This is a fundamental question. A good place to start is with a survey of your property. Most municipalities have a maximum percentage of your lot that you can build on and standard setbacks from your property lines that you will need to adhere to without needing to request special permission to build. On a photocopy of your survey you can draw in what your local setbacks are in order to define the location within which you will be permitted to build. In a best-case scenario, you will have the space to build without compromising too much on space or location; otherwise, you may need to request a minor variance, which would allow you to circumvent an obsta­cle such as a setback.
I could write a whole post on wood species as each species has unique characteristics and traits. But, one of the most common types of wood used in DIY projects and furniture building is pine wood (a softwood). Pine is an affordable and readily available option at your local home improvement store and it comes in many sizes. I highly recommend using pine for beginner woodworking projects. Then, as you improve your skill, try working with some different wood species!
Is your cellar damp? If so, you may have to correct that problem before installing your tools and lumber supplies. Insulate pipes to prevent condensation. Make sure your gutters outside keep rainwater running away from the house. Cracks in the cement floor or walls should be filled with hydraulic cement; a high water table may necessitate a sump pump to collect water at a low point and pump it out. Any or all of these circumstances may also require a dehumidifier. In any case, dampness is unacceptable where power tools are to be used because of the risk of electric shock.
Click the image at right, and start building the ideal workflow at the bottom where you see the first red arrow. This arrow crosses through one roll-up door of a typical two-car garage. Note that if the right-hand window were not present, you could place lumber storage closer to the entrance, which would also allow for easier passage onto the jointer. Work flows from the jointer to the planer and the table saw, then ideally onto an outfeed table near position #2 in the diagram. From #2, proceed left to the assembly area (pictured below).
The router—The router is the master when it comes to flexibility. Its potential far exceeds trimming and decorative edge treatments. A router will cut mortises, rabbets, and dadoes, and adding a router table builds in even more versatility, including biscuit joinery and raised-panel doors. But where the router distinguishes itself from all other tools is in its ability to produce identical parts using a pattern.
Minor variances are applications to your municipality to suspend a particular by-law to allow your project to proceed, based on common sense or precedents set by other buildings in your area. If your municipal committee of adjustment denies permission because a neighbour voices concern over the development, you would have to appeal the decision to the municipal board of your particular province. In that case, you may be better off looking for another piece of property with an existing structure that you could renovate, more relaxed zoning regula­tions, a larger lot, or more congenial neighbours. 

A shop geared toward woodworking would have lumber storage located at one corner of the triangle. Storage space for wood — both long pieces and flat plywood pieces — should be adequate. Raised storage, such as racks or shelves mounted on the wall, must be sturdy. Wood storage should also be in close proximity to the stationary tools or machines (table saw, jointer, power planer, etc.) to avoid frequently carrying heavy wood across the span of the workspace. Wood storage should be handy and near the area where the heavy woodworking tasks will take place. Keep in mind that a considerable amount of space will be needed around stationary tools such as a table saws and jointers for manipulating large pieces of raw lumber.

Efficiency does not always increase with experience, because as our woodshops grow older, they sometimes become unnecessarily rearranged or cluttered. And if you’re just now setting up your first woodshop, this shop layout should give you a great starting point. Each picture represents one half of a standard two-car garage. Click on the images for a larger view, and if anything is unclear, ask a question in the comments field!
The number of windows, as well as their sizing and placement, depends on your orientation, view, desire for ventilation, and needs for daylight and solar gain. Orienting more of your windows towards the south side of your shop and placing them high enough that they are shaded by the eaves in summer, but allow lower-angle winter light to come in, will increase your ability to get free light and heat from the sun. If your goal is to take advantage of passive solar opportunities, make sure that you carefully research the type of glass that is in your windows and look for something with a high solar heat gain coefficient. Higher windows generally allow for benches and tools beneath them, and relatively win­dowless north walls may be a place to arrange wood storage or mechanicals.
To plan my shop, I used a modeling program on my computer, but you can use the drawings I created to plan an efficient shop on paper. Download and print the PDF below and arrange them on graph paper to create a plan view of your shop. Take the time to work out the most efficient placement of benches, cabinets, and machines, taking into account infeed and outfeed zones as well as ducting for dust collection.

Just as a shed or garage can get stifling in the summer heat, winter cold can also make working conditions difficult — if not impossible. To prevent clumsy, stuff fingers from ruining your projects, you need a way to heat your workshop in even the most extremely frigid days of the year. A traditional residential space heater probably won’t cut it, as these are designed to heat single rooms. For a two-car garage or full basement, you’ll need something much bigger.
One of the misconceptions about planers is that they make lumber straight. They do some straightening, but they don’t make lumber straight. That is what jointers do. Many lumber mills just send rough lumber through the planer allowing the board to exit the machine with the same ups and downs and whoops that is entered with, only now to a consistent thickness. This is especially apparent when gluing up a couple of these roller coaster type of boards and trying to get them to line up. After a couple of those glue-ups, you will swear by lumber that has seen the jointer before the planer, and never skip the jointer.
Each entry must feature some kind of inlay. This can be wood, glass, metal, etc. Epoxy pours are not allowed per /u/kevin0611's request. An epoxy pour does not count as an inlay for the sake of this contest. (Example would be cutting a pattern on CNC or by hand then filling with a colored epoxy to give the illusion that it's inlay.) Bowties, marquetry, and banding are good examples of allowed inlay in this contest.

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The rubber cushion on my old palm sander was wearing thin around the edges. Because of its age, I couldn’t find a replacement pad. As I was drinking my beverage with a foam can cover around it, I realized I could cut the foam to fit the sander and glue it on. I peeled off the old pad, cleaned the metal base and attached the foam with contact cement. Works for clamp-on as well as stick-on sanding squares! You can find can covers at discount and convenience stores. — Allen J. Muldoon
Once you’ve planned the basic layout of your workshop and have added all the tools and speciality appliances you need, take a last look at the overall design to make it aesthetically pleasing. Add overhead lighting for general illumination and task lighting over your work stations so you can see your project clearly. For maximum flexibility, you can mount clip-on work lights to nearby shelves and point them where you need them, knowing you’ll be able to move them about as required for different projects.
Next come two options for the table saw’s trusty sidekick, the jointer, as well as for the thickness planer. Because it’s usual to work between all three tools when dressing lumber, the first option, shown in the illustration, locates the jointer nearest the saw to the right of its extension table with the planer nearby. As with the table saw, it always makes sense to align these tools with the shop’s long axis.
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