is your diesel repair shop too reliant on a single entity banner | Highway & Heavy Parts

Is Your Diesel Repair Shop Too Reliant on a Single Entity? 

Diversification is the key to a killer investment portfolio. You've probably heard this even if you aren't into the stock market yourself.business reliant break handcuffs | Highway & Heavy Parts

This advice isn't just for investments, though. It rings true for your diesel engine repair shop. Diversifying your business can help ensure everything is running smoothly, and it can actually help you when it comes time to sell your business.

We're not talking about diversifying your business assets, though. Today, we're focused on making sure that your business isn't too reliant on a single entity to operate, whether that be a huge client or a single employee. Relying too heavily on a single person is a disaster waiting to happen for your business, and it can actually affect the value of your repair shop when you choose to sell it. 

So, if you're looking to sell your shop, or you just want to help future-proof it, check out what it means to stop being reliant on a single entity. Sooner or later, you'll be glad you did. 

Looking for other ways to build value? Check out our post on building value in your diesel engine repair shop

Looking for diesel engine parts? Our ASE Certified Techs can help you get the right parts quickly!

Give Us A Call!

Where Can a Repair Shop be Too Reliant on an Entity?

There are a few main places where businesses tend to get complacent when it comes to diversifying. 

The first and most obvious is its customers. 

Obviously, you know that more customers mean more money. But what happens if you have a client that brings a lot of business to your shop. That's good, right? 

In some ways, yes. A big client means you have more money coming into your repair shop. But you need to pay attention to what percent of your profit that customer makes up. A lot of experts suggest that no one customer should make up more than 15% of your business. If they do, it's a disaster waiting to happen. Suddenly, a large bulk of your profit is dependent on the decisions of a single customer. So you put more of your time and resources into keeping them happy. 

But what does that mean for the growth of your business? Not only are you dependent on the happiness of one customer, but since so much of your energy goes into their jobs, you're not focusing on ways to bring in more customers. 

We're not saying to turn away big customers. Rather, just don't get complacent because you have a single client that keeps your lights on. Because one day those lights could go out. 

It's also important that your diesel repair shop doesn't depend too heavily on one employee. 

If only one person in your shop knows where everything is, or is the only one who knows how to complete certain repairs, where does that leave you if that person leaves? 

Of course we all hope that that great employee, the one who just gets things done, will never leave. But that's just not always a reality. So, it's important that you don't find yourself in this position, which can severely interrupt the day to day functions of your shop.

Similarly, you don't want to be too reliant on a single supplier. 

This can create difficulties for you if they were ever to go out of business, and it keeps you from knowing if you're getting the best prices for parts. 

So not only could relying on only one supplier lead to costly delays for your repair shop, it could also be costing you profits. 

 

How to Prevent Dependence on a Single Entity

So how exactly do you avoid this dependence? 

Well, a large part of it is being aware of what's happening in your shop. Do you have an eye on your profits? Do you know how much comes from certain customers? If you notice that one has a high percentage, then you'll want to work to change this. 

Again, this doesn't mean you need to get rid of that client, or necessarily cut back on the work you accept from them. Instead, look at what it means for your business. Make sure you are actively working to bring in more clients. If it's getting to a point where you are at capacity, it might be a good opportunity to think about growing your business. Can you hire more staff? Perhaps you need a larger space? The main thing, though, is to not grow complacent. Always be looking for new customers while you retain your current ones. 

Need ideas on finding new customers? Read our post on how to identify your target customer

Similarly, if you find yourself in a situation where you're relying on a single employee for everything, evaluate why. Have they been at your shop the longest and just know how everything works? Have them help you write processes for everything. Are they the most trained technician? Consider incentivizing your other technicians to continue learning. The more knowledge is spread around your shop, the better it can perform.

Are you used to just running to your local parts shop to get what you need for repairs? You might not be getting the best price for everything. And what if they don't have what you need? Then you're behind on the job, and losing even more time trying to source it from somewhere else. 

It can be helpful to know of several parts suppliers and their prices and shipping times on various parts, so that you can always be getting the best price. And, if something is out, you have a backup option.

 

Why is a Diversified Business Important to Potential Buyers? 

If you're looking to sell your diesel repair shop, then you'll especially want to be sure that your business isn't too reliant on a single person or customer. It can actually lower the value of your shop.

Buyers want to see variety because it often means stability. If you have a wide range of customers, then they won't have to worry if one leaves during the transition. It also means that your business has growth potential. You have the ability to gain and retain customers.

Want to know more about growth potential? We're breaking down how growth potential affects the value of your repair shop!

It's also important to potential buyers that a business is turnkey. They don't want to spend a lot of time and money getting everything running smoothly. That's why it's important that not just one person know how everything works. If you have processes for your entire business, a buyer can walk in knowing that your staff should know how everything works. It won't take much for them to keep things operating. 

 

In the end, it might seem like a simple thing to diversify these aspects of your diesel repair shop, but it can really increase the value when you go to sell.

Want to increase profits and raise your shop's value? Check out our Repair Shop Value Program!