Diversifying your revenue streams: When and how to expand your services

RCS Influencer Katie Clymer recommends starting small with new initiatives.

Sometimes when you think about starting a business, you have a service that other companies may not provide or you believe you can provide it better. You build your business model around that one service, which makes sense. Focusing on one area allows you to perfect what you do and build a reputation for doing it well.

But as your business grows, you may eventually realize that relying on one service or product alone can limit your growth. Take Revlon, for example. They didn’t decide they were only going to make nail polish. They expanded into an entire line of beauty products because one product alone wasn’t going to serve every customer or every opportunity. The same concept applies to service-based businesses, including roofing. When we start out, we want to be the best at the one thing we do really well. There is nothing wrong with that. In fact, it can be one of our biggest strengths. But eventually, we may reach a point where adding another revenue stream makes sense.

Diversifying your services does not mean you need to become a company that does everything. If you have seen the trucks driving around with business names that read something like “ABC Flooring & Tile & Overhead Doors & Roofing,” you know what I mean. They have certainly expanded their services, but if they can only execute one or two of them well, have they really diversified successfully?

Before adding a new service, take a hard look at your company. What is your team already good at? What skills are you not currently utilizing? What services are customers asking for? What is missing in your market? And what can you add without creating a lot of extra overhead? For a roofing company, diversification could mean expanding from residential into commercial roofing, adding siding, gutters or coatings or even moving into general construction. There is no one right answer. Start with what fits your company, your employees and your customers.

Before jumping into a new service, test it. Start small with a trusted customer or even on your own property. Make sure you understand the product, installation process, costs and potential problems. Ask yourself: Would I be comfortable installing this on my own home? You also need to understand the requirements that come with adding a service. Check local requirements, regulations, insurance needs and other guidelines. Then look at the financial side. Revenue does not automatically mean profit. Consider labor, training, materials, equipment, insurance and overhead before deciding if the service is the right addition.

Don’t diversify just because you can. Just because another contractor offers a service does not mean it is right for your company. Your diversification strategy should fit your workforce, customers, market and financial capacity. A company that does not thoroughly evaluate these things before quoting a new service is setting itself up for failure. The goal is not to be a jack of all trades, but a finisher of none! The goal is to identify additional services your company can execute well and profitably. When done correctly, expanding your services can create another revenue stream, give your customers more reasons to work with you and help your company continue to grow. The last thing you want is to add a new service that ends up costing your company money instead of making it!