Stone People: The Rocky Road to Recovery
And, Reaume adds that he can make money referring a customer to a cabinet shop – as long as he gets the contract for the tops.
SOUND PHILOSOPHY
One of the things that helped save Reaume when shops around him were failing is his “run it like every dollar is your last” philosophy. Getting started, he says he purchased at least 75 percent of what he needed outright and tried to borrow very little.
“I didn’t want to be under-capitalized,” he says. “But, I also didn’t want to have a lot of debt service. I rented a building and started small.”
Later, as the business grew, he put more money into machines; not only do they have a better attendance rate than human employees, but they produce more work without error.
“If you don’t run it like every dollar is your last, you’re setting yourself up for a fall.”
Thomas Reaume
Southwest Michigan Granite
However, as the economy has changed, so has his philosophy. Today, the operation is only marginally larger than when he first started, with less volume, but Reaume says he’s making money.
“Part of that is because we don’t have any debt; we paid that off,” he says. “We also don’t buy anything unless the work we have pays for it. For instance, I’d like a CNC machine again, but I’m not going to buy unless I can get a good used one for the right price, and I have the work to really need it.”
The real problem he believes many shops have is that, when times were good, their business models were based on production. Now, large commercial projects are being supplied directly from countries such as China and Brazil, leaving the average shop to compete on custom jobs while still selling at production prices.
“I’ve got to make every job 100-percent-different than the last job,” he says. “We’re doing individual projects and the competition is still there.”
Reaume calls it “a race to the gutter,” and says he believes the fact that he’s been able to say no to jobs that aren’t going to pay enough has also helped keep him afloat in a struggling economy.
Click photo to enlarge“It’s a race I don’t want to be in, but the whole industry was in it and it pulled everybody down,” Reaume says. “I don’t play that game any more. If we can’t make money on a job, I’m going to let it go. I simply won’t take as much money out of the business that week, and life goes on.”
He adds that one lesson he’s impressed on his son is that you can’t simply trade dollars or take on jobs for the sake of staying busy.
As it is, SMG sells about 300 different types of jobs a year, fabricating them with a bridge saw, a flat-edge polisher, and a radial arm workstation for cutting out sink holes – all operated by a three-man shop – and installing them with a single two-man crew.
Reaume also works full time in the business, which also has a bookkeeper/sales person to handle people who walk into the showroom.
For now, at least, as much as 90 percent of the work is done for home remodels, he says – and the number has been as high as 98 percent.
“There are finally people getting building permits and building something new,” he says. “The existing stock of houses is not there, the rental market is still hot, and people haven’t been building. There really isn’t enough product in the marketplace, and my prediction is we’re going to see the new home market start getting hot again over the next 18 months or so.”
One good indication that the market is changing, Reaume says, is that more people are coming in and asking for the builder’s discount – something he tries to limit to those doing 10 homes or more.
