I get asked a lot about starting and growing a small business, mostly from woodworkers who want to make the leap from corporate life to a diet of hot dogs and crescent rolls. So this post is mostly about business, with a little woodworking thrown in.
Right after I quit my job at Popular Woodworking in 2011, I was making about $10,000 a year from Lost Art Press. To make ends meet, I was teaching, freelancing and hustling. I think I was on the road about 18 weeks that year.
Then John and I got some great news. F&W Media (owner of Popular Woodworking) wanted to carry our entire line of books. And bam – F&W immediately became our largest customer.
Things went great for about a year, but then F&W missed a payment. The company was supposed to pay our invoices within 30 days. So John called F&W’s buyer to see what was up.
“Oooooh. Sorry. Meant to tell you that we switched everyone to 60 days,” the buyer said.
Sorry, but no, John explained. F&W’s buyer relented and said: “We’ll keep you on 30 days because of our close relationship.” Meanwhile, F&W placed another huge order of books.
But F&W hadn’t relented. They’d lied. After 30 more days, F&W was behind on multiple invoices. John called the buyer.
“Oooooooh, sorry. Management decided to put everyone on 120 days. No special treatment. Sorry.”
John demanded payment, and we stopped filling F&W’s orders until we could decide what to do.
In the meantime, trouble was brewing elsewhere.
When we sell our books to our retailers, we ask that they sell them within $3 of our retail price. That $3 wiggle room means that Highland Woodworking can knock $3 off the price and say our books are “on sale.” Lee Valley Tools has some flexibility with the currency transaction to Canadian dollars. And Tools for Working Wood can price our books at $27.68 so it looks like they use a magic pricing formula (maybe they do).
But you cannot sell our books for 50 or 70 percent off. (FYI, if you think this is price fixing, it’s not. It’s called Minimum Advertised Price and was approved by the Supreme Court about 2007.)
But that’s exactly what F&W started to do. They had “blowout” sales where they would knock 50 percent off a book’s price for a week.
We told them to stop. They apologized. Then they did it again.
I got the news of the sale while I was teaching a class at the Marc Adams School of Woodworking. During lunch, I called F&W from Marc’s gravel parking lot. I told them we were done and to send all our unsold books back to us. We would pay the freight.
When I hung up, I thought: This is the phone call that will put us out of business.
I was wrong. Our other retailers noticed the skirmish with F&W and increased their orders with us. Some ordered more books. Others added titles they hadn’t carried before. By the end of the year, we were back in good shape, and I think I took home $20,000 from Lost Art Press that year.
Two lessons: Big business will try to bully you. They will try to decide when to pay you. They will decide how your pricing should work. They will ask for special treatment compared to your smaller customers.
Don’t give in. Once you start treating your customers differently, you are in for a world of drama and deceit. Whenever we get asked for special treatment, I simply remember what Jennie Alexander always said: “’No’ is a complete sentence.”
The second lesson: Pay your vendors on the day you get their invoice. When someone drops off work they did for us, they leave with a check. When an invoice arrives, John pays it the same day.
Vendors remember this. And if you’ve wondered how we kept so many of our products in stock during the pandemic shortages, you now have your answer.
My friends with MBAs roll their eyes when I talk this way. They argue that LAP should use the 30 days between when we get an invoice and have to pay it to invest our cash and make a little extra.
No thanks. I’ll take the goodwill instead.
— Christopher Schwarz