Authors: Paul Downs
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SALES HAVE BEEN SLOW
. Nick has sold three jobs totaling $30,665. Three orders from Eurofurn come in, another $16,297. Dan has been told that his bid for the California engineering firm, worth more than $35,000, has been accepted, and the purchase order will be issued soon. But we can't bank or build on promises. At the end of the second week of April, we have added just $46,962 to our total.
At the beginning of this year, I set up a Google spreadsheet to record our calls and e-mails every day to see if there are any patterns. It appears that we get about the same number of inquiries each day until Friday, when the rate drops in half, and on the weekends, when hardly anyone calls. We have been averaging 16.25 inquiries per week through the end of March. In the first week of April, we have chalked up twelve inquiries, and the second week of April, just nine inquiries. We have only had one week so far with as few as twelve inquiries, in February, and that included both a federal holiday and a big snowstorm. Nine inquiries is the worst week we have had all year.
This conforms to my theory about the April Swoon, but seeing it play out in real time is distressing. A steady stream of incoming calls is required for healthy sales. I can look back at orders from the past three years and see that we close a large number of small jobs, a decent number of jobs in the ten- to thirty-thousand-dollar range, and a few whoppers. It stands to reason that more calls will yield more of each type of job. If there are fewer of them, it is less likely that we'll make our sales goal.
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ON THE FOLLOWING DAY
, I make it in to work for a few hours, and Bob Foote updates me on the Company S situation. The CEO's assistant told him that he can pick up the table any time after April 18, but it has to be back for their board meeting on May 9. This is a tight window for us.
Bob has looked into various options. Our regular shipper quotes us $2,955 for a single truck, including driver, who would pick up the tabletops and drive straight to us. I would still need to fly Bob to Company S so that he could supervise packing. The total cost of that option, including hotel and wages, will be close to four thousand dollars. Returning the table will be cheaper, but it will still be in the range of $1,000, and we have to pay the installers to put the top back on the table. Any option will eat up much of the $7,551 that Company S still owes us. The job has been running over budget from the minute it hit the shop floor.
Bob thinks that it might be cheaper if we rent a truck in Milwaukee and drive it back ourselves. And he offers to take his wife along. She doesn't need to be paid, she can do a little driving, and they can stay in one hotel room. I'm convinced. They depart on Tuesday and return on Thursday. When we unwrap the tops, they look perfect until you get up very close. Everybody is disgusted that I knuckled under, but nobody can think of a better way to deal with it.
On the twentieth, I pack the family into my '99 Odyssey van and drive to Boston to attend MIT's new-student weekend. I'm hoping to get at least another two years out of this vehicle, but there's a worrisome hesitation between first and second gears. This is the second tranny in a car with 145,000 miles on it. I keep my fingers crossed, and we arrive without a breakdown.
The lowlight of the weekend, for once, does not come from Henry. Instead, a financial aid officer provides unpleasant news. My income last year, $260,992, disqualifies us from any aid. It was the one spectacular year I have ever had. In the preceding twenty-five years, my total income added up to $888,331. Assuming a 2,200-hour working year, that's $16.15 an hour. In 1994, when my twins were born, I took home $6,200 in wages. We qualified for welfare: WIC vouchers to help us feed the kids. We used those benefits for the next three years. And as recently as 2008, if you subtract the money I loaned the company to keep the doors open, I made only $8,357, or $3.79 per hour.
Financial aid calculations take none of that into account. As far as the aid officer is concerned, I'm a prosperous business owner with a substantial income and savings. He's not interested in the fact that my income is very volatile or that Henry (who is in the meeting with us) will most likely be living with us for the rest of his life and will require expensive care. He doesn't care that I have just stopped paying myself any salary. He considers only the numbers from 2011. When I paid out the big bonuses at the end of last year, I set aside enough cash to pay for Peter's first year of college. Right now, I have $78,525 in my checking account and $48,525 in another account for emergencies. MIT will cost about $65,000 (!) each year. We'll need the rest to live on. And in two years, my youngest son will be looking at colleges, too.
