by Paul Downs
It’s a relief to stand up on Monday and report a really solid week of sales and an improvement in our cash position. And a healthy backlog—we’ve got seven weeks of work queued up. I take some pains to explain the problem of the government jobs to the crew—we’ve just committed to do a lot of work that must be delivered on time, and we don’t have nearly enough money on hand to complete it. We must continue to ship work at a good clip and hope that sales continue to come in, or we could run out of cash. But it’s not hopeless. I can delay outgoing payments for a while if I need to.
On Monday afternoon, I try to log in to my bank accounts and get a short message: “Accounts unavailable at this time.” What the—? I try again. Same result. And again. Ditto. I can’t believe that PNC Bank would turn off its Web site in the middle of a workday. I try the home page. It loads as normal. I head back to my account login. I still can’t get through. I turn to other tasks, and an hour later, I try again, but still no access. What’s going on?
Even during the panic in the fall of 2008, I knew that the government would backstop my bank if it failed. Until this afternoon, I’ve never been kept from my own money. Fortunately, at the end of the day, the accounts come back online. It’s all in the Times that night: Iranian hackers took down the five biggest banks. I briefly consider whether to take my business to a smaller bank, but then abandon the idea. Way too much trouble. I’m sure it will never happen again.
As it turns out, I’m wrong. I’m locked out four more times in the next two days, but only for a couple hours at a time. It’s worrisome, but I continue to do nothing. Funny how fast I can get used to something that had me so upset when it first happened. Especially when it would be a ton of work to fix.
Dan owns the last week of September. He gets his first order—another military job, with no deposit—on Tuesday: $30,045 for a big U-shaped table for an army base in Arizona. On Wednesday, he scores a smaller job for folding modular tables worth $9,660. And he caps his week with a twenty-four-footer for a general contractor in California, worth $18,055. After that one, I give him a handshake. He’s brought in $108,971 in orders, and for the first time has passed his monthly target. Nick is close behind at $93,832. I’m in the dust with just $17,558. I’m hugely relieved. For once, I can stop worrying that Dan can’t do his job.
We’ve booked $220,361 in new orders in September, $1,431,583 so far this year. If we’d consistently made our monthly target, we’d have sold $1,800,000, and I would have collected at least another $250,000 in cash.
I can dream about what might have happened, but eventually I’ll wake up and see reality: payroll, another $20,000 to the credit card, and vendors. Last week, I spent $28,382 more than I took in. That puts my ending balance, on the last day of September, very close to where I was at the beginning of the month. I started with $76,626 and ended with $76,019.
In my second Friday meeting with Will Krieger, we review the build-and-ship totals for the month. They’re good: $195,262 build; $221,612 ship. I managed to hold my spending to just $154,674 for the whole month, so we have a book profit of $66,938. It’s a good demonstration of the disconnect between standard accounting and what really matters—cash. Will knows nothing about accounting, but he’s very interested in this new way of looking at the business. “If we ship more than we spend, we’re making money?” Pretty much, although there are some things, like equipment depreciation, which have to be taken into account. I explain that in the short term, cash flow isn’t directly connected to profit and loss. But if we continually ship more than we spend, eventually we’ll start to see our cash reserves grow. It might take a while, but it should happen. I’m going on faith. I’ve never been able to consistently perform this feat, and I’ve always struggled with cash.
OCTOBER
DATE: MONDAY, OCTOBER 1, 2012
BANK BALANCE: $76,019.18
CASH RELATIVE TO START OF YEAR (“NET CASH”): -$61,135.14
NEW-CONTRACT VALUE, YEAR-TO-DATE: $1,431,583
At the meeting, I’m positive when I talk about sales, cautious when I explain our cash situation. I explain the payment terms for the military work: if these had been our usual buyers, we’d have another thirty-two thousand dollars on hand. I emphasize that we now have eight weeks of work. We need to get it all done quickly, without errors. Do I detect a lift in mood? From most of them, yes. Steve sits, as usual, hunched over and grim. I wish he would forget the past and cheer up when there’s good news.
