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I own a watch business and want to start selling wooden watches. I currently use a Laser to engrave my watches however this is not suitable for wood.

Carl, if you don't mind may we see what's being done now?
How small are you talking here? We know watches are small.

a simple CNC ? That would be wonders!

Hmmm... I bet @Albert Z currently building his machine might be of help.
Not that you want one built, just for picking the brains.