I ask these questions because I think it makes a difference in your ability to maximize the success of your business.
Typically, business owners consider all sources of revenue worth pursuing. In fact, businesses will offer a new line of service with the specific goal of growing the business. Since the new line usually finds customers, it appears successful in meeting its goal almost immediately. The more revenue produced, the healthier the business, right?
Actually, I disagree. True, more lines of business can add dollars to the sales of the business. However, there are some other considerations I would like to review with you.
For example, specializing has many advantages. Look at professional practices. Doctors, lawyers and other professionals who specialize usually have a successful practice, and they are able to charge a higher rate than their non-specialized competitors. Why is that? I believe it is because they are better at what they do — and they get rewarded for it. Specialists become specialists through training, expertise gained from practice and — most importantly — voluntarily choosing to narrow their business.
Although we don’t always receive professional or consumer recognition for achieving a certain level of skill, expertise or professionalism in our trade, eventually the expertise and professionalism pay off. And there is one judge of our work that, ultimately, prevails. That judge is the consumer. If customers recognize we fix it right, the first time, every time, then we have met the most important standard.
How can we get to be exceptionally good at an aspect of the business if we attempt to perform any and all jobs that someone requests? I don’t think we can. If we are trying to be an expert in many lines of business, we will most likely not succeed in some. Even if we do develop successful teams in many services, we still don’t meet our long-term goal of maximizing growth and profitability of the business.
Get Good At It: One of the advantages of specializing is the ability to command more dollars from the marketplace for your services. How does that translate to the service and repair business? Simple, it means you have to offer a level of quality and reliability that your competition cannot, and be known for it. Frankly, I don’t see any way that a business can get to be the best, the one with the most competent and professional teams serving customers, if they are trying to solicit customers for numerous types of services.
It’s not just the technical skill that’s needed to beat the competition; it’s customer service skills, too. How your experts deal with customers makes a difference. And the more you hone those skills from experience doing the same types of jobs, in front of the same types of customers, the better you become at accomplishing the job.
For example, dealing with residential customers requires familiarity with customer service procedures that are not always necessary in dealing with commercial customers. If we routinely switch technicians from one type of job to the other, we can expect some problems. If, instead, we always deal with the same customer group and our technicians are trained in how best to serve those customers, we not only eliminate problems, but we become experts.
What’s our payoff for being experts in our chosen area of business? First, we fine-tune our procedures for doing business. In our business, we have learned that if we don’t replace some small, low-cost, connecting pieces of hardware on some jobs that we will be called back to fix the same complaint the customer had on the service call we finished only days earlier. The customer is unhappy, and we usually have to send out a technician at our expense. We eventually summarized our standard procedures in an installation manual, which our technicians are required to follow. The jobs are standardized, the customers are happy and we stopped callbacks.
Our technicians are encouraged to show the customers the manual and explain why they are required to do the job in the most professional way. They know they won’t be coming back at company expense, or their expense, to redo this job — but they also know they will be coming back the next time that customer needs service.
There are more payoffs. As a business continually demonstrates expertise to its customers, they become known for quality work. (Don’t think customers don’t know or remember which companies do top quality work.) At the same time you are becoming known for quality work and the manner in which you deal with customers, some of the competition starts to get known for their lack of expertise as a result of their you-name-it-we-do-it approach. They didn’t build the needed skills to compete with you. The bottom line: Customers will call you instead. That means you can charge more for the same job; and you will still get more business. More revenue, same overhead — which looks like a winning strategy.
Focus: Though the payoff for building expertise that competitors can’t match is attractive, there are additional reasons to specialize in what you offer your customers. One of those is the ability to focus all your resources: advertising, training, equipment, inventory, procedures and more on a specific facet of business.
For each new area of business you enter, even dabbling in it, you need to have more equipment, additional training for your technicians, more inventory in the warehouse, etc. For each additional investment in those required items, you have taken resources away from your main area of business.
That means you can do less advertising, have less equipment and less inventory. Each of those shortcomings hurts your primary business.
There’s more. If you don’t specialize, each additional area of expansion magnifies the same drain on resources from your main business. All that additional equipment and inventory will get less use and turnover so it costs you more to purchase and keep. You begin to lose efficiency and your overhead has increased.
Because you are not a recognized expert in all the fields you offer service in, you may be tempted to “buy” some business by cutting prices in some of the areas, further reducing your margins. Noting your low margins overall, you may be tempted to reduce prices to get more business in your primary area, too. After all, you have all that overhead to cover and limited additional resources to promote your business. However, since you have several lines to promote you are tempted to scatter your advertising message all over, a bit here, a bit there.
I think you see where I am headed. Soon, the snowball effect of lower budgets for promotion, higher costs and lower prices erode your margins to the danger point. All because of a decision to seek more business from many areas instead of specializing.
Specializing, on the other hand, allows you to focus all your company resources at a narrow, well-defined market. Inventory requirements are less, equipment is standardized and you need less, and you can focus all your advertising and promotion efforts toward a single target.