When CnD Industries Inc. became too tied into just two customers, Clyde Shetler decided it was time to diversify.
The owner of CnD Industries says that until the mid-1990s, his custom steel fabricator and large machine shop was heavily dependent on two customers, and each quarter, he worried when he studied the sales-per-customer numbers.
“We started to see a downturn in that business,” he says. “And that’s when we said, ‘We have to diversify this customer base.’”
As a result, the customer base at CnD today is much more diversified, leading the 67-employee company to 2007 revenue of $6.7 million.
Smart Business spoke with Shetler about why it’s a bad idea to put all your eggs in one basket and how to hire strong managers.
Q. Why is it important for companies to diversify their customer base?
Historically, companies in our business tend to get too locked into one customer or one industry.
You can get stuck in a rut where you’re getting constant work from a customer.
They’re paying you on time, and pretty soon you say, ‘I don’t have to go look for work because I’ve got all the work I can handle from this customer.’ The problem is if your customer has a problem, then you have a problem.
Diversification allows you to survive through downturns. At any point in time, no customer is more than 15 to 18 percent of our quarterly business, and we cut across enough industries that we don’t have the peaks and valleys of being strictly tied to one of the industries.
Q. How do you diversify?
In our quoting and our job procurement, we try to look out as much as six to eight months and see what’s out there to be bid on, what projects are going to be coming up. But we also might say, ‘We’re really tied to this steelmaker. We need to load our shop next quarter with something from somebody else.’
Another thing that has helped us grow is doing a good job of selecting the fore-men and plant managers, the first people under me. Each step up the line it becomes harder and harder to find the right person. The closer you get to me, the more responsibility they have to take and the more decisions they have to make.
Q. How do you communicate the focus on diversification to your employees?
We relay through the managers that it’s important to have customer diversification, and we also relay to them that every customer is important.
Whether it’s a $500 job or a $500,000 job, they all are important to us. Each one needs to have the same amount of care and service. We want to keep them all. We have several hundred customers that are not big dollars per year but always have their work in here. That’s part of the diversification; we want to support those shops, too.
Q. How do you create a good management team?
Each manager that we hire goes through a series of three or four interviews with everybody he’s going to work with here, whether it’s his equal or his boss.
You want to try and get the right person the first time. If you hire somebody and it doesn’t work, it actually costs you quite a bit of money. You’ve invested time and money, and you don’t want to find out four months later that this really wasn’t the right person for the job.
Q. How do you manage delegation?
Letting go is the hardest thing to do for someone who owns their own business. You’ve always made the decisions yourself, so now you’re giving the authority to somebody to make decisions.
You have to have trust and belief and faith that, that person will do the job, make the right decision and, hopefully, come tell you if there’s a problem with the one they made. Hire the people that you can trust to make those decisions for you.
Q. How do you measure employee performance?
We do a yearly three-page evaluation at the company. We talk about strong points, weak points, areas of improvement and continuing education. It’s done for everybody that works here, even me.
My managers do my evaluation because if I’m not giving them the right information, they can’t perform their job. It helps me to get better at what I do. Actually, it’s very enlightening.
Everybody knows that evaluations are coming at the end of the calendar year, and from an hourly standpoint, employees are anticipating some sort of raise. In the evaluation process, the HR manager explains to them their total wage package for the previous year what they’re getting in health care and in their 401(k) so they understand what we’re paying for workers’ comp, health insurance and why so many programs are in place to control these costs.
And, next year, we will have this year’s evaluation to compare for areas of improvement.
HOW TO REACH: CnD Industries Inc., (330) 478-8811