Changing Your Business Model – Part Three
The Final Parts to a Modern Business Model
While we’ve talked about business models of the past and how to begin transitioning your business model to keep pace with the changing industry, it’s time to finish looking at the personnel that could potentially be included in a new business model as well as revenue growth opportunities.
Our observations of shops in our industry indicate that shops rarely use temporary personnel, 1099 personnel, or part time staff. Some of the reasons for not outsourcing include:
- The amount of time it takes to setup business operations to maximize the use of these resources.
- The additional investment required.
- An in-depth understanding of how to incorporate these resources into their businesses.
- How to source these resources.
Our recommendation is to have shops become familiar with how each of these resources can be incorporated into their operations, budget the investment, and forecast the return on investment. Quite often use of temporary or part time personnel can enable a shop to accomplish a great deal more work in a shorter period, often leading to increased efficiencies and profitability.
Professional Resources — Accountant (CPA)
Many industry shops use the outside resources of an accountant; however, few use these professionals to their full advantage. Accountants often know bankers, can assist with budgeting and forecasting, can be of assistance in obtaining financial resources, planning asset purchases, and many other very useful services.
Other Professional Resources — Business Coach & Attorney
Quite often the value of a highly skilled business coach is undervalued and underutilized. A business coach can assist you with many elements of your business including: forming a business plan, creating and implementing standard operating procedures, sourcing financial resources, business growth planning, real estate purchasing, lease negotiations, establishing wage and benefit packages, determining hours and days of operations, hiring, evaluating and terminating of employees, equipment purchases, community involvement, advertising and marketing, business continuation and succession planning, business flows, sales, and a host of other services.
Another valuable professional resource is a business attorney. There are many legal documents that shop owners will need drafted and periodically updated. Some of those documents may include business succession documents such as wills and powers of attorney, non-disclosure/non-compete agreements, copyrights, patents, review of property leases, real estate purchases, as well as the ongoing review of other legal documents that come up from time to time.
Equity Building & Sales Revenue Growth
Majorities of industry shop owners either rent or lease their shop facilities. In those instances, we suggest they consider purchasing their facility or finding one close by to purchase, move and lease back to themselves. The reason for this suggestion is that they will then be able to add to their income appreciation for the property as well as the equity that is derived from debt service. In addition, they may be able to lease the building back to themselves at a profit, which is not subject to payroll taxes…a savings of approximately 15%. When it is time to sell the business the shop owner may derive ongoing income from the property or sell it along with the business pocketing the remaining equity after taxes and payoff. Property ownership is just another method of increasing revenue to the owner over the long term.
Additional Sales Revenue Streams
Growth is no longer an option! One of the additional revenue streams shop owners can implement is the sale of accessories. We have been stressing this practice in our training for several years. There are several types of accessories. Some examples are installation of trailer hitches, snowplows, running boards, mirrors, visors, bedliners, mudflaps, bug shields, window drip rails, dual exhaust, nitrogen, remote starters, power inverters, off road winches, and engine toolboxes, just to mention a few.
Reception area accessories could include bicycle racks, tire dressings, wash and wax kits, safety kits, floor mats, and air fresheners along with many objects. The point is that additional sales can be easily obtained from the sales and installation of accessories.
Another additional revenue stream would be to become adept at servicing hybrids and other new types of technology. It’s amazing to me how many shops don’t have technicians capable of working on hybrid technology. After all, there are hundreds of fleets, including the federal government, who are using hybrid technology. Without capable technicians and current equipment, a shop owner is out of the running for this type of work. More of this type of work is on the way and in great abundance!
The current economic climate presents a great opportunity for shop owners to grow by acquiring additional locations. When considering additional locations, we have recommended for years that shop owners go from a single location to a second and sometime shortly thereafter to a third. Therefore, the initial decision should be to go from one to three shops in a short period of time. All too often shop owners are very unprepared for the demands, costs, and investments required entering into the world of multiple shops. When this happens, they acquire a second shop and in a short period of time it begins to drain the resources of the flagship shop and shortly thereafter both shops end up in trouble. We recommend that when giving consideration to multiple shops that shop owners seek training and coaching to assist them with their quest to grow through multiple locations.
Multiple locations provide opportunities for additional owner income even if the per store profit is low. Low profit from several stores an add up to a substantial figure. Additionally, the concept allows for significant equity growth. We have several clients who have elected to go with multiple stores, and with careful planning, aggressively pay off the real estate in just a few years thereby increasing their net worth beyond their wildest dreams.
Now is the Time to Act!
Shop owners need to understand that they are loaded with opportunity no matter what financial shape they are in. Many of our clients have implemented many of the suggestions shared in this article and have retired early and with a comfortable income and/or net worth. The main decision is to accept the challenge and use it to your advantage to affect the necessary growth. You’ll be pleased you did!
If you need help implementing that change or even deciding which changes are necessary for your business, we’re here to help. Call our office at 425-988-6812 to discuss the group and coaching options available.