Growth Through Diversification
Diversification. It’s so big and corporate-sounding. But every business owner—even the smallest of pro painters—thinks about adding lines of service at some point. It’s easier said than done, and there are plenty of pitfalls for those who look before they leap. Here are some questions to consider when the diversification conversation heats up.
Who am I?
Pro painters must first take an honest look at their company’s core competencies and existing skills, says Brian Phillips, president of Houston-based Philpaint Inc. “You also need to determine if a new service is in alignment with what you already offer,” Phillips says. “The closer the alignment, the easier it will be to integrate [the new service] into your business and sell it to customers.”
Knowing an added service is beyond your abilities is OK too. “Avoid potentially fatal business mistakes by knowing your limits and your employees’ or subcontractors’ limits as well,” adds Jerry Fancher, owner of Fresh Coat Eden Prairie in Eden Prairie, MN.
Can I afford it?
Tommy Johnson, owner of Johnson Home Construction in Wilmington, NC, used to be an exclusive painting contractor; he now offers remodeling and other services. His experience-based advice (“I learned a lot of this the hard way”) is to do plenty of market research and determine what investment is required in terms of tools, equipment and time. “If the investment is not in line with the returns, I would pass,” he says.
Located in San Diego, Linnea J. Blair, president of Advisors On Target, LLC, suggests polling your existing customers to find out about their needs, interviewing other contractors, and most importantly, carefully projecting your costs. “You can then evaluate whether you think you can bring in enough new revenue to have it make sense,” she says.
But Phillips also adds a cautionary note. “It’s easy to build a spreadsheet showing that a new service will be a gold mine. But if that analysis isn’t realistic, you could easily be stepping on a land mine.”
Have I underestimated?
Sometimes it all looks great on paper. But is it? “Assume that a new service will take more time and money than you anticipate in the beginning,” says Paul Willems, owner of Paint and Hammer in Winnipeg, Manitoba, Canada. “Give yourself a deadline and assess; if it isn’t profitable and you don’t see reasonable solutions, back off.”
10 tips from the pros
1. Evaluate your assets, core competencies and skill sets.
2. Analyze complementary market opportunities.
3. Consider needs of current customers.
4. Don’t dilute your core offerings.
5. Set and track your profit margins carefully.
6. Consult marketing professionals.
7. Investigate using contractors/subs.
8. Cross-train current staff.
9. Survey customer satisfaction and listen to feedback.
10. Back off if you can’t do the job well.