Before I begin, I want to mention our recent collaboration with Design Milk. For those who don't know, Desgin Milk is a wonderful resource for beautiful and functional items to add to your life, we're huge fans! The Pinterest board they designed for us, as well as the Small Business Spotlight article of our business are a high point for us over the past year, and we'd love for everyone to take a look, and share in our enthusism.
Coming into the new year, planning has looked so different than last. This is the story for literally every business, regardless of size. As you can see from our last staff picture (and with one less than shown at this point in time), we are an exceptionally small outfit, creating exceptional furniture. We were granted a small amount of funding through the first round of the Payroll Protection Program, and we are hopeful to qualify for the second round, as every bit helps. Through all of the changes and differences in planning, what has really struck me has been the cost margins, specifically the increases (yes, plural) in the price of raw materials.
Our packing materials rep was the first to inform us that there would be a 9% increase overall in our cost of materials we purchase to ship our orders, effective December 14. This, he explained, was directly attributed to the pandemic's effect on demand for paper production (we use high grade carboard crating for our furniture). We said we understood, and tweaked the budget.
These awesome cardboard crates are shipped out on pallets, and because the cost of rough lumber increased, we saw this in the cost of each pallet we purchased for our shipping. Another look at the budget, and another set of financial adaptations.
Next up was our freight shipping broker. Because of widespread lock downs and general loss of workforce among all carriers, pricing increases and extended lead times ensued. Stands to reason, so we made appropriate adjustments to our lead times, and communicated this to all of our customers, most of whom were very gracious and understanding. As we include the cost of shipping and delivery in our pricing, we didn't need to discuss that part, but added it into the mounting budget changes.
The most recent increase was in lumber, the very heart and soul of what we do. We partner with two local sawmills for our material, both supply us with the highest quality American hardwoods, and we couldn't be happier with what is supplied. Our rep was in town last week, and was kind enough to visit us at the shop. He had never been, and was so interested in our process, quality and design of our work. He explained that with our next order, we would see a 7% increase in the kiln-dried lumber we use, and that they would be absorbing another 7% themselves. I wanted to cry...
A lot of attention is being paid to the plight of the small business in the face of this pandemic. Most recently, numbers indicate that as many as 63% of all small businesses have faced permanent closure since April 2020. That number is staggering, and makes everyone on our team so grateful to still be operating. With all of this in mind, I want to say this:
We take immense pride in our work, and in the craft itself. We will never be able to compete with cheap, fast furniture. Never. Our commitment to our customers lies in unparalleled quality and service; in furniture created for aesthetic and function, and of heirloom quality. We will continue to only use the best materials we can get, even as the cost of those materials increases, and only pass on what we must to our customers in terms of price increases.
Every time someone makes the choice to purchase from a small, independent business, they are literally supporting the people who are making with their hands the items they have selected. They are supporting those people's families. They are truly, honestly making a difference, and keeping an essential part of our economy alive. I mean all of this in a very literal sense, one that has been highlighted by the current state of everything. We are extremely grateful for your business, and for your referrals, and for continuing to keep our small and talented team employed. Thank you from all of us at ModernCre8ve, and Happy New Year!