Honing Your Business Skills

Running a machine shop requires a unique approach.

Whether a shop is specifically focused on motive power machining and engine rebuilding or has branched out to take in more industrial jobs, it is a business unlike virtually any other.

It is not a business quite like manufacturing, nor is it a repair business. And, while there are similarities to parts remanufacturing, there are enough differences that looking for too much commonality can probably lead you away from the path to prosperity.

So, while many businesses are looking to diversify to grow, it may be wise to look at building core competencies and focus on becoming a niche marketer.

“Instead of trying to become something to everybody, becoming a specialist seems to be the way to go,” says John Solecki, owner of SEM Powertrain in Pickering, Ont. His business, which has evolved from the more general Scarborough Engine & Machine of the past (SEM is technically a division of that company), Solecki says that he has learned a few things over the past 30 years.

“Be ‘The Guy’,” in a market, he says. In the case of SEM, the company has focused on becoming a problem solver for the original equipment sector, catering to a few automakers’ hard-to-troubleshoot engine issues.

He admits that it took him a while to recognize the need to go beyond being a generalist catering to the independent service outlet, and beyond the racing market, which once was but is not right now an area of focus.

Those shop owners who have come to a similar realization have done consistently better than those who have remained generalists and sought only to gain business by keeping prices low, he says.

“You have to be creative, but you have to be aggressive too. A lot of it is about relationship selling.” If you want to be the go-to shop for the powerboat set, for example, you need to know the players and be able to talk the talk.

“You don’t do boat motors because you see the market potential; you do it because you are a boat person yourself. You need to know the people and know the names.” Years ago, Solecki became closely aligned with Honda engine work, through focusing on it technically and becoming the official rebuilding source for a Honda Civic racing series.

“I knew Hondas inside and out and people instantly figured that out. You have to be part of the community like that.”

Of course, the nuts and bolts of attracting and keeping customers are important too. You cannot simply become technically proficient and then sell yourself to a market. Considering that you are looking to build your business by finding new customers, you will need to provide prospects with confidence that you are in fact professional by presenting an image of professionalism. They don’t know you, so first impressions are important.

“The shop must be clean and organized,” says Rob Munro, owner of Valley Speed Machine Shop Ltd. in Kamloops, B.C. Munro has been honoured with a number of awards over the years and today serves on the board of the AERA-Engine Rebuilders Association.

“I can’t emphasize this enough: an impression is established with the first few minutes of walking in as to the kind of product you produce. The Internet has given every customer a chance to view other shops online and give them an impression as to what your shop should look like.”

Munro says that door greetings and phone manners are also critical. Always acknowledge customers when they walk in, and offer to help them unload the parts.

Of course, you have to know your stuff too. Munro says there is plenty of training available, and having staff attend key trade shows helps too.

“One of our staff members won a scholarship from the E.R.I. Group (buying group); we are sending him down to Joe Mondello’s cylinder head porting school in Tennessee this winter. I’ve always been a big believer in educating our staff.”

Munro says that marketing the business is an important activity, too.

“We do shop tours for the high schools, car clubs, and any customer that shows an interest in what we do. We are proud of our shop, our staff, the equipment we’ve invested in, and love to show it off. We’ve placed our office in the middle of our shop just for this reason.”

It wasn’t always that way, of course.

“I can’t argue the fact that the business has changed in the last several years. We’ve had to take a hard look at how we spend our advertising dollars. We are focusing more on direct mail, car shows, niche market events like motocross races, and off-road truck events that we only need to have a small presence at to get face-to-face contact with current and future customers.”

Of course, that face-to-face contact can reveal if you’re not knowledgeable, professional, and serious about seeking their business.

“I don’t think you can be a wannabe,” says Solecki. “You have to be a player.”

Priming Your IT Infrastructure

As important as having the right machine tools is the right computer tools.

It is also wise to focus on having a management package tailored to the machine shop business. This can help you manage the appropriate variables for your business, rather than trying to shoehorn your needs into an off-the-shelf package.

High on the list of many shops is the AERA-Engine Rebuilder Association’s Prosis software. The software problem-solving capabilities, spec sheets, and diagrams can help with customer issues.

Get your e-mail and website up and running; many customers are used to doing 100% of their transactions this way. You can have the most modern equipment on the shop floor, but by not having e-mail and even a small, simple website, you could appear outdated to many customers.

Emerging Diesel Market

While the gasoline engine market is predicted to have slow growth, the diesel market in North America is another story. It may be an opportunity for the future.

In a study by researcher Frost & Sullivan, it is estimated that approximately 2.5 to 3% of light vehicles in operation in North America in 2006 were equipped with diesel engines. Only some light pickup trucks, some SUVs, and some European passenger cars from Mercedes-Benz (V-6) and Volkswagen (I-4) were equipped with diesel engines.

However, the split in aftermarket unit shipments of gasoline and diesel engines was approximately 93.4% to 6.6% in 2006, showing that the diesel segment was delivering more dollars than its share would indicate. And in the future, the dollar share commanded by diesel rebuilds is expected to increase even more, driven upward by new, clean diesel technology and a desire in the market to seek greater fuel economy.

The revenue share of remanufactured diesel engines in 2006 was 15%. This is expected to increase to 24.1% in 2013, since this segment is expected to witness growth in both unit shipments and price.

While the basic price of diesel units is higher, this segment of the market is expected to get an additional boost for several reasons:

* Increased fuel economy, product life, and power in comparison to gasoline engines will boost demand for diesel engines in new vehicles and thus the diesel vehicles in operation.

* Diesel engines are widely used in fleet vehicles for freight transportation, which are serviced more frequently than personal vehicles because they are used more extensively.

* Remanufactured diesel engines are approximately 60% to 70% of the price of new replacement diesel engines.

For more information on Frost & Sullivan’s “North American Remanufactured Engine and Transmission Aftermarket” contact the company at www.frost.com.