Diversifying Your Business: The Good And The Bad

Sept. 6, 2016
Evolve, but don’t dilute your best services with too many options.

In a service business, it’s easy to get caught up in trying to be everything to everyone. On the plus side, it is one way to get clients to increase how much they spend with your company. It allows you to go after other types of accounts, increasing your revenue potential. Much like diversifying an investment portfolio, it can mitigate risk when one segment declines (or the fickle consumer heads in a different direction). Companies that don’t evolve with the times don’t succeed. However, diversifying can have an ugly side.

The 7-leg stool

In theory, if you offer all possible services, there should be no reason for a potential customer not to choose your business. However, that is not always the case because customers can’t define your business or what you’re good at. I read an article where a consultant called this having a 7-legged stool. He argued that a stool only needs three legs, like a good business only needs three strong lines of service. Tacking on more services clutters the message, is unnecessary, and can, in fact, be detrimental. He argued that when potential customers come to your website looking for a specific service, they expect to see it. When faced with a list of 20 other services you provide, they are no longer sure if you are an expert at the service they need. They might just go elsewhere when faced with too many options.

The point is, don’t confuse (or annoy) your primary customer with everything you offer on your homepage or in a drop down link. You can have pages that mention your other services, or perhaps include those in packages, but keep your first impression to your three top service strengths.

The services to keep

Let’s say you agree with me about highlighting a few services. Which ones should they be? It might be obvious to say vending, micro markets and office coffee service, but will those really resonate with your customers? Consider the services you perform regularly, and those sought after by your top clients. Those should certainly be on the list. Conversely, if you haven’t performed a service recently, it should probably be removed from your website/marketing materials.

Also look at the cost per service. If one service has a 5 percent margin, and the other a 50 percent margin, it makes sense to highlight the second one. Knowing the cost of the services you provide is extremely important. Otherwise, how will you know what to charge for your services?

A necessary practice

Diversification comes with risks and rewards no matter the industry. However, as far as vending, micro markets and office coffee service is concerned, workplaces continue to evolve, and consumer demands continue to change. This encourages operators to diversify — a good strategy as long as it strengthens the operation. Don’t crowd your marketing message with too many “and we also do…”s. Keep them for add-ons later. It’s better to be good at something up front, then possibly good at lots of things the client never asked for.