Expanding Your Business - Start & Run a Computer Repair Service (Start & Run Business Series) (2012)

Start & Run a Computer Repair Service (Start & Run Business Series) (2012)

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Expanding Your Business

As more and more customers find out about your business, you may find yourself struggling to keep up with demand. Once this happens, you may find that it is easier to expand than to run yourself ragged with work! There are a few different ways to do this; you could add existing staff, open a retail store of your own, purchase an existing store, or even buy into a franchise. Of course, each of these has different risks and benefits.

1. Hiring Employees

One of the easiest ways to expand your business and maintain control of your brand is to add another employee.

When you are looking for a new team member, there are many different qualities that you will want to find. The most obvious is someone who has the technical skills to complete the job. However, more subtle requirements are often more critical. For instance, if you are hiring a technician, you need to be able to work with him or her. During the interview process you need to determine if you can have a working relationship.

At our stores, we pride ourselves on having down-to-earth technicians that work well with customers. When we interview new techs, my wife found a way to weed out technicians that wouldn’t fit with our store. She often asks a new interviewee to help her with some broken-down used system in the back (not a customer computer). Now, the computer problems could range from missing a hard drive to an obscure operating system problem — either way, she acts like she has no idea what is wrong. Watching the way people respond to this test tells us how they will respond to customers. The techs that make it through the test usually diagnose the problem and promptly give her the result. The techs that fail are condescending and rude during the test. One went so far as to ask her how she could be running the store! The point is, the test shows not just skill but also personality.

1.1 Paperwork, paperwork, paperwork

As soon as you hire an employee, you will need to make sure that you have completed all the appropriate employment paperwork. Hiring a new employee means managing all aspects of adding a new employee (e.g., regular payroll, paying payroll taxes, paying workers’ compensation, updating insurance). One way to do this with relatively little work is to hire a payroll company. For less than $100 per month, you can get the entire function outsourced and even offer your new employee direct deposit.

There are two documents you should ask your new employees to read and sign:

• Non-compete agreement: If the employee leaves your company, this document says that he or she is not allowed to steal your clients and customers.

• Non-disclosure agreement: This document ensures that the processes and forms that you use at your business are not allowed to be distributed to your competitors by employees or former employees.

1.2 Training new employees

Once you have chosen who will join your team, the next step is to get the person on board with your system and your processes. Adding an employee is about expanding your business and brand, not finding a new way to do things.

Have your new technician shadow you as you work. This means that instead of him or her working alone, the employee should be watching what you do and how you do it. Teach him or her about your forms, tools, and processes.

1.3 Transitioning your existing clients to new employees

If you have a retail storefront, transitioning your clients to new employees is easy. However, if your business is made up almost entirely of on-site visits, expanding to add new employees has a risk associated with it. It is possible that a new employee you send to a business client could eventually try to steal your client!

We had a client we did business with regularly. When business started to pick up we found another part-time technician to do the additional on-sites. This seemed to be working well for the first month or two. Then, one of our big clients stopped calling. After a month or so I stopped by just to see how things were going. Guess who was there? Our technician! I severed the relationship with both.

2. Opening a Retail Location

Consider whether you really need to open a retail store. A thriving computer business may not benefit from a retail location. If you are running a successful business out of your home, you may want to consider what changing your business model will entail. Not only will you have additional expenses, but you will also have less flexibility!

In order for the business to make a profit, you need to cover not just your expenses, but also all the overhead fees. Bills for a retail space will include:

Commercial rent

Utilities (e.g., water, electricity, gas)

Cable and internet connectivity

Security (e.g., roll-down doors, cameras, alarms — computer stores can be targets of break ins)

Custom signage

Increased insurance (check with your insurance broker on the price and service differences between insurance companies)

Dedicated phone and fax lines

Full inventory

Shelving and benches

Also, keep in mind that having a retail location requires additional licenses. Check your local city office to make sure that you comply with all the requirements. You may need a security alarm permit, a retailer license, and if you sell used computers, you may need a secondhand license.

2.1 Find a great location

Of course, if you want to open a retail store, you need to find a great retail location. When we opened our second store, the location was so wonderful that we were profitable the very first month! The following are some things to look for in a great retail location:

No immediate competition: You may be able to do business against Best Buy’s Geek Squad, but you still don’t want to be across the street from a Best Buy or, worse yet, another small computer retailer.

• Street visibility: There are so many shopping centers that can’t be seen from the street. While this is fine for businesses that are destinations (e.g., bowling alley, supermarket), for a small business such as a computer retailer, it would be nice to pull in customers who are driving by. After all, you are paying for retail space, so you may as well get the advertising benefits from it.

• Parking: Remember that customers will be bringing large desktops to your business. Don’t choose a location that will make them walk a long way with a heavy computer — they simply won’t do it. Instead, find a retail location that has parking spots available directly in front of the store. Furthermore, check the parking lot at various times of the day. The spots you want your customers to use should be open. If the shopping center is too busy then the center may not be a good place for a computer repair business.

