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How fabricators diversify revenue streams and find new customers

Mitigating the risk of high revenue concentration for custom and contract fab shops

Illustration of a pie graph

Mykyta Dolmatov/iStock/Getty Images Plus

Ask fab shop owners what would make them sleep better at night and they usually talk about the labor shortage—but market diversification usually enters the conversation too. High revenue concentration is a perennial issue for custom and contract fabricators. The latest operational benchmarking survey from the Fabricators & Manufacturers Association Intl. reported that, on average, only six customers make up half a fabricator’s revenue pie. Moreover, sales from new customers make up just 3%.

No one likes venturing outside their comfort zone. People stick with what they know, yet fab shop owners are all too aware of the risks. They might build the business to serve the needs of specific industries, only to find demand drop. Revenue plummets, so the shop has no choice but to lay off the workers it tried so hard to attract. It’s a nightmare scenario. How can fab shops avoid this?

They can start by examining all business processes not just for overall efficiency, but also with new customers in mind. When a prospect calls or emails out of the blue, what happens?

The New Customer Experience

“Put yourself in your customer’s shoes. You call in. How are you received? How does the order process go? The moment a prospect calls in and is directed to a full voicemail box, or a voicemail that isn’t set up, the marketing effort dies right there.”

That was Josh Blankenship, director of business development at Houston-based TopSpot Internet Marketing. “You need to be clear how engagement happens, and what will happen next after the prospective customer reaches out. Such clarity builds confidence.”

Polishing and refining that customer experience on the front end complements continuous improvement efforts on the back end, after the order is won, processed, and sent to the floor and, ultimately, out the door. A shop might invest in advanced manufacturing execution systems, instill rigorous shop floor controls, deploy advanced visual management, and have machine technology that epitomizes what advanced, automated, flexible metal fabrication should be—yet when someone calls the main number and dials zero to talk to a human, no one answers the phone.

Give Focus to Marketing

Admittedly, the reason many might not scrutinize the new customer experience is the fact that the prospective customer calling in might not be a good fit, leading to what’s seen as wasted effort—but is it, really, especially if a shop is looking to diversify? That customer might not be a good fit today, but they could be a good fit down the road.

Blankenship added that such mismatches often occur because the company’s website and overall marketing content, paid and unpaid, lack specificity. A website might spell out certain certifications that specific industries require—ISO 9001, AS9000 for aerospace, ISO 13485 for medical, CMMC for cybersecurity—but beyond that, useful information is lacking. So, buyers call to find out more, only to find the fabricator unresponsive. If they request a quote (RFQ), the fabricator puts it in the “no quote” bucket and moves on.

Some of this mismatch might be unavoidable. But just as a shop works to identify waste on the floor, it can do the same for marketing, sales, and quoting—all with the goal of minimizing those time-wasting mismatches.

As Anthony Colarusso of Littleton, Colo.-based SALT Marketing explained, this starts by asking a fundamental question. “I start by asking, ‘What product or service do you sell?’ [Shop owners] usually say, ‘Well, we’re a job shop. We build parts to print.’ That’s the first answer. Then I say, ‘Tell me more. There are thousands of sheet metal and plate fabrication job shops. What do you really supply? And don’t say great customer service and on-time delivery. Everyone says that. What really makes you different from the job shop next door?’”

This might involve the capacity of certain equipment, like a tube laser, an ultrahigh-powered fiber laser, or a high-tonnage press brake. But as Blankenship explained, buyers often aren’t looking for specific machines. They’re looking to make certain products, and they’re looking for content that relates to them. This might be a certain material grade or thickness, or a drawing or photo of a certain kind of part. Or it could be certain verbiage used to describe specific applications that apply to more than one industry.

Blankenship described a tank fabricator serving the oil and gas business, a famously volatile sector. The company had content on its website and advertisements related to certain aspects of tank fabrication, and that content happened to attract a sector that’s about as far removed from oil and gas production as you can get.

