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The Benefits of Diversifying Your Services - Add-ons boost revenue and offer shelter from economic volatility

Written by  Terry Sambowski

Window Cleaning Service

According to a 2012 study by the Freedonia Group, a market research group based in Cleveland, Ohio, revenues for commercial and residential contract cleaning companies are expected to rise nearly five percent annually and reach more than $68 billion by 2016. One big reason for this projected growth, specifically in the commercial side of the industry, is an improving economy. Commercial building construction, which came to virtual standstill after the stock market crash in 2008, is now on the uptick in most areas of the country. These new buildings—large and small—will all need to be cleaned, and BSCs are the ones likely to be doing the majority of this work.

Another reason for the expected growth is that many facilities have re-embraced outsourcing cleaning. We say “re-embraced” because some facilities go back and forth on this issue, hiring their own cleaning staff and then reverting back to hiring BSCs. Today, however, more facility managers are finding it more cost effective to outsource their cleaning than to do it in-house.

But there is another reason many BSCs, especially large contractors, are either currently experiencing or can expect revenue growth, and that is because they are diversifying their services more to help overcome economic ups and downs. This trend is an outcome of the Great Recession. According to the Freedonia study, “The recession motivated many cleaning companies to diversify and offer a wider range of services at more competitive prices... [these added services and their] growing affordability will support revenue gains.”

But what “wider range of services” can BSCs provide? And if diversifying is helping the large cleaning contractors increase revenues, should smaller BSCs also consider looking into these services? Let’s take a closer look at these new services, along with other related trends and issues.

Word to the Wise
We probably should start with some cautions about service diversification. First, you must always remember that janitorial is your core business—this is the foundation from which any additional services should sprout. This becomes all the more important as you diversify. There are surely situations where a company has expanded into other services and found one of these new service offerings has grown larger than their core business. However, what is far more common for many companies in a variety of industries is diversification causes them to lose focus on their core business. In order to get back on track and protect their business, these companies either sell off their add-on services or simply cease offering them.

Here are some other issues and questions that should be considered when diversifying with add-on services:

• Are the add-on services in demand? Let’s say your company is considering cleaning blinds and curtains as an add-on service. Would there be more demand for this service than, for instance, offering pressure washing?

In this case, pressure washing would likely result in more opportunities.

• Is there profit potential in the new service? Using the above example again, pressure washing would likely offer more profit than blinds cleaning because fewer companies specialize in pressure washing. Also, consider what kind of profit margin is necessary to make this add-on service worthwhile. Some add-on services have very low profit margins while others can be very high. Finally, it can take several months, even years, for add-on services to prove profitable, so when considering profit potential, take a long-term approach.

• How much competition is there? While there always seems to be room for another BSC to enter the professional cleaning industry, this may not always be true for an add-on service.

• Who will do the work? Can you train your current employees to provide the service, or will you need to hire new employees or perhaps use subcontractors? How difficult will it be to find these people?

• What will it cost to get started? This question primarily focuses on equipment issues. For instance, if your company decides to go into residential carpet cleaning using a truckmount carpet extractor, this can be a very hefty investment. Along with equipment, other expenses to consider are chemicals, labor, insurance, overhead, etc.

• Where will the customers come from? This involves marketing. Will you have the people, time, and resources to market the new add-on services?

Diversification in Action
Once you decide to diversify, you’ll need to select which add-on services are best for your business. It is not unusual for an established company to offer a service quite different from their core business. For instance, who would have thought several years ago that Google and Apple would venture into car manufacturing? However, in most cases, BSCs will diversify into cleaning- or facility-related services, and most will likely look into one or more of the following:

• Window cleaning
• Light bulb changing
• Wall and ceiling cleaning
• Indoor plant maintenance
• Exterior building cleaning/pressure washing
• Metal polishing
• Landscaping
• Pest control
• Providing break room supplies
• Air-Filter replacement
• Painting
• New construction clean-up (residential and commercial)
• Residential cleaning
• Office partition cleaning

"...the best reasons to consider service diversification is because it can help your business weather economic storms as well as open the door to new revenue streams."

If that is not an option, BSCs should consider calling on their current customers. This is a very good place to start for a variety of reasons. Your clients already know you, they have been doing business with you possibly for years and, as a result, their door is already open to you to discuss and market your new add-on services.

However, once this approach is exhausted, the next step is to market these add-on services in the same way you currently market your janitorial services, including cold calls, the Internet, networking, social media, etc. Pursuing new business like this involves identifying potential customers for your new services, taking the necessary steps to reach them as referenced earlier, deciding where in the community your company will offer the services, and deciding if you will need to hire salespeople.

As we have discussed, the best reasons to consider service diversification is because it can help your business weather economic storms as well as open the door to new revenue streams. Along with identifying what add-on services might prove most profitable and likely to succeed, look for those that appeal to you. Invariably, the greater your personal interest in a new service, the greater the chance it will become a success.

By Terry Sambrowski is executive director of the National Service Alliance (NSA), a leading group purchasing organization (GPO) for larger building service contractors and related businesses in the United States. She can be reached through the NSA website at www.nansa.org.

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