If you haven’t thought about diversifying your business yet, chances are good that you will at some point in your company’s life cycle. When you do, lawn care might emerge as a natural choice. The science and licensing requirements for lawn care and pest management are similar, after all, and your technicians are already accustomed to working with chemicals. Profit margins tend to be similar for the two businesses, and the systems required for lawn care success probably aren’t all that different from those you have in place today.
Still, making the lawn care leap isn’t for everyone. In fact, diversification itself isn’t always the answer. Whether you’re considering adding lawn care or some other service offering to your business, it’s important to evaluate the pros and cons, operational and financial requirements, and potential outcomes of diversification. Not every company is cut out for it, and those that are must be thoughtful in determining which business area is the right fit.
Jennifer Lemcke, chief operating officer of North American franchise lawn care provider Weed Man USA, shared important insights into the pros and cons of establishing a lawn care arm during PCT’s recent Profit Boosters Virtual Conference. Highlights of her discussion follow.
Deciding to Diversify. Business owners opt to diversify for a number of reasons. Many are looking for a way to grow their business quickly. Others want to maintain their strong competitive stance. Customer satisfaction is a determinant as well: If customers are requesting a service, or if a business believes that adding a service will augment customer satisfaction or loyalty, diversification might be in the offing.
“When done properly, diversification can increase revenue and profits, offering great growth opportunities for both your business and your employees,” says Lemcke. “However, when carried out poorly, diversification can send your business into confusion and chaos. It can harm your core business, decreasing revenues and profits. It’s vital for you to understand whether your business is ready to diversify and, if so, what steps you need to take to do it right.”
Typically, companies should consider diversifying when:
- Business growth has stagnated. If your momentum has reached a plateau and you don’t anticipate long-term core business growth, diversification can get revenues rolling again.
- You’re struggling to compete. When your competitive environment includes local, regional and national companies, each offering different types and levels of service, diversification may give you the differentiation you need to give your business a leg up.
- Your core business is not creating healthy profit margins or equity. If your business is underperforming in terms of either profit margins or resale value, it’s a good time to analyze the financial potential of adding a new line of business.
- The new service offering can bring subcontracted work in-house or offer new efficiencies across your customer base. Your existing customer base offers a solid foundation for cross-marketing your new services. If these are services you’ve been subcontracting for your customers, bringing them in-house can offer you great profit potential.
- Employees have limited growth potential in the current structure. People are always at the heart of business success. If you want to keep your best employees, then you need to provide them with opportunities for growth. Diversification creates new positions and responsibilities that enable your key employees to explore their full development potential and become even more integral to the company’s success.
When should you not diversify? When:
- You are comfortable with your business the way it is. Diversification takes considerable drive and energy. If your heart isn’t really in it, and your business is as big as you want it to be, don’t feel obligated to try diversification. It’s not for everyone.
- You don’t know how, or lack the systems, to diversify. If you can’t decide which service offerings are right for your business, or you simply don’t know how to go about expanding into new areas, don’t do it! You need to have systems in place to accommodate the changes and growth that are about to come. Take a step back and thoroughly prepare your organization for the change, or pass.
- You lack the financial and/or human resources to support diversification. People and capital are critical to diversification success, from getting things started through delivering the new services on an ongoing basis. If you can’t pull sufficient resources together, or if your team isn’t behind your new pursuit, then the time isn’t right.
Is Lawn Care Right? “If you’re serious about diversifying, your next step is understanding where you are in your current business,” advises Lemcke. “Are you in the infancy stage, wearing all the hats yourself; the adolescent stage, beginning to build your staff; or the mature stage, solidifying systems, training and verification measures to ensure you’re sticking to your mission?”
Mature businesses — those with proven systems, a strong corporate vision and culture, and dedicated employees with a collective passion for building the company into the future — are ripe for diversification. These businesses know who they are and where their strengths lie. The question becomes, is lawn care the right offering for us, and are we prepared to branch out into this area?
The following questions can help in your evaluation:
- Is lawn care a good fit with our other service offerings?
- Does it offer our customers added value? Does it solve a problem for them?
- Is it consistent with our corporate culture?
- Does it align with and facilitate our corporate mission?
- Does it have the potential to inspire our team to new heights of operational and service excellence?
- Will it provide new growth opportunities for our employees?
- Do we understand this business?
- Do we have the delivery mechanisms and bandwidth to provide the level of service excellence our customers have come to expect from us?
As a line of diversification, lawn care offers a variety of advantages to pest management companies, says Lemcke. “You want to diversify into a business that’s in growth mode, and lawn care certainly is. Everyone wants a green, weed-free lawn. That proactive appeal shows in the industry’s growth — about 20 percent annually — and in the renewal rate: At Weed Man, we renew 75 to 80 percent of our customers each year,” she says. “Add to that the natural cross-marketing opportunity — your customers are already focused on protecting their homes — and lawn care is a natural diversification choice.”
