There’s no escaping the fact that sales and new business is a common gripe across all industries. No matter the nature of the business’s offering, company owners are often left wondering how to maximise their sales effectively. However, subcontract engineering companies in particular can often become complacent when it comes to new business, with not enough thought given to the future and too much focus put upon the present – especially if they are currently running at full capacity. This can prove to be a detrimental mindset that wreaks havoc upon the sustainability of a company’s long-term goals.
One of the most common phrases I hear from subcontract engineering companies is, ‘We’re busy! We don’t need to look for more work!’. However, to play devil’s advocate for a moment, it’s really important that these companies don’t lose sight of the bigger picture, or disregard the often fickle nature of industry demand.
If you’re currently in the enviable position of being busy, then firstly, congratulations! Limited capacity is often the mark of a great subcontract engineering company who are both respected and sought after by their clients. However, even the best companies sometimes fall victim to external forces that slash their workload, which is why it’s vital that you consider the following scenarios before deciding that new business is not a priority:
Have Your Eggs In More Baskets:
Many companies have made the mistake of dedicating a large amount of capacity to a small amount of clients, meaning that their survival becomes totally dependent on receiving business from those companies. When one of these main clients scale back production – or move it in-house or overseas – this can have devastating consequences for their suppliers, forcing some businesses to fold almost overnight.
By having a wider customer base, you reduce the risk to your own company and ensure that you can still operate if unforeseen setbacks should occur. It can also give you back control over your production schedule, instead of having to meet near-impossible demands to appease your main customers and keep their business.
Slow-Paying Customers Disrupt Cash Flow:
Unfortunately, the prestige that results from working for a big name often comes at a price. Larger companies are all too aware that everybody wants to work with them, meaning they can call the shots when it comes to paying their engineering suppliers. It’s not uncommon to see suppliers held to ransom on 60, or even 90 day payment terms set by larger OEMs, which has a detrimental impact on cash flow and can leave suppliers struggling to pay their own bills.
Many suppliers have gone under in these circumstances, so if you work with a handful of slow-paying companies, then it might be worth looking at replacing – or subsidising – their business with that of faster-paying customers. After all, it’s never worth risking the future of your company purely for the kudos of working with a large selection of household names.
There are a number of industries, such as motorsport, that are notoriously seasonal. If you’re currently busy with work that has an expiry date, then it’s extremely important that you plan ahead for when this work inevitably tails off.
It’s something that we see happening far too often – engineering companies waiting until work slows down before wondering what to do next. Unfortunately there is no quick fix when it comes to new business; from the moment you start quoting for work, there is an interim period before any orders come in. This means that you have to pre-empt any downturn and start looking for work in advance – otherwise, you’ll likely suffer from a drop in workload which can take a toll on your business.
Peaks and Troughs:
The nature of engineering lends itself to peaks and troughs, with very few subcontract suppliers reporting a consistent level of work. This can be attributed to any number of reasons including political climate and supply & demand ratios – other times, fluctuations can occur for no obvious reason at all. That’s why it’s important to always be on the lookout for new business and not to get complacent while you’re riding the peaks.
The message here is to make hay while the sun shines – it’s not necessary to wait until you’re panicking and desperate for work. Even by identifying additional opportunities among your existing customer base, you will offset the risk of substantial tail-offs occurring. New business is a constant process and it should continually be top of every subcontract supplier’s agenda; it should always supplement your account management efforts in case of unforeseen circumstances. After all, we never really know what’s around the corner, even when business appears healthy and abundant.
Qimtek has helped hundreds of subcontract engineering suppliers to fill spare capacity and grow their customer base. If you would like to find out how we can help your business, then please call us on 01256 394 500 for more information.