No one goes into business with the goal of shutting the doors. However, only about half of businesses make it past the first 5 years. What’s more, only one-third are left standing after 10 years, proving that fewer business owners practice strategies for staying in business and more concentrate on ways to go out of business. There are probably as many ways to undermine a company as there are different types of enterprises, but we know of five sure-fire ways to put your shop out of business. They’re habits that are easy to fall into but, if you catch them soon enough, you can still implement successful business strategies to keep the doors open and make your shop profitable.
1—Use Your Gut Instead of Numbers
When you first open a business, you have to trust your gut to some extent. After all, the process involves a leap of faith as much as doing your homework. On the other hand, once your shop is up and running, you can’t rely on your gut to grow the business. Successful business strategies use real numbers. You should always be aware of the things that affect your bottom line.
Top factors include:
- Paying yourself—pay yourself an actual salary rather than taking what’s left over so you’ll have a better idea of what’s extra at the end of the month.
- Controlling overhead—know everything you spend money on and streamline where you can so overhead doesn’t drain profits.
- Improve technician efficiency—efficient techs bill more hours for increased profit. If just one tech adds one more billable hour to the workweek, profits can increase by $5,000 a year or more.
- Marking up parts sufficiently—take at least a 25 percent markup on parts to help meet your budget and profit goals.
- Charge for shop supplies—someone has to pay for them and, if it’s not the customer, it will be you. If you don’t charge directly for brake cleaner, grease, etc., make it up in labor. Otherwise, supplies are a hole in your profits bucket.
A financial modeling tool is the best way to get a grasp on these factors. An Excel spreadsheet using formulas that concern your shop like revenue, cost of sales, overhead, and margins works well enough if you know how to set it up. Essentially, it calculates your shop’s profits. If you’re not currently using one, check out Fullbay’s free financial modeling tool. It’s designed to help you start tracking all those essential numbers that can make your shop profitable or break it.
2—Allow Your Cash to Collect Dust on the Shelf
You wouldn’t let an employee go to the bank and withdraw stacks and stacks of $20 bills, then store them on pallets in the warehouse, right? Best case scenario, the money will just sit there and collect dust. Worst case, some of it will disappear never to be seen again. If you’re not being proactive and purposeful with your inventory, that is exactly what’s happening in your shop.
People who practice successful business strategies track inventory so they can stock what moves, not what they think or hope will sell quick. Also, they don’t buy more than they need, even if a vendor is offering a “great deal” on caseloads. Unused parts start costing money after a month or so and there goes the great deal.
Above all, try to spend your money on things that will generate income like equipment, lifts, and trucks to take your services on the road. Do cycle counts at least once a month, so you know what you have, what’s selling, and what you need to stock. Reconciling your stock also lets you see if anything is walking out the door.
3—Tune Out the Voice of the Customer
Your customers are your income. If you’re not listening to them and meeting their needs, your business will dry up. In heavy-duty repair, most customers are fleets. Aligning your shop with what really matters to them is a successful technique that ensures longevity for your business.
Generally, fleets have three top concerns:
- reducing costs
- DOT compliance
Fullbay’s customer portal checks those boxes and then some. It gets the customer involved by allowing them to run their own reports on PMs, repairs, compliance issues, and pretty much everything you do on their vehicles. Plus, it lets them submit maintenance and service requests any time of day or night from anywhere on their mobile devices. They can also access estimates and pay invoices through the portal, too. That improves transparency and cuts down on billing disputes while also enabling customers to pay you immediately.
4—Use the Wrong Tools
Being in the repair business, you know the right tools are effective and even essential. On the other hand, spending money on the wrong tools can affect your shop’s profitability. Take servers, for example. On-site servers are expensive, require frequent maintenance, and need replacing every few years. Servers and storage in the Cloud, however, are more secure and always up to date.
When it comes to software, shops should take a best-of-breed approach rather than looking for an all-in-one option. Everyone does one thing great and can pull off an okay job on the rest. Rely on Fullbay’s shop management software to help with the details of managing your shop, but stick with QuickBooks, Worldpay, and other software you already use for things like accounting and accepting payments.
5—Ignore Your Revenue Funnel
Most days, you probably feel good just making it through the whirlwind of taking orders as they come in. Shops that pay attention to successful business strategies, however, strive for more efficiency so they can look ahead and take advantage of selling opportunities. There’s a ton of potential for upselling in a heavy-duty shop—upselling work on existing orders, proactively scheduling PMs, and selling future work. That’s called pulling opportunities through your revenue funnel and doing that turns potential sales and work into cash. After all, someone is going to be doing those services at some point anyway. Take charge of whether it will be your shop or the one down the road. The more you can put in the top of the funnel, the more money will come out at the bottom.
Putting Successful Business Strategies to Work to Keep the Doors Open
Fullbay is an all-inclusive tool that puts these successful business strategies to work to keep your shop doors open. It keeps track of inventory, orders, and jobs. Fullbay is Cloud-based, so you can access all your data anywhere and don’t need a special server for it. And the customer portal keeps your client’s needs on the front burner where they belong. Steer clear of the top ways to put your shop out of business. Fill in the form below to give Fullbay a try.