Choose Your Markets
In the millwork industry there are two primary markets that most millwork companies focus on residential and commercial. However there are often others that are overlooked that provide steady income and sometimes higher profit margins these include industrial and military. Oftentimes millwork shops focus on one sector or another, but that leaves them vulnerable to downturns in the economy. For example, when the 2008 housing crisis happened and residential construction stopped, commercial construction continued to grow during the time period of instability in the residential market.
In the industrial market, millwork shops can find a very stable source of income because the products that are provided are consumables and factories tend to maintain a steady pace over fluctuations in the market. These include but are not limited to, wood bearings, wood blocks, templates, guides, jigs, fixtures, etc. These are mass produced products that come in on a cyclical basis in bulk orders. While the profit margins tend to be a bit slimmer, they help pad out and increase long-term resiliency of a millwork shop. A complete dependence on these sale items may limit the growth of the organization and be rather boring to the workers, but it’s good filler work to keep the machines of industry running and cash flowing through the company.
Military contracts are another great source of stable income for a millworks shop. Like the industrial market, the margins are tighter and it’s still mass produced products, it tends to offer long term stability and generally speaking the military is good for payment. It does come with more paperwork, compliance, sourcing constraints, etc. so it isn’t immune to headaches. It is another good source for filler work that keeps the shop running and cash coming into the organization, while also being a hedge against fluctuations in the residential and commercial markets. Typical military products include mobile work stations, crates, modular walls for urban training, medical station cabinetry, etc.
These two markets are great ways to maintain stable income, however it is pertinent for any millwork shop that loves the trade, or cares about higher profit to not get bogged down to heavily with these contracts. They’re great for filler work and provide well needed stability for millwork shops. Although, they shouldn’t consume over 50% of the production capacity for any millwork shop. An ideal range is between 30% and 50% of production capacity. This keeps stable work coming through the shop, but also gives room for the real bread and butter of the company and the reason why most people are in the industry in the first place custom builds.
First before I go onto custom builds, I want to touch on two sectors of the residential market that may make more sense in the coming years. Mass produced RTA cabinets and semi custom cabinets. Everyone is aware that we allow foreign companies to compete in our market with an unfair advantage due to lower labor, material, and energy costs in their respective countries.
Competing in this markets has been a waste of time for most cabinet shops over the years, since most shops can’t purchase materials for the lower end cabinets for less than what they’re being sold for. Let alone produce them and compete on price for low end mass produced consumer products. However with the ongoing war in Iran (2026), this may change.
As of April 2026, resources from the Middle East have been cut off from the world. The countries that have historically out competed US countries within our market are heavily dependent on the exports from the middle east for energy, farming, etc. If this war continues and the exports from the middle east are halted for an extended period of time. These countries won’t be able to compete. A similar thing happened during the Covid lockdowns and the companies that were poised to take on work in the low end range of cabinets saw record breaking profits. This opens up potential long-term profits for Mexico based operations to leverage the lower wages, and ease of shipping across the border.
The other sector is well made semi custom cabinets, which have historically maintained a foothold in the United States through larger suppliers who rely upon economies of scale to out compete smaller companies. Automation is changing that. Yes economies of scale still persist, however, it is becoming increasingly more profitable for smaller shops to produce a semi-custom line direct to consumers, especially in their local market where they have the home field advantage.
Now if there’s a semi-custom shop producing cabinets in your town, it’s going to be harder to compete. however, most towns that host cabinet shops don’t have any shop offering a semi custom option. Strangely what I have seen are shops completely specialized in custom cabinets, while their next door neighbor is selling semi-custom cabinets from out of state suppliers.
While being a fully custom shop is great, it isn’t resilient to economic downturns. As well, fully custom work is more challenging to turn a profit in than semi custom. Semi custom is easier to plan for, execute, and finish than fully custom work. While many cabinet shops may turn their nose up at offering a semi custom line, doing so enables smoother operations and to expand product offerings to people of lesser means than the upper middle class and upper classes of society. I have often seen companies lose work in the upper middle class market by not offering high end semi custom cabinet line because oftentimes people are still wanting to keep their expenses under control and custom work costs more.
Strategically, most successful organizations offer a broad range of products for people of various means and willingness to pay. A perfect example are power tools often times companies will produce a higher end product line for professionals while also producing a lower end product line for home owners. In addition, semi custom provides clear estimating, clear upselling advantages, and clear timelines based on historical data from the company. For a custom shop that’s looking to increase their profits, and grow long-term developing a semi-custom product line that appeals to mid-level consumers is a viable route.
Now the cream of the crop is custom work. Custom millwork will always attract the clients with the finest tastes, largest wallets, and craftsman who love their trade. However, custom millwork has many pitfalls. Especially for a company that hasn’t refined their systems from drafting and engineering, project management, handling change orders, and billing, to shop manufacturing all the way to installation. Every step of the line needs to have refined processes, institutional knowledge and people with deep understanding and love for their craft in order to be successful in this part of the industry.
Those that succeed are those with clear systems that function well. Those who fail are generally struggling with money, can’t keep a project on a timeline, miss opportunities to capitalize on change orders, and have cost over-runs that make you wonder how they’re still in business. A dysfunctional company is a nightmare to work in and has constant in fighting and stress. On the other hand, a functional company with refined systems are a dream to work at. Even though problems will arise, as they always do, a functional company will grow, move forward and reach high levels of success.
As with anything there are more than one way to produce and install fully custom millwork. While I have experience working for and contracting with many companies I have noticed a principles that separate the people at the top from the losers and those who are only mediocre. These are:
Refinement of their systems
Flexibility
Ability to capitalize on change orders promptly
Capacity to say no
Quality control
Well paid star employees.
An apprentice structure for craftsman, project managers, engineers, etc.
Ability to adapt
Built in Resiliency
Staying “right sized” for their capacity
In my next blog post, I’ll go over the lessons, I have learned about being successful in the custom millwork market, and address many of the pitfalls I have seen companies walk into.
