Exploring Growth Ellen Wood, our CEO and co-founder of vcfo, recently shared her expertise on how...
How Delta Millworks is Gearing for Even Greater Growth
Fresh off Austin-based Delta Millworks’ recognition on the 2024 Inc. 5000 List of fastest-growing private companies in America, Delta Millworks COO & Co-Owner Price Taylor reflected on the growing pains the company contended with to earn this distinction and how it’s now positioned to reach new heights in the years ahead. Lessons learned on the road Delta Millworks has traveled and what they’ve done to shape their path forward provide valuable insights for other business owners and executives navigating growth themselves.
Origin Story
Delta Millworks was founded in 1985 by Bob Davis (his son, Robbie Davis, is now the CEO and Majority Owner) with a focus on architectural millwork and reclaimed longleaf pine. In 2010, Delta Millworks introduced the architectural and design community to modern shou-sugi-ban (a Japanese wood burning technique) and sold its first shou-sugi-ban cladding job. Fueled by this and other product & process innovations, plus a steadfast focus on customer satisfaction, Delta Millworks is now the leading provider of thermally modified wood sidings in the United States and offers more than 2,000 product variables.
Taylor joined Delta Millworks in 2015 as a consultant following a period of entrepreneurial-oriented work with organizations primarily in the concert promotion and event management space, exposing him to businesses at different phases of growth and revenue generation. “I thought I knew my way around startups and financial statements but had never worked with a business as capital intensive as Delta Millworks,” he shared. Looking then at Delta Millworks’ 2014 achievement of ~$2M in revenue, the pride and belief employees had in the product, and the quality and sustainability of the materials used, he sensed they were on to something good.
Grappling with Growth
Delta Millworks followed their 2014 revenue performance with 63% top-line growth in 2015 and has experienced continual top-line YOY growth ranging from 12% to 58% every year since. Growing their revenue and client base remained a priority as they built the market for prefinished, made-to-order wood siding that ships nationwide. Taylor noted that “we’d bootstrapped this thing from day one” and that this phase of organic growth was supported by an initial line of credit in 2016 along with a handful of bank loans for equipment - but no outside third party financing. Delta Millworks broke even from 2014 to 2018 before moving more clearly into the black with ~$600K net income for 2019 and ~$2M in net income for 2020.
Amid their impressive gains in growth, Taylor noted that he and the leadership team “still felt like we were broke” and that “the business wasn't generating a lot of cash.” Looking at financials prepared on a cash basis with a capital-intensive business and revenue model entailing significant up-front deposits for orders makes cash look good, because cash in the bank is months ahead of orders being fulfilled. Delta Millworks looked great on paper circa 2019-2020, but they were also being hit with significant tax liabilities.
Contending with COVID
Supply chain and inflationary pressures that were commonplace across countless businesses during COVID hit Delta Millworks hard. First, they were a small business with a long and relatively complex supply chain involving specialty products that didn't have robust supply chains to begin with. When the company began experiencing issues with getting materials on time and receiving materials that didn’t meet quality standards, productivity suffered mightily.
At the same time, rapid rises in inflation inflicted pain on Delta Millworks’ practice of securing a deposit to lock in orders that would not be fulfilled until three months later. Lumber prices that rose in many cases multiple times per week during the periods between initial deposits and order fulfillment translated to diluted profits. The company continued focus on growing the business, building relationships, and supporting clients through it all helped them weather the storm.
Coming out of COVID, Taylor and the Delta Millworks team moved to implement an ERP platform and more robust accounting system, shifting from QuickBooks Online to NetSuite. Operationally, the connected nature of their work called for an integrated system - CRM flowing into an order à order queued for fulfillment à having inventory on the books. They also assisted international suppliers in establishing US-based plants and distribution centers to mitigate future supply chain disruptions. The new ERP alone didn’t get Delta Millworks’ accounting where it needed to be. Taylor knew they needed help to get their books cleaned up and to have the business insights needed to optimize operations.
Securing Expert Advisement
In 2022, Taylor was referred to vcfo, a provider of virtual CFO & HR services. After a conversation with the managing partner of vcfo’s Austin office, he was introduced to consulting CFO Elbert Johnson. Johnson brought with him not only the finance and accounting expertise that Delta Millworks needed, but also deep experience in the lumber industry having previously served as CFO for the nation’s largest walnut lumber supplier. After a relatively brief but focused period of assessment, Johnson and the Delta Millworks team aligned on several objectives that would put the business in a much stronger position:
- Improve cash flow with renewed focus on cash utilization and investment
- Solidify plans to construct a new manufacturing facility
- Clean up the company’s books and financial reporting processes
- Smooth out persisting ripples in Delta’s ERP implementation
- Convert from cash to accrual accounting (to better support clean transactions), and
- Strengthen period-to-period financial close processes
In the two years they’ve now worked together, vcfo’s Johnson and Delta Millworks have made major progress across each of these objectives. Taylor shared that “Elbert has been critical to us turning the corner to greater profitability, getting our books clean, and laying the foundation for future growth.” Johnson’s industry-specific relationships and network have benefitted Delta Millworks in other ways too, including a switch to the lumber division of a national insurance provider that better meets the company’s needs, introduction to different banks to optimize financing opportunities, and connecting the company to advantageous ancillary business providers (e.g., temporary power generation).
Ready for What’s Next
Delta Millworks is now on pace to generate an impressive $40M in revenue for 2024. Taylor and team are also energized by the still largely untapped market potential they see for their unique and sustainable products. In a matter of months, the business will break ground on a new multi-million dollar manufacturing facility that will enable them to achieve new levels of efficiency and production capacity.
In addition to maintaining a clean financial foundation and access to capital through improved banking relationships moving forward, Taylor also noted the immeasurable impact of Delta Millworks’ passionate employees, many of whom started with the company in the same 2015-2017 window - “We feel like we’re just now really getting good at what we do and understanding what our core competencies and competitive advantages are. We're doing something pretty special over here.”
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Growing a capital-intensive manufacturing business comes with unique challenges—especially when it comes to capital structure and supply chain resilience. The experts at vcfo understand the landscape and can build a strategic plan tailored to your business goals. Connect with a vcfo expert for a Free Consultation, and let us put our 29 years of expertise to work to support your success.
