The past 24 hours were not the most pleasant for Keith and I by any means. They were filled with anxiety and stress and negotiations and many of the things that I try so hard to avoid. But being a growing business, we all know that it isn’t possible. These things are all part of the process, and since they aren’t avoidable, we banded together and met them head on as a team and as a result, we think we came out of it alright.
Part of me feels like I have been through a war. Perhaps that is over reacting just a bit, but some of the decisions that were made yesterday would impact our business and our lives for a long time. Not only that, but it would also dictate how we were viewed by the other company and certainly affect the level of respect that they would have towards us. It was as if they were testing us to see just how far they could push us, and we didn’t like the feeling at all.
It has to do with some production work that we are doing. We have been involved in this for over a year now and so far, it has gone well. While we know that eventually we won’t be able to do much production work ourselves if we are to truly grow into a larger business, at this time we can’t afford a laser cutter or equipment needed to expand in this direction and have to cut our kits and pieces by hand.
Now this isn’t a huge problem for us, as we are focused and can get the job done quickly (a couple of months ago we cut 6000 pieces in six days) but as things get busier, we need to carefully watch how much we submit to companies that would require this labor-intensive process so that we don’t overextend ourselves and are not able to meet the demands that may be put upon us. It is somewhat of a tightrope act, as you can imagine.
“Why do we do it at all?” you may ask.
We do it because at this point in our business life, we need to have the extra income to help keep us sustained and even growing. The spring and summer is traditionally a slow month for scroll saw patterns, and with the heat and the poor economy, it is even slower. Designers around us are all suffering from these circumstances and we have seen so many of them have to fold up shop because they can’t afford to stay in business. These side jobs – labor intensive as they are – help tremendously in getting us through these dry periods and still keep our income coming in so that we are able to function and grow. That is very important.
So things were going along quite nicely and our kits were selling very well and we were keeping up nicely with the orders. I recently submitted just one kit for consideration because I didn’t want to over-burden us during the busy fall and winter seasons, yet I still wanted a presence in the catalog with a new product. The new item was accepted and all was well – so we thought.
In setting up the initial order, it was mentioned that the company decided that they wanted to outsource the wooden pieces to be cut by their own wood cutters. This didn’t sit well with us because the actual cutting of the wood was one of our main reasons for doing this. The profit per kit was small, but Keith and I could cut as quickly as a laser cutter, and as accurate and for the time being we wanted this part of the job to remain with us. Also, they were asking that I sign the rights over so that they could do the outsourcing and sell the pieces themselves – with NO profits at all to come to me. They would only pay me a percentage for the pattern. and any income from the wood pieces would go to them.
This would not do.
I must take part of the blame myself for perhaps encouraging this idea. Each time I talked to them to negotiate terms, they naturally were pushing to cut the pieces themselves and outsource them. Each time in the past I have told them that I did not want to – not even asking or knowing the terms – because I knew that would take away a major part of the profit for our company. Initially, I adjust our price to them so that we would be competitive with their wood cutters and we would still be able to make a profit that would make it worth our while. For a bit, everyone was happy.
But as these kits continued to sell well, it seemed that they were pushing more and more for me to allow them to cut. On the last big order, there was a glitch at Customs because the shipment was valued over $2000, which threw it into a new category at the Customs office and it required additional attention to be cleared. It was held up for almost a week, and the agent actually told us to avoid this in the future, just make sure the shipments did not exceed the $2000 value mark. Easy enough to do.
But it seems that the company took advantage of that to fuel their argument that they wanted to do things on their side, and only wanted the patterns from us without the pieces (at a very small profit – less by far than we give ANY of our distributors) and they would have all the rights to market and sell as much of the wood as they wished, without giving us any profit at all. They presented us with a couple of different ways that they did things – all which cut us out of the picture almost completely. One scenario included forfeiting the rights altogether for 90 days (from the catalog ship date) for a flat fee, which was smaller than I get for a magazine article, and they would be able to market everything and even allow free downloads of my pattern on their site. That made no sense at all to me because even when the rights did come back to me, which would of course be after the season passed, who in their right mind would ever want to BUY the pattern from me that had been available for free?
The funny thing about it was that the current terms we were on were terms that THEY set up only a couple of months ago. It wasn’t as if we were asking for MORE. We had compromised a bit back then, as we weighed the above mentioned facts and still felt that it was worth our while to do, but with these new terms, we just didn’t see it being to our benefit, and were willing to walk away.
After much back and forth, we finally told them that we needed to keep things as they were or we wouldn’t be able to continue. This is still good for us, but as I said yesterday – giving any more would sour the deal for us and make it not worth our time and effort. It was difficult to take a stand like that, but necessary for the health of our business.
When we presented them with these terms, they realized that at least for the items already in the catalog they would need to honor them. They placed a large order, but told us that they were not sure that they would take the new item (on the terms that they had set only days before). We told them that was fine and would do the order for the previous kits in the same timely manner we have been doing them. They said they would get back to us on the new item when they decided.
I don’t know if they thought at that point we would compromise, thinking we were ‘losing their business’ but we held firm. I wasn’t sure if they would take it or not, as the other things were selling well and they knew that they would be walking away from a good product. They were making a substantial amount on what they already carried from us, and to me it would have been their loss, as I would find another way to market them to another source.
A couple hours later, we received an order for 150 kits of the new item (this was in addition to the order placed earlier) I suppose they decided that we were worth it after all.
While I am happy about the outcome, I look at the company through different eyes. From their point of view, they are trying to make the most money they can. I had the delusion that these business relationships that I have with these companies are somewhat ‘friendships’ and I imagine that yesterday was the day that the lights came on for me and I figured out how wrong I am.
Perhaps working with Creative Woodworks Magazine for over 15 years has trained me to think that way. They are a family owned business and many there ARE my friends as well as my business colleagues. There is a human factor with that company that doesn’t exist in business. But as this little bird is leaving the nest and working more with companies from all over the world, I am realizing that there is no such thing as what I have come to know with Creative Woodworks and All American Crafts (the parent company of CWW) Oh! How I am growing up!
To end this (LONG) post – I will say that all is well. Keith and I are revving up our scroll saw saws and we plan to ship this order out by Tuesday (and that is with us heading to Halifax for the weekend for his brother’s wedding!) It is a tall order, but we are geared up for it and will start cutting today.
Last night, after going out for a bite to eat to decompress, I came home and took the photos of the new plaques and ornaments. Below are the example of three of the twelve:
I will save the other nine to show you in the next day or so, as it will give me some pictures for you.
Keith spent the evening applying the patterns to the boards so we are ready to begin cutting today. It will be an exciting day for both of us, as we feel that we did the right thing standing our ground and not selling out. I’ll talk more about things in upcoming posts, but I realize that this has become quite lengthy and I will sign off here.
I wish you all a wonderful and productive day, and thank you all for your advice and support!
-- Contributing Editor, Creative Woodworks and Crafts, Sheila Landry Designs http://www.sheilalandrydesigns.com "Knowledge is Power"