The week proceeds with plenty more to celebrate. On Monday afternoon, Nick gets an order from a defense contractor. Two weeks ago he sold them a pair of credenzas worth $13,670. Now they commit to the rest of the room, an additional $77,690. We’ll get a credit card for 50 percent of that today.
On Tuesday, Nick writes a much smaller order: $7,460. On Wednesday, he completes the trifecta: an order from a company that supports large retailers, worth $19,684. Dan gets a whopper of his own. It’s the boardroom table for a local pharmaceutical company, worth $66,932. He’s been chasing this job since February.
In three days, a total of $171,766! We’ve collected deposits on all Nick’s orders, and some pre-ships and finals as well. We’ve added $100,056 in cash this week, and only spent $34,706. For the first time since March, I end a week with more cash on hand than I had at the start of the year.
My Friday meeting with Will focuses on how to do all this work. I tell him that we have a potential helper ready to go. Kristian Scheld sent me his résumé as I requested. I interviewed him last week. He made a good impression by mumbling his way through the interview, sweating profusely, barely able to meet my eye or answer a question. Typical woodworker. Will agrees that he’s worth a try. I call him after Will leaves. He’ll start next week.
The following Monday, it’s all good news: whopper sales, cash to match. Our backlog is up to ten weeks. I conclude by introducing Kristian Scheld. He waves to everyone but says nothing.
In the office, we agree that there are jobs that might land soon, but a down week seems more likely. We’re mistaken. By Friday, we’ve closed another $75,625. I win salesman of the week, with one large order for $47,816. And I get another small one the next day, $561 for data ports. Dan brings in $11,365 on Thursday, and Nick wraps up the week with a nice $15,883 order on Friday morning. Two weeks into the month we’ve sold $247,391.
I’m basking in this success on Friday when Bob Foote knocks on the door. “Uh, do you have a minute? My credit card just got refused.” Bob was ordering the cardboard we use to wrap all our tables. We usually buy a thousand sheets at a time.
I log in to my accounts and see that I’ve used $67,097 of my $70,000 limit. I consider whether to pay the whole balance. I’ve got $124,087 on hand. We’re still waiting for deposits to arrive from the non-military deals we’ve closed in the past two weeks. Taking out what I owe on the credit card leaves me with just $56,989. I decide to send in $25,000 and hope that more cash comes in soon. I end the week with $97,042. I’m back to negative relative to my January 1 balance. Oh, well. It was nice while it lasted.
On Friday afternoon, I tell Will that we need more overtime work from everyone out there. “And not just you and Dave,” I emphasize. Dave has been working an additional fifteen to twenty hours a week, and Will is not far behind. “You two can’t carry the whole shop on your back. Tell the other guys to step it up. I want at least five hours a week out of everyone.”
I rarely ask for overtime from the guys, even when we’re very busy. I know from my own shop floor experience how tired one can get after a long day, and how that leads to trouble: you’re hurrying to finish a cut. A little voice in your head is saying that something might go wrong. You ignore it. And then—I never removed one of my fingers, but I came very close. And I spent a lot more time in the emergency room than I saved by trying to cut corners.
I learned my lesson. I’ve always told my workers that if they hear a little voice, stop what they are
doing immediately. That seems to have worked. We’ve had no amputations in the twenty-six years we’ve been open. Now I’m telling Will to get the guys to hurry up, but I don’t want him to give them the impression that they should cut corners, either in quality or safety.
“So how are you going to tell the guys they need to work OT?” Will shrugs and says that he’ll just tell them to work some overtime. “Will you get them all together and tell them? Or one at a time? What exactly are you going to say? And what if someone says he can’t do it?” Will clearly hasn’t considered how to deliver this message. I continue, “When you’re in charge, you need to know what you are going to say before you start. Otherwise you might find yourself tongue-tied in front of a bunch of guys. That makes you look stupid. It’s OK to write down notes with the things you have to go over. And you have a choice here—discuss this at the Monday meeting, or call the shop guys together afterward and have a smaller meeting, maybe out on the shop floor. Which do you think would be more effective?”
