We’ve talked about scaling your business in previous posts, but this one is a little different. If you’re looking to grow your business, you might consider expanding your service offerings. Obviously this depends on the business you are running, but adding additional services is a great way to increase your profitability, diversify your income and expand your market. But before you jump ahead, there are important things to consider before adding to your income streams.
Here are 4 important things to keep in mind when you consider adding to your services.
1. Does the expansion compliment your business?
The best way to expand your service offerings is to add value that complements the work you’re already doing and is attractive to your current client base. While it takes more effort to bring new customers in, adding something that your current clients need and that you already have the capacity for is an efficient way to increase your profits.
For example (any gardeners out there?!)…if you already offer lawn maintenance, find out what other gardening work your clients need done. It might be fairly simple for you to offer those services to your clients, and they’d probably be happy for you to do it rather than hiring someone new or looking elsewhere!
2. Is your profitability consistently high?
Spending money to hire new people and buy more equipment if your business isn’t consistently profitable is …risky. It might be tempting if you make a lot of money in one year to jump into offering a new service, but hold back until you’ve got a couple years of high profits behind you. We know it’s tempting to jump in and get excited to grow your business now that you’ve made some money. But holding back for a while allows you to save money to cover the increased expenses and ensure that the one year wasn’t an anomaly.
Invest in your business, but expand your services when your profits are consistently up, not when you’ve had one really good period.
3. Is there a potential partnership or merger that makes sense?
There are times when forming a partnership or otherwise merging businesses makes sense. Is there someone out there who works in a similar capacity that you could work well with? Maybe they are great in their field but need help running a business. Explore a partnership or a buy-out.
For example, if you offer immigration consulting and you know someone who offers relocation services, you might form a partnership so the new company can offer both immigration help and relocation services. That can lead to new clients for both you and your new partner.
4. Are you doing it for the right reasons?
There are many good reasons to add new services, but there are also reasons that can increase your risks. Competition, for example. While competition can drive innovation, it’s not the only reason to add a new service; and doing so just to beat your competitors can lead to mistakes being made and money being lost. Rushing to expand is when companies find themselves in trouble for adding services there’s no market for or without a fully-formed plan.
Expanding your business IS exciting, but it’s important to consider some issues before you commit your time, energy and financial resources. If you’re adding new services, do so because it makes sense, you’re in a financial position to do so, your clients want it and you have the capacity for it.
Here are some free resources we have that may be useful to you – share them with your friends and colleagues!
The Team at London Accountants