I suppose I could do what everyone else does and borrow Peter's tuition. But that presumes future income to repay the loan, and I have no confidence in my ability to make steady money. I'm terrified by debt that can't be discharged through bankruptcy, like student loans. No matter what happens to Peter or me, we could be stuck with that millstone around our necks for years.
I was very fortunate to start my adult life without student loan debt. School was a lot cheaper back in the 1980s, but my father and mother worked hard to put five kids through school without loans, and I'd like to give that same gift to my own children. If I had been saddled with loan payments, I would never have started my own business.
Driving home, I mull over all the numbers that don't add up: the sales we have not made, the cash on hand, my income for the next year, and the cost of putting two children through school. The one redeeming feature of having an autistic son: he won't be going to college at the same time as his twin. He will never need to go to college. He will be expensive in the future, but not right now.
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I STAY HOME
on Monday, since I am flying overseas after dinner. The long flight gives me plenty of time to reflect. Nick and Dan have sold a few jobs, but we're still far behind our target. My bank balance is down to $115,229. On the other hand, this trip holds some promise. At the very least, I'll see how an established company makes conference tables. And maybe this trip will initiate a flood of orders from Eurofurn.
I arrive in Hannover early Tuesday. Nigel told me that Eurofurn would make all arrangements for my stay. Sure enough, in the line of drivers holding cards, I see my name: “Herr Downs.” I am staying in Hildesheim, about fifty kilometers from the factory.
When I was in high school, in the fall of 1978, I visited West Berlin. It was the definition of “grim”âcold and foggy, and with plenty of war damage. Hildesheim couldn't be a greater contrast. It's a charming town with medieval walls and old half-timbered houses. My hotel is a restaurant with a few rooms on the second floor. I fire up my iPhone and find a text from Nigel. We will be joining Peter Baumann, Eurofurn's worldwide head of marketing, for dinner.
Nigel and Milosz, who's also here for the week, pick me up at seven. I am looking forward to real German food, but the sign on the restaurant says “Pizza.” And it's packed. A mention of Peter Baumann's name makes a table magically appear, along with some bottles of wine. We start drinking. About an hour later, Peter Baumann appears. He's young, cheerful, and fit, with a shock of blond hair. Nigel has prepped me on Peter's attempt to bring fresh air to the hundred-year-old company. Peter has led the expansion into Southeast Asia and the Middle East and is behind the move to start up in America. Everything has worked out well so far, but continuing economic weakness in Europe is raising questions about the wisdom of more expansion. The meal stretches on until midnight, but we don't talk business, just soccer and politics. I get the feeling that the real purpose of the evening is for Peter to get a look at me. I hope he likes what he sees.
Nigel and Milosz drive me to the factory the next morning. It's deep in the countryside. We'll be taking a tour with two new hires from New York, both in their mid-twenties: Jeff, in charge of shipping, and Pamela, who tells me, to my relief, that she will implement a new IT system. We're still having trouble with confusing job names.
The tour starts at the headquarters building. The walls are covered with large black-and-white photos of Eurofurn's designers. The message: product design is a heroic struggle, performed by geniuses. The company's head of design, Gerhardt, suddenly appears among us, dressed entirely in black. He talks for twenty minutes, explaining Eurofurn's philosophy: the company exists only to make superior design. How lucky we are to be able to participate in bringing these precious objects to the masses! He's mesmerizing. I'm both impressed and jealous. I've been designing furniture for twenty-six years, without much fuss. I take pride in my work and I hear from my customers that they like my designs, but nobody in the outside world has taken any notice. Will I ever have my own heroic black-and-white picture on the wall? Will I join the pantheon of form-givers? Maybe my relationship with Eurofurn will vault me from obscurity, and I'll become better known as a designer. Gerhardt's speech has inspired me to dream big.
