Editor's note: This article originally appeared in November 2013 PCT magazine.
Lawn care and pest control technicians use similar products, and there’s a strong focus in both businesses on customer service skills.
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 Pros
|
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 ddefranco@giemedia.com.