How Your Diesel Repair Shop's Growth Potential Contributes to Its Value
If you're wanting to sell your diesel repair shop in the near future, then you're probably concerned with its current value. But the overall value of your shop is calculated on more than just what profits your shop is currently making. Potential investors also take the growth potential of your diesel repair shop into consideration when deciding whether or not it's a good investment.
But how do you know your growth potential? No one knows what the future holds, right? Well, yes and no. No one knows exactly what will happen, but it's possible to estimate how much money your shop stands to make in the coming years, given its current profitability and the path you have it set on.
So, how do you calculate the growth potential? What can you do to help set your shop on a path that will lead to the most money for you when you sell? That's what we're diving into in this article!
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What is Growth Potential?
It makes sense that people looking to buy a business will pay more for a diesel repair shop that has the most potential for growth. In other words, a shop that will make them the most money after they purchase it. In some cases, depending on the buyer, they may even purchase a shop that has lower profits now, but has a high potential for growth, if they think that they can make more profits later by using their existing resources.
How do You Calculate the Growth Potential of Your Diesel Repair Shop?
The initial calculations for determining your growth potential are fairly simple. You take a look at your profits over the last few years and see how much you've grown, on average, year over year. Then, you take that rate and project it into the future.
Unfortunately, that's where the simple task ends. That number doesn't take into consideration other factors that can affect your profits in any given year, nor do they acknowledge any special growth efforts or initiatives on your part.
It's also not always easy to tell what factors impact the numbers you're getting, and this could lead to some inadvertently false projections. For instance, you might be growing profit-wise, but you're having a problem with client retention. So, you might be bringing in a bunch of new customers, but can't keep them coming back to your shop. In this case, you aren't actually growing as well as you think you are, but if you aren't paying attention, you wouldn't really notice.
Because of this, you want to make sure that you're not just looking at the basic growth potential number, but looking at other factors and key performance indicators that could impact how your growth potential actually looks to an outside buyer. An independent evaulator can help you find your numbers and identify some of these factors if you want to be sure you're getting the most accurate information.
What Can You Do to Help Your Repair Shop's Growth Potential?
If you're looking to sell your repair shop in the near future and you want to make sure that your growth potential is attractive to potential buyers, there are a few things you can do:
1. Increase Your Market Share
It's time to take out the competition!
Or, at least take as many customers away from them as possible. You should investigate who else in your area offers the same or similar diesel engine repair services. What do they charge? How do they market themselves? Are they doing something you're not?
Once you have a better understanding of how your competition operates, make a plan to lure customers over to your shop. Maybe you need to run a different advertising campaign. Or maybe you can expand the services you provide. Find or create something that makes you unique and sets you apart from your competitors. Setting a plan like this into action can not only help you to increase profits, but it can lead to you controlling a larger section of the market share. And the more you control, the more attractive your shop is to potential buyers.
Check out our article to make sure you're advertising your diesel repair shop effectively!
2. Increase Your Revenue Sources
This one seems fairly obvious. If you have a lot of different revenue streams, you have a higher growth potential (and you're making more money!).
So, what does this mean for you? Well, essentially, you need to bring in new customers and retain your current ones. What are you doing to bring old customers back in? How are you reaching new ones? Trying to keep up with the needs and wants of current and potential customers can keep them coming back to your shop for all their diesel repair needs.
Some of this is in your customer service, and some of it is in how you advertise your shop. Work on your message. What makes your shop unique? It could be your team of expert mechanics, or maybe you offer services that other shops charge extra for. Find your angle and bring in those customers!
Learn more about creating a great marketing message for your repair shop by reading our blog post!
3. Make Sure You're Running an Efficient Business
The key to having an efficient business lies with the employees you have working for you and the systems you have in place.
What systems have you set up for the day to day operation of your repair shop? If the answer is "none" then you should get to work setting some up. Buyers like to see that they'll be able to just step into a shop that runs itself, without a lot of babysitting from them.
You also want to make sure you have good employees working for you who will follow the systems you have set up. If your employees aren't following your systems, find our why and coach them on the importance of doing so. Do they have a good attitude? A bad attitude can bring down shop morale and affect customer service and retention.
Need help getting started creating systems for your shop? Read our post on creating systems your employees will follow!
4. Track and Measure Key Performance Indicators
Knowing your KPIs can also help you to improve your growth potential. You need to know how your shop is currently performing to make a plan for it's future growth. Make it a point to track different measurables from your shop other than profit. This can help you get an idea of where you should focus your efforts to increase your bottom line, and make potential buyers look at your shop more favorably.
If you're wondering about which KPIs you should look at, read our series on the 10 metrics you should track to increase profitability!
All in all, buyers like a shop that looks like it has a strong future. Make sure you're setting yours on the path to success by increasing its growth potential!
Want another way you can help increase your shop's profits? Check out our Repair Shop Value Program to help you save money!