He considers. “I don’t know. In the meeting, the whole company gets to hear the announcement. If I do it afterward, then it’s just the shop guys, but it might not seem like criticism. They already work hard. But then again, it might be more special because it’s not just the meeting.”
“Good points. Now make a decision.” Will suggests that we do both—I’ll announce it at the meeting and then he’ll repeat it in a huddle on the shop floor, to make sure everyone understands that it’s mandatory. I like that—it’s better than what I came up with.
Next Monday, my speech focuses on sales and why we don’t have the cash balance to match: missing deposits and military orders. And then I tell them about overtime. No visible reaction, as usual. The guys drift out the door to the shop, where Will is waiting. I watch. They pay more attention to him than they did to me.
The rest of the day I design a table for the CEO of the same defense company that placed the big order two weeks ago. They must be doing well. They’ve already run up a $91,360 tab, and now their boss is going to tack on another $35,000 or so. While I’m doing that, three checks arrive, totaling $27,213.
The next morning, I take a quick lap around the shop. Double take: it’s Jésus, missing since May, here sweeping sawdust. I find Bob Foote and ask where Jésus came from. He stares at me, then asks back, “Didn’t you set this up?” I wave Will over and say, “Jésus is here.” He gives me a “No shit, Sherlock” look. I fill him in: “I didn’t call Simba. He just showed up by himself. Do you want to keep him?” Will thinks, then says that with Jésus back, Kristian Scheld will be able to concentrate on learning to make bases.
I call Simba. “Jésus just showed up this morning. Did you send him out here?” He didn’t, but he’s happy to resume our previous deal. I go out to see Jésus. He gives me a big smile and holds out his hand for a shake. I take it—it’s like shaking a brick. “Where have you been, Jésus?” He keeps smiling—no answer. No English. Just work. I drop his hand and head back to the office. This is a nice piece of luck. I’m back to the same number of workers that I had at the beginning of the year.
On Tuesday, I look to see who owes me money. Number one: Brand Advantage. We’ve heard nothing since their check arrived last month. I send another invoice. I’ve had a nagging feeling all morning that I’ve forgotten something, and suddenly it pops into my head. The sample for Dubai. I’ve had no response to the proposal I sent to Shiva in September. But I was supposed to send her the sample weeks ago. We must have lost the job. If we were in the running, she would have pressed me for the sample, right? I send her an e-mail, asking whether she still wants it. No answer the next day. Or, as it turns out, ever again.
In our Friday meeting, Will says that he plans to spend significant time training Kristian Scheld, who’s showing great potential. I’m very pleased. Will is exactly what I’ve been missing all these years: a shop foreman with energy and imagination, who likes working with others and wants us to be a profitable business. My other workers are all excellent craftsmen, but none has Will’s extra spark. Where did it come from? His family is of modest means—his father works in a warehouse. But the Kriegers have a deep streak of mechanical genius. His father and grandfather can build or fix anything: welding, carpentry, electrical work, plumbing, auto repair. Will grew up helping them with all this.
Will got his first paying job at the age of fourteen in a local cabinet shop. His shop teacher knew talent when he saw it and encouraged Will to enroll in a local technical college, Stevens Tech. When he graduated, Will started working at a local sawmill, then moved on to another cabinet shop. One day it ran out of money, and Will was back on the job market. That’s when he saw my want ad.
Will’s background—modest education, modest college, bouncing from one crappy job to the next—is typical of the guys who work for me. I even have a couple who never went to college at all, and I suspect that Dave Violi didn’t finish high school. That doesn’t bother me. I’m not interested in credentials. I care only about performance. These guys are smart, and capable of doing excellent work.
