Wood-be start-ups

May-Jun 2017 Wood Industry cover 250Entrepreneurial spirits can soar

Getting a business off of the ground can be a daunting task, but entrepreneurs in Canada are constantly making the leap. So whether your garage is just too small for your ambition or the vision at your current employer is too small, there are ways to get bigger, personally and financially.

“I’m just an entrepreneur at heart,” says Alain Albert, owner of Woodoer.com, a digital manufacturing CNC contract services company. Albert admits he’d rather start his own business than anything else in life — and has already started quite a few businesses to date.

“Starting an actual business needs to come from seeing an opportunity and wanting to serve that opportunity,” says Albert. He did notice an opportunity while working in the research field in the wood sector at a large organization. “What I noticed is that the wood manufacturing industry is mostly a custom-made product industry and e-commerce serves custom products very poorly. My plan was to offer custom cabinets online and to try to establish how to actually offer custom products online.”

Albert has experimented with a few different ideas. “Now where I think the opportunity lies is in providing custom manufacturing services directly to the consumer through an online configurator. That is what I’m pursuing right now.”

This idea starts with the person who wants to do a renovation project on their own, but doesn’t have access to custom manufacturing services. “If they want to renovate their kitchen themselves, then the only source of manufactured components they have is Home Depot and Ikea — but those aren’t custom components. I figured there was a huge opportunity in providing custom manufacturing services for do-it-yourselfers and small contractors and renovators.”

The well-established Axyz Group of Companies in Burlington, Ont., including its CNC router manufacturing division, wasn’t always the $50 million company that it is today. Axyz started in 1990 with a conversation about potential business opportunities between two friends coming back from a ski trip, according to Alf Zeuner, now Axyz president. The router table business was known to Zeuner from university co-op jobs and that it was also early days for the technology. “The machines were horrible and there was a very scattered manufacturing base,” says Zeuner. “We thought we would combine our energies and start a service company repairing router tables. So we did that for a few years.

“Then we decided after repairing a lot of these machines that we didn’t think were very good, that surely we could make a better one.” By 1995, they started building their own machines and released the first versions the next year.

Since the company started as a service company, Axyz did not require startup capital. “We’re basically selling our hours. We did start with the manufacturing relatively slowly. We didn’t really finance anything externally until we purchased this building that we’re in today.”

To acquire the building, the company used BDC Finance. “We didn’t need a whole bunch of staff and a lot of R&D dollars. So financing was never really an obstacle to us because we didn’t need or use a lot.” It helped that the service business was very profitable, Zeuner explains, “we did make good money and reinvested it.”

Montreal, Que.-based BDC — Business Development Bank of Canada — is a national lending and consulting organization aimed directly at Canadian entrepreneurs. According to Louisa Horne, director of Small-Business Solutions at BDC Advisory Services, “we love those entrepreneurs because they’re such an integral part of the Canadian economy.

“They are the ones we want to see be successful, because they grow to be successful small businesses and then hopefully grow to be successful medium and large businesses.”

Horne recommends that anyone starting a business, including in the wood industry, that they visit BDC for advice, along with its partners Futurpreneur Canada and CBDC, as well as scout for provincial or municipal based programs.

“The most important thing is the planning and the thinking it through,” says Horne. “There are lots of tools and templates and very easy-to-read advice pieces for them. With the support of our partners we can get them advice, usually locally, to help get them through those first steps.”

Horne cautions that there is “so much information available online that if someone was to type into a search engine, ‘starting a new business,’ they’d be overwhelmed.” She notes that it can be hard to know what is relevant and what is Canadian, for example. “That the BDC site is available to them for resources is a great place to start because it is designed for the Canadian environment, for entrepreneurs, and it’s credible. They don’t need to wonder if it’s just something the Google has given me or is this something I can trust.”

BDC is able to provide a lot more support once an entrepreneur has a business that is up and running, especially when it comes to financial and advisory services. “It’s an integrated approach for us, says Horne, “because entrepreneurs usually need both to get to the next phase of their business growth. So we have our folks across the country talk them to them to understand their business and where they are going to provide the right kind of advice.”

The advisory services can also be remote so that no matter where someone is located across the country, BDC can link them with an expert advisor in the core area that entrepreneurs typically need help with as they are getting their business off of the ground or to the next level.

Financial support from BDC is only forthcoming “once they have gotten through that first step and then we have quite a range of options in terms of loans.” Online loans up to $100,000 can be accessed, for example. “This is very quick and easy, very minimal paperwork, with basic requirements,” says Horne. “We have help thousands of entrepreneurs across the country with that online service.”

Albert notes that when he started his first woodworking business back in the 1980s, an entrepreneur could basically rent a garage, get the basic woodworking tools and start manufacturing for people and they would buy it. “Nowadays that is pretty much gone, I think. If you want to start a woodworking business or a manufacturing business now, you need equipment, software and all sorts of skills that the traditional woodworker doesn’t have.

“You’re looking at capital investment that is probably in the order of half a million dollars or more If you are going to start a business that has any chance of succeeding.”

Zeuner’s company sells machines that are capital investments to his customers, so he has observed how both startups and established businesses cope. “They have probably done OK in the garage but they realize to make a real business they have to move to the next step. Now you’ve got to hire some people and you’ve got to pay some rent and get some machines. Suddenly the health and safety inspectors have you on their radar screen. All of these things are barriers for people to make that jump.

“I think that was certainly the biggest hurdle when we went into manufacturing machines. The jump from being a comfy little service business that was basically four people working and everybody covered their own payroll by their billings.”

For the startup looking to upgrade from hand tools to automation, leasing becomes an option, according to Zeuner, with amortization schedules close to five years. “Leasing companies are more comfortable funding known brands. So the leasing company knows that the value is there and that the machine will work.” Leasing obscure brands is much more difficult than leasing branded machines, but that’s not all there is to growing through automation. Zeuner adds that it becomes easier, “provided the person has a decent business plan and some track record of making some money to be successful.”

For those really early days of a business, according to Horne, the key thing is to have proper plan. “We see this all the time with small businesses that are started and operated by people who are very passionate and very skilled and knowledgeable about the nature of the work. Whatever the specifics are about the woodworking or manufacturing, they are probably experts in that.

“However, they might not be experts in the functional areas of operating a business — having the strategic plan in place at the beginning, having a plan for their human resources, knowing how to do some very basic things with managing their finances, knowing what their sales and marketing strategy is going to be, and having a good sense of how their operational approach and technology will serve them as they grow. Then, of course, they need to think about how the leadership approach that is going to happen to make it all come to fruition and to meet the goals that they’ve set out for themselves.

“In fact, very few people are effective in all of those areas, so it’s very important that they acknowledge at the very beginning that they know what they don’t know and they know where to go to access the support all of those functional areas in place. As they grow, those are the areas where we provide coaching for them.”

Sometimes entrepreneurs can ignore what made them successful initially, too. Zeuner notes that his original service business was “left to die down probably more than we should have. There has been a big effort the last two years where we have been really building and growing the business again. Now we have quite a few trucks on the road, but we grow one truck at a time and train one guy at a time.” The conservative growth strategy at Axyz means that it won’t go out and buy 20 trucks, but that it is quite capable of financing one or two trucks each quarter.

“I think once an entrepreneur always an entrepreneur,” says Zeuner.

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