Gerhardt leaves usâI'm surprised when he just walks out the door and doesn't disappear in a puff of smokeâand we are joined by Jens, an engineer who oversees Eurofurn's manufacturing subcontractors around the world. His job is to make sure that their products are identical to the work that comes out of the German factory. Jens is young and seems like the guys in my own factory: careful, diligent, and intelligent. He tells us the rest of the day's agenda. After the group tour and lunch, the others will see another facility. Jens will spend the afternoon with me answering any questions I might have about making tables.
The tour starts with the upholstery facility, where leather is cut and sewn into chair seats. About half of the work stations are occupied. The workers appear to be in their late fifties or early sixties. Their skilled hands guide laser-cut pieces of leather through the sewing machines. The finished product is beautifully made, consistent, and precise. Modern craftsmanship: machines and people, each doing what they do best.
Next we see the office. It's large, but the thirty-four people I see don't fill all the desks. I peek over one person's shoulder and see room plans with a table in the center. Jens explains that the tables are designed to fit the client's space, just as we do. I see a printout with a 3-D drawing tacked to a wall. Jens confirms that this is what the customer will see after placing an order. The model is not all that detailed, isn't in color, and doesn't show the wood grain or the room. Our presentations are much more impressive.
Eurofurn gets work from furniture dealers and architects, and through an old-boy network. Its CEO and other top managers sit on the board of other companies and influence purchase decisions. In contrast, Google allowed us to grow without any relationships with the mainstream furniture industry. We bypass the normal sales channels and still have a very prestigious clientele. But our sales tend to be one-offs. We work with a client and then move on. We have no network of allies in the market. When I ask Jens whether Eurofurn sells direct to clients over the Internet, he looks as if he has never heard of such a thing. “You sell something to a total stranger? Why would anyone want to do that?”
I ask him how they keep track of the variations in a job. Pamela, who has been hired to solve this problem for New York, overhears and says that the whole company uses an enterprise software package. She will be getting special training in it later today. I hope she masters it soon, and that it's actually capable of solving their naming problems.
We move into the woodworking facility. I can barely see the far wall. This building looks at least four times the size of my shop floor. Our first stop is a veneer cutting station, where a single worker, a middle-age woman, is fixing a manufacturing error. She is trying to replace the damaged section of a tabletop. That makes me feel better. We're not the only ones who make mistakes.
We walk for an hour as Jens explains how tables are built. I recognize every machine. This plant is larger, better lit, and neater than my shop. Every step of the process has its own logically arranged area, full of the very best German machinery, and special assembly jigs to speed production. There's a huge investment here. I see at least a hundred special lifters, to help a single worker move tops. They cost fifteen to thirty thousand dollars each. In the veneer glue-up area, there is a glue application machine. Last year, I looked into getting one, but was stunned by the price tag: sixty-five thousand dollars. It might make sense if we were doing thousands of panels a day, but we do only a couple at a time, using paint rollers that cost seventy-nine cents each. Three workers are hosing the machine down. I ask Jens how long it takes to prep the machine for work. Twenty minutes, and more than an hour for a three-man crew to clean it. “And we only had one order today. Fifteen, tops. The machine ran for less than thirty minutes.”
Jens's comment leads me to ask how busy the factory has been. As it turns out, most of the workers have been laid off. The recession in Europe has been brutal, and even in 2012, the market is very soft. My business grew steadily from the beginning of 2010 until March. Is the weakness in Europe starting to spread to America? We continue for another hour, and everywhere I see the same thing: beautiful machines, spacious work stations, but very little work being done.
Before I left for Germany, I asked Nick and Dan and Andy Stahl, my engineer, what they wanted to know about a modern factory. We came up with eighty-three questions. After lunch, Jens answers most of them but can't comment on build times, labor rates, or overhead costs. It turns out that, except for a couple of automated processes, we use similar machines, glues, and finishes. We are capable of producing most of Eurofurn's tops in our shop. How much we should charge is another matter. We won't know how long it will take us to make tops in quantity until we do it. And we don't even have cost targets to aim for. We need those numbers.