The electrical apparatus repair industry seems to have peaks and valleys when it comes to repairs, no matter your business’s size, or your location.
Some days you do not have enough people to complete all the work and other days the shop is as clean as it’s ever been from excessive sweeping and tidying, getting ready for the next wave of breakdowns, rush jobs, and general work.
I have experienced this both as an apprentice mechanic, supervisor, and now owner. However, a long time ago when working in outside sales with my family’s motor shop, we looked to balance this inconsistent workload with more services and repairs that were still centered around the electric motor.
These services included on-site predictive maintenance, electrical and mechanical services, switchgear repair, as well asset management programs. Our sales increased dramatically over the next few years and the new strategy appeared to be working. Then most of our competitors caught up to us and we began to experience this cyclical phenomenon again.
Then, about 5 years ago a contact from a former client reached out to us looking for help with a new company he was working for. The industry and requirements were ones in which we had not previously worked, an entirely different direction than any projects we had undertaken before. After a meeting and tour of their two sites, the direction was clearer – improving their processes and equipment would mean hiring industrial engineers and utilizing our existing team’s experience with industrial services.
We dove right into the work. At first, the team was comprised of my son, myself, and a single contractor. This diversification occurred over 5 years ago and today this division of our company now has a staff of 10 people with current and completed projects all over the world, in addition to a heavy presence in the Canadian market.
This story illustrates how our company was able to diversify and discover new revenue streams, but how might diversification look for your business? Depending on your team’s specific skill set and industry niche, different diversification opportunities will be available to you.
As a small business owner, start by assessing your current revenue streams. Do you think your sources of revenue are diversified enough? How do you know? If one of the following statements sounds like a vague description of your company, you need to start diversifying as soon as possible.
- You depend on a single customer, to the point where losing this client would drastically affect your entire business.
- All your company’s resources are tied to a single product or service.
- You operate in a single industry or sector, refusing work in other areas.
- Servicing customers located in a single town or city, limiting your client base by geographical constraints.
These are all common risks that small businesses may experience, and can have a drastic effect on the growth, long-term viability, and stability of the business if they’re not addressed in a timely fashion.
If losing a single customer would cripple your business, it’s time to diversify your accounts. This will of course depend on the breakdown of your client base, but it’s always important to be wary of relying too heavily on a single client for continued revenue.
The same goes for operating in a single sector. What will happen if that sector suddenly contracts or experiences a long-term decline? If that does happen, having a diversified book of business in other sectors will protect your business.
As an example, one of our major clients is in the international travel and logistics industry. As you can imagine, the past few years have seen a massive drop in work and revenue from these clients, as they had all been essentially shut down for the pandemic. Fortunately, as previously mentioned, we had been careful to diversify our accounts to other sectors and industries. This helped protect us during the pandemic, and even saw a surge in revenue from these sectors that performed better during this time.
Another risk that businesses may have to overcome is that of a single product or service line. You may have been making the same great product or providing the same great service for years. In fact, doing so is probably what made your company successful and still operating today. However, the market won’t stay the same forever. Changes in consumer’s preferences and technology will always have an impact on the market, and if you rely too heavily on a single product or service, a shift in the market could have a drastic effect on your company.
Lastly, be wary of limiting your company to a geographically limited market like a single town. By doing so, you’re effectively tying the success of your business to that of the town or area you operate in. This might be fine if you operate in a large metropolitan area, but many towns and cities will have different industries and opportunities for growth. By expanding the geographic area in which you operate, you’ll help protect your company from any significant economic downturn in the area in which your company traditionally operates.
The first step in diversifying your book of business is realizing that you need to. A lot of business owners can get caught up in the hectic day-to-day operations without taking a step back and assessing the overall health of the business. Judge the common risks mentioned in this article and see if any apply to your company. A useful exercise would be to stress-test your business every quarter using these risks. Run your finances with your largest customer removed, or your best-selling product. Doing so will help you better understand where diversification is needed in your business.
In the case of our company, diversification saved us in these past few years. We found ways to diversify into similar sectors that allowed us to create synergies with existing team member skill sets and assets. This helped us increase margin, as well as cross-selling electrical apparatus, millwrighting, and electrical services to these new sectors. By constantly assessing, stress-testing, and diversifying your business where necessary, you will mitigate risks of revenue fluctuation, while consistently growing your business and revenue.
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