If there was one common question I received at this past National Pavement Expo in Nashville it was, "Brad, how do you know when to add another service?" This question, or some form of it, came from young business owners, desperate to find another income stream, and from seasoned owners realizing that to become a bona fide pavement maintenance "specialist" they would need to expand their vocabulary and offerings to customers.
This topic seemed to be on the minds of many contractors, so let me share a few thoughts and observations that I've made over the past 20 years that might aid you in your own evaluation of growing your business.
When not to add services
It might be helpful to address some poor times to add new services.
- When your primary business is experiencing increased amounts of customer call-backs and rework. This strongly suggests that your focus on quality is in need of attention. Fix your quality problems first and you might not be tempted to expand.
- When an employee says, "I've done that before." There is always an employee, usually a new hire, who can be quite convincing on what he's accomplished at previous companies. In most cases this type of worker may be a new hire for a reason.
- When you notice increased competition. New competitors shouldn't send you looking for another service to provide. Competition, especially new competition, can be good for you. It often adds pressure to do things right the first time, can force better attention to details, and generated a more creative mind set for marketing and sales.
Now, there are certainly more reasons why you might want to think twice before adding new services but let me provide you some proactive, positive reasons to add new services.
When to add new services
- When adding a new service will compliment and further expand business opportunities with existing clients. This is the primary reason to add a new service. If your current and paying customers are asking you to take on additional pavement maintenance services this is a good sign that you and your crews are doing a good job on meeting customer needs and consistently providing quality.
- When your profitability is running consistently higher over the past season or two. It's doubly difficult to acquire additional equipment, add another crew, and learn another service if you are not making much money. Profits are good; they should be used to reinvest into your company. Expanding into new services is made easier when you're profitable.
- When a specialty contractor is technically proficient but has little to no business savvy. It is just amazing how many technical experts get into power washing, curb and gutter, infrared application, sealcoating etc. who can't run a business. Offering to buy one of these contractors out might be a "win-win" for both you and the business-challenged owner.
- When there is a new geographical opportunity available and it could be getting your foot in the door. Pavement maintenance contractors have begun a new service where they have little to no current business at and then use this new addition as a lead-in for their existing services. This is sort of coming through the back door, but it can be a strategy to add a new service that ironically opens the chance to do more business with current services.
Certainly one or more of these four criteria should be in place before you expand. It is important to also note that if you are seriously looking at adding a new service, develop a business plan addressing such topics as: market needs, competitors, cost of needed equipment, suppliers and their locations, and type of customers, to name just a few areas.
Adding a new service will require that you have the proper attitude and mind set - it will renew your commitment to be patient and consistent. Plus, prepare to have the capital needed to keep the new service moving ahead while you and your workers are learning the new business.
Adding a new service should be a positive and profitable experience. If you've never added a new service you are in for a real challenge to your old policies and approaches. Be open to new lessons and best practices that you can learn and even pass on to your existing services. You might just end up adding a service that becomes the new profit leader for your company in the future.
Brad Humphrey is president of Pinnacle Development Group and provides business consulting to pavement maintenance contractors. For more information visit www.pinnacledg.com.
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