• Safety and security: As a computer retailer, you will always have to consider the costs associated with security for your business. In general, the worse the location, the lower the rent, but your security costs and shrinkage (loss of product from theft) will be higher.

• Compatible businesses: One of the big things to look for in a location is what other businesses are around you. Obviously if the entire shopping center is vacant, your customer base will not be growing because of drive-by traffic. However, a shopping center with many different, growing businesses will actually generate sales for your store! One of our stores is directly next door to a Dunkin’ Donuts which meant that hundreds of potential customers saw our store as soon as we opened!

• Flexible signage rules: Some shopping centers have very rigid rules about signs — basically they aren’t allowed. Other places are flexible and allow businesses to advertise on the street, in the parking lot, and with banners. As a new business, it is always easier to launch your business in a business-friendly shopping center than in a more restrictive one.

2.2 Buying an existing store

Another way to expand your business is to buy an existing store that is already in operation. Small computer stores exist all over and you may find that some of the owners are willing to sell for the right price.

In general, the price of purchasing an existing business will be higher than the initial investment of starting a business on your own. When you start a business, you will pay for the cost of tangible assets such as inventory, equipment, plus about two times the “yearly net.” This means that you not only pay for the assets, but you are giving the business owner two years of profit to buy his or her business. In return, you are receiving the business’s existing customers, reputation, good will, and usually about one month of the owner’s time to teach you the business.

Just make sure that you don’t overpay for the business. The owners will try to show that their business is as profitable as possible. This means that many sellers will try to downplay expenses. In some cases, owners who are planning to sell will go as far as to drop advertising and other expenses a few months before they sell. Their hope is that sales will remain stagnant, but expenses will be low, thus increasing the appearance of profitability. Of course, when the new owners do buy the business, they may find declining sales, and reduced profitability.

In other cases, owners may want to sell because they know something you don’t. Many people will say that they are selling to move out of town or to move on to a different investment, but that may not always be the truth. If a big-box store like Best Buy is moving in, a savvy business owner may decide it’s time to move out!

The following are some of the things you can do to protect yourself:

• Hire a lawyer: Always get a lawyer for any large business transaction like this. The value of a lawyer’s expertise will be worth his or her charge.

• Hire a professional appraiser: These individuals will know a business of this type and what the retail value is in your area. Like a home appraiser, these people will provide comparable sales for the business, and give you an idea of just what the business is really worth.

• Review the financials: Ask the business owner for all of his or her financial records for the last two years and have these reviewed by a professional accountant. Checking everything from tax returns to profit and loss statements will help you verify that the business hasn’t changed dramatically (e.g., due to reduced advertising or a sudden drop in customer sales).

• Negotiate everything: The asking price of the business is just a starting point. Make sure that you negotiate for every penny. If there are new expenses that you need to pay, reduce your offer accordingly. If the owner dropped advertising, add that back into the expenses before you bid. Make sure that you are clear where your offer came from so that the owner realizes you are being fair and not just “lowballing” the bid.

If you are thinking about buying an existing store, www.BizBuySell.com is a great place to start investigating businesses. You can learn about what businesses are available and how much the owners are asking.

2.3 Buying into a franchise

Just because a company is offered as a franchise doesn’t mean it will make money. As a matter of fact, there are plenty of franchise businesses that open and close each year. Before you buy a computer repair franchise, make sure to ask these important questions:

• What training does the franchise provide?

• What advertising and marketing does it do?

• What are the start-up costs and ongoing costs? (Most franchises take a percentage of every sale.)

• What has been the success or failure rate of the businesses in your area and in your state or province?

Can you talk to other owners for references?

Today, there are many different franchise businesses and every owner has a direct impact. For instance, a few doors down from our first store was a franchised sandwich shop. The old owner ran it into the ground with food safety violations and poor customer service. The franchise was then purchased by a more professional owner who began growing the business immediately. So, before you get involved in a franchise, make sure you find out all you can about what makes a successful chain franchise.

3. You Can Make It Work!

Let’s face it, none of us is perfect. When we first started in the computer repair business, my wife and I each had years of experience in IT and management. We purchased an existing store and even had the owners train us on the business. We had all the advantages we could and still we had problems with computers, trouble employees, and annoyed customers.Then the recession hit!

The key is to make sure that you learn from every failure and gain knowledge from every experience. Sure, things won’t always go your way, but if you learn from the experience, you will find that things start getting better and not worse. Sometimes it is actually good to fail as fast as possible. What I mean by this is that you will oftentimes learn more by trying and failing than you will by preparing. While the lesson may seem expensive at first, when you realize what you learned from that experience and how much it can benefit you to go forward, you will realize that it was still a great opportunity.

When we first purchased our computer store, it was great. However, when the economy started failing, so did our store. To survive, we redesigned our business and recovered. For more information on low-cost (or free) ideas to increase sales, reduce your business expenses, and bring in new customers, read our first book: 19 Ways to Survive: Small-business strategies for a tough economy.