Chapter 14: To Focus or Expand
It is your job as the business owner to know what is going on in every aspect of the company. That is, not only how the numbers look, but also who the customers are and what they contracted for. Which customers are ready to upgrade their contracts to more and pricier services? What is the status of bids and proposals? Which vendor has the best pricing this quarter? When was the oil in the truck changed? Do we have enough blades for the mowers? If you have employees, you will need to know what they were hired to do, what they need to be trained to do, and how many hours they work.
How will you know if it is time to expand your business or narrow it down to a tighter focus? For expansion, the rules are simple: if you are too busy to think, and you know you could get more customers or satisfy them better if you had more help, you need to expand. If you have had to turn jobs down because no one on your staff was able to perform them or had the proper expertise, but you do not want to add a subcontractor to the mix because that subcontractor is only partly under your “control,” then you need to expand. For example, if you have been doing lawn maintenance exclusively for a while, and someone asks you to put in a flowerbed, it will be very tempting to expand into flowerbed installation. If you do not know the first thing about installing a flower bed, but take this customer’s money but do a poor job at design, installation, and choice of plants. If the customer is unhappy, the word will get around. So if you decide to expand your services on a trial-and-error basis, at least do a thorough amount of research as you perform it. Maybe you will make less per hour on the project, but you will be broadening your skills and can reap the full reward you expect on subsequent projects.
Another factor that will tell you if you need to expand is if you are bored. Boredom can kill a business as fast as undercapitalizing it. If you feel weary and irritated all the time with your work, then consider what might cheer you up and breathe fresh life into your business. Whether it is learning masonry or adding wildflowers to your plant list, the expansion type is not nearly as important as how you feel about doing it. Everyone needs to feel excited and enthusiastic about his or her work, especially the person who is going the extra mile to run a business of his or her own. Life is too short. Do not let your work become drudgery. Open your mind, heart, and bank account to look at your business creatively again. You will find the right path.
Focusing or narrowing the scope of your business is the opposite of expansion. This may become necessary due to a tough economy, or feeling overwhelmed by too many different responsibilities. It may also be a matter of dollars and cents. If you evaluate the many different tasks you are doing, and notice that certain tasks are more profitable than others, you may choose to limit your business to the most profitable tasks that bring you the most satisfaction.
If you are reducing services, it is kind to your existing customers that you inform them of this fact in plenty of time, so that they can engage someone else. Also, you may want to draw up a list of outside sources they can contact. This may enhance your goodwill, not only with your customers but also with the firms to whom you refer.
For expansion or focusing advice, be sure to involve your accountant, banker, and possibly your attorney — as well as other advisors who seem to have a pragmatic attitude. Making impulsive decisions in any direction is usually a poor idea
Cutbacks in the economy often mean brutal times for existing businesses. Telling trusted employees they may be facing a layoff is never fun. Starting a business in a tough economy is more challenging than launching your venture when consumers are feeling prosperous in general, and banks are competing aggressively to loan you money.
There are some good reasons for starting a business during a recession though.
For one, you may have been laid off yourself, and are deciding to go off on your own because then no one can lay you off or fire you but yourself. If that is your situation, then what have you got to lose? It is certainly worth trying and testing yourself in the world of the self-employed.
Things are cheaper during recessions. There are more deals available when people are worried about money. You might even find an existing business that is for sale by a discouraged lawn care specialist, or used equipment that can save you a lot of money. Renting a garage to house your equipment may also be cheaper. You have to shop, of course — but when times are tough, there are opportunities for value. Auctions are everywhere. Not only could you purchase your truck at auction, quantities of equipment of every type is out there being unloaded by firms that are ready to call it quits. You may find some tremendous deals.
Being new, energetic, and enthusiastic, you may be better able to charm customers away from their former yard specialist. Giving your services away is never a good idea. You have to sell at market rates, but if you are operating from home your overhead is low. There may be some flexibility in pricing that will get you a full customer list even when the stock market is down.
Credit is still available, just harder to qualify for. You may be able to entice friends and relatives to invest in you — a known quantity — compared to a large corporate entity whose stock price has collapsed. You can offer your investors a reasonable rate of return. Ask your accountant to help you prepare a plan that you can show your personal friends and family that it will pay off for them in the future.
If you have a business going already, and it is suffering—the first thing you do is staunch the loss. Your accountant will have some thoughts about this. Scaling a business back for a while may be a viable way to keep it going in spite of the downturn. Merging with another company is a way to join forces to fight the rough economy together. The good news is, almost every recession through history has ended in less than a year, and the subsequent upturn averages 50 months of growth, before the cycle repeats itself. So by starting or forging ahead, even when the economy is bleak, you are pushing through the adversity instead of starting off in a deceptive cushion of easy cash. You will be fire-tested, stronger, wiser, and more determined to continue steering your business ahead. In the end, your business may do better because it was birthed in difficult times.