When I look at Will, I’m looking across a class divide. He’s a very intelligent, capable man. His rural upbringing, and his choice of woodworking as a career, put him in a sector of the economy where very few people get rich, and most barely stay afloat. What would his future be if he had been raised in a family like mine and went to a decent school? He’d be on his way to the C-suite somewhere, by way of an excellent university. He’d be like my son Peter, who is also a self-starter. Peter, left to his own devices, taught himself to write code rather than work with his hands. Our local schools provided him with a solid education in math and writing to supplement his self-taught skills. And he’s gone directly to a well-paying, professional job, even before getting a college education. What if Peter was more interested in auto repair than software? If he worked in a succession of small repair shops, for workman’s wages? Would his classmates call him a success, or would he be a cautionary tale of brains and talent wasted?
That’s probably how my peers see me. I’m the guy who jumped off the professional track after college and ended up working with his hands. Struggled all my life to keep the business afloat. Never made real money. Never got advanced degrees. I get no recognition from my professional peers—woodworkers don’t have professional organizations. I’m buffeted by an economy that encourages manufacturing to go to countries with the cheapest labor.
I attribute my survival, in part, to my intellectual abilities, not my manual skills. I’ve taken my Ivy League education, and my design and marketing talents, and built a business that, despite many problems, has grown and produced decent jobs. If my sales issue is really fixed, my next challenge is figuring out how to move beyond survival. I need to improve as a businessman. In order to make a more secure future for myself and my workers, I have to get out of selling, step away from minute-by-minute operations. Otherwise, I won’t have the time or energy to take the next steps toward success.
For that to happen, Dan and Nick need to succeed. And if they do, we’re going to need to change how the shop operates. Will looks like the guy who can drive that transformation. Today I saw something that I haven’t seen in eighteen years: a shop foreman eager to spend time training a new worker.
At the Monday meeting, I report our sales for the month: $261,371. And cash is strong. Incoming deposits have reversed last week’s slump: $78,372 in; $24,310 out. Our balance is now $151,104.
The following morning, I check the overtime numbers on the pay sheets. My guys get paid time and a half for every overtime hour, which I see as a bargain. If I assume that I cover all my fixed costs in the first forty hours they work, OT hours are almost 25 percent cheaper, due to the lack of overhead. If the guys can keep working productively during the extra hours, the more they work, the better. But our call for overtime has yielded mixed results. Will Krieger and Dave Violi, as usual, are doing plenty. The problem is th
e other guys. Kristian did fourteen extra hours—a good effort. Ron did nine and a half hours. Bob did three and a half hours in the first week, but didn’t even make forty hours the second week. Sean worked just one extra hour. Steve Maturin did none. I’m baffled. Who doesn’t want to make more money?
On Friday, Will and I discuss the situation. He’s talked to the slackers and has listened to a variety of excuses. It seems that some of the guys just don’t want to be here any more than what’s required to cover their bills. What should we do? We’ve already told the guys that it’s mandatory, but we don’t have a policy in place that addresses what happens when they don’t comply. I could write one, but what would it be? Should it be a termination offense? Firing someone would teach a lesson to the remaining employees, but dismissing a highly skilled, difficult-to-replace worker would not help raise short-term production. It’s one of those situations with no clear best choice. We decide to do nothing.
Friday afternoon, after everyone has gone, I stare at my cash spreadsheet. We sold another $98,157 last week. Much of that came with deposits, and we’re still getting pre-ship and finals from work we’ve completed. Our haul this week: $81,852. It was tempting, as I wrote payroll on Tuesday, to give myself a paycheck. I’m just surviving on the $3,225 monthly interest payment that the company is paying me for the money I’ve loaned it. That takes care of my mortgage, but Nancy and I are in recession mode for all other expenditures: no new clothes, no travel, lots of macaroni and cheese. Peter will be starting school next fall, and I don’t have enough money to pay for it. Maybe he’ll be able to save some of his salary, and maybe I’ll get some financial aid, but I don’t want to assume anything.