5 Things Every Valuable Cabinet Shop Owner Takes Seriously - Part 2
If you want to own a thriving cabinet shop, then there are five very important things that you need to prioritize. In this article, I’ll share the last two things that should be top of mind for any cabinet shop owner, plus a bonus tip.
In Part 1 of this article, I shared that successful cabinet shop owners focus on their margins, hire great people, and have a consistent process for collecting payments, but that isn't all that they do.
4. HAVE A REALISTIC GROWTH STRATEGY
Sometimes, as a small business, it can be hard to follow a growth strategy because so much of the business is fly-by-the-seat-of-your-pants. However, you really need to create a realistic, repeatable strategy to control your growth. You don’t want to grow too quickly and go off the rails, but you don’t want to grow too slowly either.
In my shop, we currently shoot for 20 - 25% growth per year. More than 25% can make it too difficult to keep up with the cash demands, but less than that isn’t enough fuel for our fire. We may not be able to sustain 20 - 25% forever, so we may scale back in a few years.
In your business, figure out a realistic number for your growth, create a plan to achieve it, and then stick to it.
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5. HAVE A DIVERSIFIED CUSTOMER BASE
This tip may feel overrated, but it’s super important, especially when looking at your business from a valuation point.
If one customer makes up 30 - 40% of your revenue, it’ll significantly affect your valuation. You want to keep your large customers to 20% of your gross sales or less. Allowing one customer to account for more than 20% of your sales creates a situation where losing them could sink your ship.
In my shop, we shoot for 15% of gross sales or less per customer. 20% is our absolute upper limit.
Take a look at your customer base. How many individual customers do you have that make up 20% of your gross sales? Do you have any that make up 30% or more? If so, you need to look for new customers to protect yourself from the potential catastrophic downside of losing one of your big customers.
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BONUS: START GROOMING A SECOND IN COMMAND
Start grooming someone as your second in command, either from within your organization or by hiring someone suitable. You need to prepare your shop to operate without you in the event that you have to take leave for some reason. Alternatively, you may just want to take a vacation.
Start grooming someone to keep your shop running while you’re away before you ever have to be away. If you have an emergency or decide to take a well-earned vacation, you can step away without worrying that your shop will collapse without you.
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IT’S TIME TO WORK ON YOUR BUSINESS
If you aren’t already implementing these last three tips, then it’s time for you to step off the shop floor and start working on your business. Owners who want their business to grow beyond their personal capacity strive to create and stick to a realistic growth plan, have a diversified customer base, and groom a second in command who can steer your ship while you’re away.
Tell me: which of these are you still working on? What are your persistent pain points?
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