Job shops looking to grow larger and scale faster have a lot to lose by saying “yes” to every RFQ.
As a shop owner myself, I’ve made this mistake in the past, extending my company beyond its limits to take on a job that wasn’t a good fit when business was slow. After a few weeks, business started picking up again fast, but we were stuck trying to push an ill-suited job through the shop. I had said “yes” when we should have said “no,” and it cost us.
My advice for job shops? Be choosy. If you want to be genuinely successful long-term, be discerning about what work you accept (even during challenging times).
To learn how to say “yes” more often, get specific about your capabilities and the market you serve. As I spoke about recently on the Revenue Throughput podcast, job shop owners who know where their company should be headed will attract the right workers and customers.
How to Choose the Best Customers for Your Job Shop
Here are three strategies for choosing your best customers that I’ve learned along the way:
1. Consider the value of each job
When a job shop owner says “yes” to the wrong job, they stretch workers, resources, and budgets too thin, causing underperformance and profit loss. Know which customers are worth serving. Ask questions like:
- Is this customer in an industry we specialize in serving?
- Is this job too big or small for us to take on?
- Can we meet this customer’s expectations given our current resources?
2. Use job shop software to analyze past work
Data is king when deciding which jobs are right to take on—and having great job shop software for quoting and a robust ERP system will help you conduct the right analyses. Once we started assessing which parts, volumes, and customers generated substantial revenue, a formula of sorts emerged.
We realized we only wanted to make parts smaller than a basketball; we just didn’t have the forklift capabilities to easily transport anything bigger. Even with creative workarounds like reconfiguring equipment or taking surrounding structures apart to ensure large parts could be transported successfully, we were spending too much time, energy, and effort to want to do it again.
That was a big “aha” moment for us, and we wouldn’t have had it if it weren’t for the technology behind our job shop software. Making small parts that were easy to transport worked well for our team. Still, the ideal parts couldn’t be too small. If a team member could simply sneeze and lose five of them, we also weren’t interested.
3. Determine your worth
Every time I quote a job that’s over a certain number of parts, I hear that my shop is 2-3 times more expensive than other shops. And that’s because our pricing is geared toward small-batch work. We don’t discount it for larger volume work because that doesn’t ultimately benefit our bottom line. This was another lesson we learned the hard way.
Once, we went low on our dollar-per-hour rate to win a 3,000-piece job because we assumed it would run for months and months and generate significant revenue. Unfortunately, we encountered so many unanticipated issues that we regretted ever taking on the job.
Ultimately, it just doesn’t make sense for us to tie up a machine for slightly longer at a lower rate if we can stay busy at a higher rate running lower-volume orders. Our sweet spot is small-batch, tight-tolerance parts—and we’re comfortable conveying that message to potential customers.
“No” vs. “No, But”
No shop wants to no-quote someone, so my last bit of advice is to take a slightly different approach. Instead of saying, “No,” say, “No, but.” For instance, “No, I can’t quote this job, but I know a great job shop that will.” Ideally, that shop will send suitable customers your way in return.
See yourself as part of the larger manufacturing family—including your competition. There are multiple ways to win. Instead of being a jack-of-all-trades, be a specialist.
Justin Quinn is the President of Focused on Machining, a CNC precision machining shop in Denver, Colorado.