Weighing The Pros and Cons Of Lawn Care
Lawn care is easier to schedule than pest management, too, because the customer doesn’t need to be home, Lemcke points out. On the technical side, the science is similar, as technicians use similar products, and there’s a strong focus in both businesses on customer service skills.
What’s on the other side of the scale — the negatives of lawn care as a new line of business? “It is a different business, which means you have to create separate systems to support the business operations,” says Lemcke. “You also need to commit to developing a strong business plan and sales plan. Otherwise, you will be making a very large investment but setting yourself up for a very low yield.”
Because the businesses are different, you also need to seek out technical knowledge and experience, whether on your own or with the help of a lawn care consultant. The busy seasons for lawn care and pest management are virtually the same, so using the same technicians for both services isn’t a likely option. You need new training, equipment and marketing to set your new business up for success.
Time to Commit? Lemcke suggests carefully weighing the pros and cons before making the diversification decision. If you decide to move forward into the lawn care business, commit to planning; to putting the right people into place; to backing your plan with adequate financial resources; and to developing your people and giving them the tools they need to succeed.
“Remember that you will need solid systems, outstanding training and consistent follow-up,” says Lemcke. In other words, give your people a structure, the knowledge and skills they need to excel in this new business, and the reassurance that you will keep them on a positive path toward success.
“More than anything else, successful diversification depends on having the right people in place,” she concludes. “If you have good people who understand your business, embrace your culture and share your passion, your potential for success is outstanding.”
The author is a frequent contributor to PCT magazine. She can be reached via email at firstname.lastname@example.org.
More Add-On Revenue Opportunities
In the market for an add-on service? Consider these opportunities to cross-sell your customers:
Pest Bird Management. Pigeons, house sparrows, starlings and other pest birds can cause serious health and property hazards.
More than 60 diseases are associated with birds, their nesting material, fecal droppings and other detritus. Accumulated, acidic droppings can damage building materials long after they are removed, and may cause employees and customers to slip and fall. Feathers and other debris are combustible and cause ventilation problems.
“Even a handful of birds can get to be quite a nuisance,” making bird control an ideal add-on service for pest management professionals, said Tasheena Dillingham, president and CEO of Avitrol.
Avitrol has produced EPA-restricted grain baits to control specific pest bird species since 1971.
Its active ingredient, 4-aminopyridine, targets the birds’ central and motor nervous systems when ingested, causing species-specific distress signals like alarm cries and visual displays that frighten away the remaining flock. Target flocks treated with Avitrol do not return, Dillingham said.
Affected birds feel no pain, and PMPs can target as low as 4 percent of the flock for minimum mortality, said Dillingham. Avitrol products are proven humane in an independent study by a renowned animal welfare advocate, she said.
“Our products are cost effective and highly efficient,” said Dillingham. They can be used to provide a profitable add-on service, recurring revenue through monthly monitoring programs and a competitive advantage. They offer long-lasting, quick results and are well-suited for clients without large budgets for pest bird management, she added.
For more info, visit www.avitrol.com.
Lighting & Restoration. Outdoor Living Brands has four franchise opportunities, among them, exterior lighting and surface cleaning and restoration.
Outdoor Lighting Perspectives — North America’s largest, full-service outdoor landscape and architectural lighting company, Outdoor Lighting Perspectives (OLP) has 45 locations and has installed more than 1 million fixtures since 1998, said Operations Vice President Rich Young.
“We’re selling warm and welcoming outdoor environments that create a sense of pride and illuminate special moments spent with family and friends,” he said.
OLP franchisees design, install and service exterior lights for residential and commercial clients. Holiday lighting and annual maintenance plans provide a recurring revenue stream.
The sales closure rate is 60 to 70 percent. Last year, the average location had sales of $398,000 and a gross profit margin of 56 percent. Young said sales from LED lights, alone, are expected to increase 60 to 70 percent in 2013.
Named a World-Class Franchise by Franchise Research Institute, OLP supports franchisees with marketing and lead generation, customer relationship management, and training and support. Its operational platform offer web-based scheduling, Google maps integration, email reminders and in-route text messages, QuickBooks integration, and online proposal design.
Renew Crew — A “dramatic before and after” experience creates a robust referral business for this outdoor cleaning and restoration service company, said Stan Krempges, vice president of operations.
The company’s 30 U.S. locations clean, restore and protect exterior surfaces, from wood decks to siding to driveways and paver patios, using environmentally friendly products.
Renew Crew’s professional approach, marketing and image raises the bar, providing gross profit margins of 62 to 72 percent and an average sales closing ratio of 58 to 62 percent, said Krempges.
Franchisees get support with marketing and lead-generation, as well as help cobranding their existing and Renew Crew businesses. The start-up investment is $60,000 with a flat monthly branding fee.
For more info, visit www.outdoorlivingbrands.com. — Anne Nagro
Editor’s note: Outdoor Living Brands’ other franchise opportunities include MosquitoSquad for the prevention of nuisance mosquitoes and Archadeck, which builds outdoor living spaces.