Diversifying Your Business
The first rule of business is to make a profit; the second is to stay in business. One way to achieve both is to provide additional services to existing customers.
By performing more services for the same clients you are able to increase the overall revenue without significantly increasing overhead, thereby increasing the margin (profit) on each job performed. This concept of offering multiple services is known as diversification.
Operating a successfully diversified company means you are often able to cultivate stronger customer loyalty. As you provide more for them, you become more valuable to them. The relationship grows stronger with each satisfactory service you provide, helping create a more stable business.
When deciding how to diversify your business, there are several factors to consider. First, select a diversification that represents a service needed by the same clientele you are already serving. For example, if you offer carpet cleaning, the same people that need carpet cleaning also are likely to own upholstered furniture and need a cleaning service for it.
Second, choose a diversification that uses the same or similar equipment, supplies and basic skills as your existing business services, if possible. Here again, the example of upholstery cleaning is a good one. With the addition of a few hand tools and brushes a well-equipped carpet cleaner can use the same base equipment to clean upholstery utilizing many of the same cleaning principles learned through carpet cleaning training. Some diversification is selected in order to offset slow business seasons and level out the cash flow for the business. Water-damage restoration seems to be more sought after during the winter months, while carpet cleaning is steady throughout the spring and summer.
However, diversifying into water-damage restoration is not just adding a service. While carpet extraction is often part of each job, entering the field of water-damage restoration is really more like starting up a whole new business. Besides the need for a number of different specialized skills, such as wall repair and carpet installation, the pricing, billing and payment elements are different, not to mention a whole new world of liability. Make sure that, before expanding into a new area, you understand all the nuances and special factors that are part of the new diversification.
You might select a particular diversification in order to complete or round out your base service. For example, carpet repair, odor control, or spot dyeing would all serve to make a carpet-cleaning service more comprehensive, and would probably open quite a few doors for additional carpet-cleaning business. Offering the complete service when your competitor cannot ensures your customers never have to look elsewhere for their cleaning needs.
One mistake often made in diversifying a business is to offer the new service prematurely. Make sure that you have all the right tools, supplies, and proper training in place before offering any new service. Attempting to provide a service without being fully ready often results in poor results, and can do irreparable damage to your business reputation, costing you customers instead of building loyalty.
Diversifying your business is a good way to increase profitability, broaden your business base and add to your stability. But remember, do your homework, select a diversity that fits your business and make sure you are properly prepared before expanding.