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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.