“We were tracking the inbound leads and their listed applications,” Blankenship said, “and one happened to involve raw honey processing. We analyzed the leads that came in and realized we had about seven similar leads come in over the past year and a half. Seeing that, we started to build content around raw honey applications, and now we’re seeing four or five leads a quarter. There’s a market out there. It’s a fragmented one, but it’s there.”

To generate that content requires research, both online and in person. Blankenship described shop managers who visited sector-specific trade shows and conferences, shook hands, made contacts, and (most important) asked a lot of questions. They could cover the basics about the industry’s structure and its major players, but questions also can be about the industry’s pain points. From that research can come specific website content that’s anything but bland.

Digital marketing with generic, our-customer-service-is-great content has become, as Blankenship described it, “the white noise of the Internet. It just fades into the background.” And because it’s so bland, a fabricator might get all kinds of leads that don’t come close to being qualified.

He added that when well-crafted digital marketing starts generating inbound leads, those can create valuable metrics for marketing effectiveness. For instance, shops can track the leads that were disqualified as a percentage of overall inbound leads. Why were they disqualified, and is there any way to shape the marketing message to target a different but perhaps related buyer that’s within our wheelhouse?

Qualifying the Leads

Blankenship described leads in two categories. The first is marketing-qualified, meaning that the business meets the baseline qualities marketing is aiming to attract. A portion of these might move to the next level, becoming a sales-qualified lead. “You could call this ‘sales- and operations-qualified,’” he said, explaining that these represent those leads sales actually engages with and confirms that the project fits the shop’s capabilities, and people from operations confirm that they can deliver.

Inbound leads could complement traditional list-buying. A fabricator focused on ag might purchase a list of mining equipment players, for instance. SALT Marketing’s Colarusso added, however, that a name and contact information alone does not constitute a good lead. Moving that lead one step closer to a potential sale requires more information.

Colarusso called this step lead verification. “The first question is, ‘Does this prospective customer buy what we sell?’ It’s a simple ‘yes or no’ question. At this point, we don’t care if they’re interested in buying or not. If the answer is yes, the next thing is to find the decision-maker.” This can involve cold calling along with other research. Whether it’s outsourced or done in-house, Colarusso recommended lead verification be handled separately from sales. The process takes time and patience, and it pulls the salesperson away from servicing existing customers as well as prospects closer to pulling the trigger on an order.

Once leads are verified, Colarusso then recommends grouping them into four categories: “A” leads represent those that could grow to be 10% of the shop’s product mix; “B” leads might not have such growth potential, but they’re still significant; “C” leads have limited sales potential, but they still represent some level of opportunity; and “D” represents a lead that’s disqualified.

Colarusso emphasized that this system hinges on potential growth, not what the prospect is currently asking for. “Let’s say you make parts for Deere, and you receive an RFQ from a well-known mining company. You look at it and see it’s a small order, and it seems purely transactional. Maybe they’re just pricing around. So, you don’t quote it.

“This part might be low volume, but it’s also from a major OEM in an industry that’s outside of the shop’s core ag business,” he continued. “Yes, it might be transactional, or it might be a price exercise. But you’ve got to go through that. It’s part of the sales process.”

This also brings up another wrinkle of complexity when it comes to diversification. A fabricator might identify itself as a contract operation and so pass over a quote for low-quantity work, even though it falls within a shop’s core capabilities, comes from a sector the shop doesn’t currently serve, and has potential for growth. That practice can make attracting new customers an uphill battle. “In most cases, no new customer is going to just hand over a $1 million purchase order,” Colarusso said.

Operationally, a fabricator needs to be set up for flexibility and quick changeover. This could include breaking into production runs with a low-quantity order, or perhaps having cells dedicated to low-quantity, quick-turn work. Having that capability could help get a foot in the door with new customers who could offer higher-quantity work down the road.

Every custom and contract fabricator wants to build a business on customer partnerships, not mere transactional purchases—but new customer relationships have to start somewhere. “It’s like going out on a date and expecting love at first sight,” Colarusso said, adding that, in most cases, “partnerships are developed over time.”

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.