No one goes into business with the goal of shutting the doors. However, only about half of businesses make it past the first five 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 seven 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. Absorb Costs Instead of Passing Them On
In a world filled with high fuel prices and inflation, you absolutely should not be sucking it up and paying those higher rates alone. You’ve absolutely got to pass some of that cost on to your customers in the form of a fuel surcharge or increased shop supply fee. If you don’t pass some of these on, you’re just eroding your margins—fast.
In an ideal world, you should have provisions in your contracts for that (and if you don’t—start building it in!).
2. Fly Blindly Into the Night
If you aren’t measuring your goals at least quarterly—if you haven’t set goals at all—then you are cruising for a bruising, so to speak.
Financial planning is critical to a successful business. If you aren’t tracking your results and how you got to that point, how do you know what worked and what didn’t? Don’t try to manage your finances from the rearview mirror by trying to reconstruct what led to this rise or that dip; you should instead be focused on the road (and income) ahead.
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.
What follows isn’t an exhaustive list, but it’s things to keep in mind:
- 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—set goals based around your parts margin (and base markup on that) to help meet your budget and profit goals.
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.
3. Forsake All Marketing
A lot of shops cruise along and think, “I’m good—I don’t need to market.”
This is a trap. By turning off your marketing awareness, you’re cutting off your quickest and most efficient route to growth. If you have one or two customers that “keep the lights on” as Fullbay calls it, what happens if one or both of those customers abruptly goes kaput? This may seem unlikely, but before rolling your eyes, think about how many unlikely things have happened in just the last few years.
Keeping your marketing efforts up—even if you dial them back slightly when you’re extremely busy—keeps your operation in the game and in front of potential customers.
4. Allow Your Cash to Collect Dust on the Shelf
You wouldn’t let an employee go to the bank, withdraw stacks and stacks of $20 bills, and 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.
Tracking inventory is important; you need to stock what moves, not what you think or hope will sell quickly. Don’t buy more than you 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.
5. 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.
6. Ignore Your Revenue Funnel
Most days, you probably feel good just making it through the whirlwind of running a shop. Operations that pay attention to successful business strategies, however, strive for more efficiency so they can look ahead and take advantage of future 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.
Think of it this way: the more you can put in the top of the funnel, the more money will come out at the bottom.
7. Mismanage Your People
A great business manager isn’t necessarily a great people manager. People tend to be surprised by that fact, but when you think about it, you realize they’re entirely different skill sets.
It comes down to this: If no one wants to work for you in the midst of this tech shortage, you will put yourself out of business. Your techs can and will find new places to go if they don’t feel properly compensated and appreciated.
What does good retention look like?
- Appropriate compensation—maybe it’s time to raise your labor rates!
- Benefits! Not just health insurance and PTO, but tool allowances (or buying the tools), paying for continuing education/certification, and more.
- Good coffee (we’re putting it in bold because it’s important).
- A steady supply of snacks and other drinks (Gatorade, etc.) available whenever they want them.
- A barbecue—preferably a service writer fires that thing up at least twice a month.
- Showing appreciation. If a tech puts in a week’s worth of long days to get something done or get ahead of work, how do you thank them? Sure, you could provide a financial sweetener. But there are other ways to show you’re thankful. You’ve taken that tech away from their family for the week—what about paying for them to take their family out to dinner?
What’s that old saying? “Happy techs, happy shop.” Your techs are generating revenue for you and handling the daily work of your operation. Make sure you’re treating them well!
Bonus Tip: Use the Right Tools
We only got into seven specifics, but in reality there are a million and one ways to hurt your shop. Fortunately, if any of these warnings look and feel like something you’ve been doing, you’ve got time to turn things around.
Here’s a not-so-big secret (and one you probably saw coming): use the right tools.
That doesn’t just mean the correct wrenches or lifts (that’s important, too). That means tools that make it easier to streamline your operations. Tools that let your parts manager scope out and purchase parts. Tools that help your techs be more efficient. Tools that track preventive maintenance. Tools that make it easy to invoice.
Tools like (drumroll, please) Fullbay.
We built Fullbay to make your life easier—and to help you keep your shop in business. Can’t believe your eyes? Schedule a demo and let us show you what we can do!