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To Your Success: Business Diversification: Trap or Opportunity?

March 10, 2002
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There are many diversification opportunities; just find them.

"The optimist sees the doughnut, but the pessimist sees the hole."
-McLandburgh Wilson

My wife Sioux always called them "big boy's toys." I called them business tools that would hopefully even out our workload and expand our income base. As usual, the truth was somewhere in the middle. Both of us were referring to equipment purchased in my business diversification efforts.

The carpet cleaning industry offers so many opportunities to diversify into other areas. (The November issue of ICS Cleaning Specialist magazine reviewed several interesting diversifications for carpet cleaners.) That's right. Every day can be "Christmas in July" for a carpet cleaner buying new tools and equipment. And, diversifying can offer many advantages to any cleaning operation. But before we get carried away on a wave of "new opportunity" optimism, a few words of caution.

Years ago I encountered an accurate definition of "diversification." When I sold my business I was amazed at the assorted debris and junk left over from years of failed diversifications. Like many of you, I impulsively bought the latest, greatest diversification opportunity only to let it gather dust.

The key word here is "opportunity." Even the best systems and tools will lie idle if you don't take advantage of them. But the potential dangers of any ill-advised diversification run deeper than just wasting money on unused equipment. (Which is bad enough in itself.) In my typical contrarian fashion let's review some potential problems in diversification for the carpet cleaner.

Managerial dilution

The majority of carpet cleaners do not manage their existing company correctly now. When they diversify, their current business often suffers greatly. The result? A business that was at least adequate limps and the new diversification suffers from lack of knowledge, experience and performs even worse. Not a nice place to be.

Marketing dilution
One reason companies fail is the lack of marketing, specifically in face to face selling. As my friend Chuck Violand says, "The hardest door to make it through is your own." Once again, when you add another "diversification opportunity" to your business repertoire, your current company marketing is likely to suffer. Another bad place to be.

Change is stressful
Unless you are adding new workers to operate your new service, your existing employees -- most of whom are "creatures of habit" -- will have to learn new tasks. At the very least, they will passively resist changes in their comfortable routine. As an entrepreneur, you thrive on change. Employees largely hate it.

Confused customers
Your marketing has hopefully stressed one "defining difference" no one else can match. If you try to be "all things to everyone," your image and position in your customers' minds will be affected.

Lack of focus
Most carpet cleaners never come close to dominating their existing service area and specialty. Depending on market size, most are better served focusing on being the best in one specialized service.

At least in its early years "J & D Commercial Carpet Cleaning" had a better chance at success than "Jack's Carpet Cleaning and Installation, Window Treatment, Scissor Sharpening, Pet Grooming and Deodorization Services."

The reason we diversify? Boredom, plain and simple. After a few years of pushing the wand, many carpet cleaners lose interest in the actual work and start looking for new interests. But like a marriage of many years, it may be better to look at what you have instead of searching for something new. It could be your "love affair" with carpet cleaning needs to be rekindled.

On the other hand, there are powerful reasons to diversify. We'll examine these and consider some business diversification ideas in our next "To Your Success." In the meantime, enjoy the "toys" in your life. Just make sure that your business expansion efforts are based on sound economic principles instead of always searching for the latest and greatest.

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