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To Your Success: Three Powerful Words:

February 1, 2002
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Diversifying lets you become more valuable to customers, and to pay employees better. So consider this ...

The next time you're working in a house, calculate how much it will cost you just to do this job. Figure gasoline and what you feel your time is worth, then factor in a pro-rated percentage of your business overhead including your marketing and advertising expenses. My guess is the total will take your breath away.

Given this shocking cost of acquiring a customer it makes sense to extract as much money as possible "while you're there." Please, don't feel guilty about this proven business strategy. Today's customer has more disposable income (and less time) than ever. Your target client is delighted to pay premium prices to a company that provides consistent quality work and "one stop shopping."

Offering more services can also be smart business because of the old maxim, "You fly empty ... you fly full." How can an airline make money selling $99.95 tickets for a New York-Los Angeles flight? Because flight and general overhead costs (including marketing) have been covered by higher paying passengers. You are in the same situation when you are already working in the customer's home and can offer them other services.

Carpets cleaners have a huge number of diversifications they can expand into. The challenge is finding those that return the most net profit/least problems while not distracting you from your "core" business. Here's a "diversification check list" with a few questions to ask yourself before you leap:

Is the diversification "synergistic?" Will the new service complement my existing business, both logistically and in my customer's mind? Carpet deodorization or upholstery cleaning are synergistic add-on services; offering home delivery of Chinese take-out food probably isn't. Your proposed diversification should complement services you have already developed.

Remember as customers we're all looking for "one stop" shopping. Your expansion options should fall within what the average customer mentally expects. If you can save money/make life easier for them "while you are there," diversification plans may work.

Is the diversification part of your future life goals? Looking back, I'm amazed at how I blundered to business success. At different points I offered chimney sweeping, computer sales and repair, Indian jewelry, auctioneering, home remodeling, residential painting, furniture building, entrance mat rentals and sales and janitorial services along with the "normal" arsenal of carpet cleaning services. (We even thought about opening a restaurant. One disaster I successfully avoided.) There is no doubt I would have been better off (emotionally and financially) by avoiding some of these unwise "diversification distractions".

Can your employees "deal with it?" Over the years I've shut down many diversifications (some at great cost) because of my employees. As a bored entrepreneur, I loved switching from my carpet-cleaning hat to my chimney sweeping "top hat" before putting on my painting contractor hat. On the other hand, my workers loved their comfortable routine and hated constant change. Quality and morale dropped sharply when I moved employees from one trade to another. (This was true even if they were skilled in both areas!)

If a diversification is not related to your core business, ask yourself if you will be able to assign full time employees to it because you will probably eventually need to do so.

Can YOU "deal with it?" If you are struggling to stay on top, don't add to your challenges by diversifying. If your business style is "management by crisis," the last thing you need is another set of problems. Get your ducks in a row first, then expand your services.

Can you implement the proper financial controls? Carpet cleaners often fall into the old trap of "losing money on every job but making it up in volume." This doesn't occur because the market will not pay more, but because the carpet cleaner fails to even remotely understand the cost of taking on a given job. This is a common problem in business, and much more serious when you diversify your company into other areas.

Will you make a whole lot of money at this diversification? Notice the modifier "whole lot"? You're probably making decent money with your main carpet cleaning business. But, inevitably there will be hidden traps and perils along the way of starting up any new diversification. At the very least, the profit potential of this new service should be higher (much higher) than what you are doing now.

Can you give a resounding "yes" to each of these questions? Then, diversify by offering your existing customers more services. After all, your core carpet cleaning business should be already covering your basic business overhead, allowing you to charge premium pricing for your proposed diversification, skimming the cream and making a "whole lot" of money in the process.

Diversifying also lets you become even more valuable to your customers, to pay your employees better and to just have a lot of fun using those three little words, "While we're here ..."

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