sayso in their emails.

A peripheral aspect of CRM is asking clients and interested lookers how they heard of the shop. Their responses can help build a roadmap for marketing. Another part of CRM is soliciting customer reviews and then posting them. That doesn’tjust get you more stars, it also tells you what the shop does best and where it’s dropping the ball.

Zoning in on strengths and understanding the client base lets the SEO expert build an online presence that combines what the shop sells with people who will buy it. But the site builder’s job is just to get people to the website. When they arrive, they need to have options.

E-commerce gives potential buyers an immediate way to satisfy their impulse, which is to complete an online search and make a purchase. It’s no longer enough to show a few photos of fireplace mantles and tell people that’s where the woodshop specializes. They need to be able to see the fireplace in their living room. Virtual visits, 360-degree viewing, photolike rendering, and DIY design tools have all come a long way in a short time. To take advantage of them, the woodshop will need to reach out to a second expert. Most SEO teams also offer site building, but that’s not always their strength. A quick online search will reveal several sites that a shop owner likes, and most of them have the site builder’s info at the bottom of the page. It usually doesn’t matter where they are located: the woodshop will supply raw data such as descriptions and artwork, so the result will have a local flavor.

One quick and inexpensive way to start generating new revenue is to initiate a bonus program for both employees and subs such as installers, countertop suppliers, electricians, plumbers and painters. Giving them a fixed fee or a very small percentage of the gross encourages them to supply the woodshop’s contact data when their customers ask for a referral.

Outsourcing has become so ingrained in the industry that it might be time for a woodshop owner to approach smaller or similar sized shops throughout the region and see if they want to buy production time on machines that the shop owns (and they don’t). For example, a shop with one or two CNCs might want to approach smaller shops that are still using traditional machines and let them know just how affordably parts can be manufactured. These potential clients might be even more receptive if the CNC owner offers to use their materials and only charge for machine time.

Many full-sheet CNC owners can add a fourth axis (C) at a reasonable cost. This lets the machine do large lathe work such as reproduction newel posts and spindles. If there’s a historical area nearby, restoration work pays well. A CNC turns in the round without a full-time operator and delivers more precise results than freehand traditional lathe work or parts produced on a pattern jig.

Other new revenue streams can be generated by catering to the needs of non-traditional cabinetry clients such as custom RV shops and classic car restorers. Outsourcing also takes a lot of the work out of cabinet refacing and repair. There’s a large market for phone accessories such as CNC-made cases and hands-free stands. Charcuterie boards are a growing trend too, and they’re easy to make and ship.

Originally published in the September 2024 issue of Woodshop News.