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Posted By

MILDRED COOK (East Providence, RI)

Category

General Contractor

Posted Date

3/9/2018 12:00:00 AM

Forum Title

Question On New Custom Cabinet Business ...

Good morning everyone.I thought of posting this in the business section, but it's related to carpentry so I try it here instead.==> I really need your advice so please pardon the long post & read everything to advice me. I'm currently a GC doing mostly K&B remodel, occasional room addition, about 3-4 custom homes in the last 6-7 years. I've been using low end RTA cabinets since start. And that's where things get ... stuck I guess.Low profit margin, non-wow factors to generate high-profit potential referrals getting me into exploring semi-custom options instead. I posted about this and get quite a bit of useful info from this forum, which I'm thankful of. But then recently after reading a lot of posts on this forum & ran into the senerio described below, I'm thinking about the option of becoming a custom cabinet maker. So the story is, I ran into a custom cabinet maker in my area, nice guy I think, who built 2 custom fireplaces for one of my projects earlier this year. Really like his quality. Checked out his cabinets, looks really nice too. But I don't know enough to judge if he would be one of the best around my area as he claims.Now the question: I've been thinking about 2 possible options I'd like to have advices on:- I just rented a 6K warehouse I mentioned in one of my other post. It has a 14x17 room up front I can use as a showroom, and a L-shape area in the warehouse area (about 9'x12') as well where I can use as a display area. 2 single restrooms (6x9 each) can also be used as showcase. One big room about 18x26 in the middle can be used as a shop area. The rest I let a non-profit group I'm a part of use. So option one would be to use this place as my own showroom/shop and start my brand new custom cabinet making department. Tools I already have: table saw with router table extension, planner, drill press, and a couple of other. With this option, I would have to learn most of the how-to's (material ordering, finish, good box building techniques, etc. etc.). Ok ok, I need to learn from scratch. This location is in an average area of an average city of my area.- Second option: the cabinet maker I mentioned above has a warehouse/show room about 4K sqft in a very good area where all the big granite & cabinets businesses located. He just moved from a smaller place around the corner, in the corner, to this much more visible-to-traffic place for about 6 months or so. We talked and there are 2 possibilities with him: one is I partner 50/50 with him, which I'm NOT a fan of (partnering that is). Second is to just buy his company out right. If he sells, he will be helping me learn everything for about 3 months. Right now his business is 80-90 referrals, with home shows (about 2-3 shows/years), no other marketing. His average kitchen (cabinets only) is about close to $20K. I've seen a couple of his contracts for $35-$45K. Buying his company out is so tempting since I would just take over his claim-to-be on a rise company. So my questions are:+ which choice makes more sense.+ For option 2- how do I determine how much his business worth (multiple of net/gross income?)? How much I should offer him? If he asks for a number, how much I should negotiate back?- how do I make sure if his cabinets are high quality (so I can keep following the system)? I've only seen RTAs, so not sure how to define a well-built cabinet- how do I make sure he won't start up a competing company right next to me? We mentioned about signing a non-competing (terminology?) paper and he said he has no problem with that.- just a glance over his numbers, I figure his net is about $12-$15K/month for the last 11 months, plus some of the ... cash-paid projects on the side. He said 2 years ago his gross was averaging about $2.5M (but on the safe side I'd say about $1.5-$2M) with 18-20% profit, after paying himself. There's a high potential of signing a 1 year contract with a builder for just doing RTA for a potential net of $100K (doing ~$7K-$8/month, just assemble the RTAs & install).- the purchase would includes everything: display (1 big kitchen display 10x20 dual-used for home shows as well), computers (2), furniture (2), all machines, 1 box van (I think GMC 7x16).Sorry for the long post as ... usual, but I really need your help on this. I'm really excited about this but not sure if the high end custom cabinet business is still good or not (seems like most of you are moving into bigger places).Thank you very much. Nhi
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