Tuesday, February 27, 2007

Week 27 - Working the Hidden Gold Mine

For the next few weeks I am going to focus on building new income streams to support your business. How many products or services do you currently sell or rather, how many products or services are you currently relying on for an income? The best way to check this is to ask “would I still be in business if people stopped buying my main product?” The danger is obvious, market trends, product obsolescence, price competition, even the potential failure of your own health make this a very risky and “reactive” way to run your business.

By establishing new lines of business you can create a safety net for your business via increased sales and profits. If these new income streams are good you may actually find yourself having to work less. This is not unrealistic. Many of the new income streams may require little or no extra effort, they simply leverage off your existing products or services.

Now you could be thinking for example, “I own a concrete truck, there is NO risk as people will always need concrete!” Well, in the words of the late John F. Kennedy, “The time to repair the roof is when the sun is shining”. Today it might not seem that you need to offer new products or services, but change is inevitable and you need to protect your business. The relationships and income streams you put into place during the good times will be critical to you when your business is tested by stress.


One of the easiest ways to increase your turnover and your profits is to offer your existing clients other services or products which are complementary to your own. Many business owners already have these relationships set-up in some way, but as I keep saying, it is not a systematic approach. Essentially the relationships are set-up in an ad hoc fashion. To really take advantage of these relationships and build strong new income streams for your business, you must begin to proactively plan and nurture these third party relationships. So where do you start?

As the business owner you have the opportunity to:

  • Sell or recommend other third party products or services to your customers
  • Market your relationship with your customers to trusted third parties
  • Remain in constant contact, resulting in sale after sale

Who has your customers before and after you do?

Before or after a customer buys your product or service, what else are they buying? For example, when a travel site sells a flight, the buyer might also be booking a hotel room, hire car and travel insurance. That might seem like an obvious example, so how about a cosmetic surgeon? Prior to their visit they might be members of a gym or skin clinic, or any other organization that aims to help people improve the way they look and feel. You see there are always products and services that go before or after what you sell or provide. Some other examples:

Office Computer Supplier

Before: Network cabling, associated network products, computer workstations
After: Software training or an on-going system maintenance service

Mortgage Lending Company

Before: Life or income protection insurance, real estate agents who have prospects without finance
After: Furniture removalists, solicitors, real estate agents for when a loan is approved

Refrigeration Company

Before: Architects, builders, shop fitting companies, food wholesalers
After: Shelving companies, food storage providers, maintenance contractors.

Menswear

Before: Gyms, fitness instructors, stylists, barbers, men’s magazines and web sites,
After: Barbers, shoe stores, personal products such as aftershave and skin care.

Sporting Goods Store

Before: Sporting teams, school sports programs, health food stores, associations such as Life Saving.
After: Sports clubs and bars, physiotherapists and massage therapists.


Next week we will look at striking deals with these companies and building the pillars to support your business long term.

4 comments:

Simon said...

Scott, your practical insights are a goldmine and I'm glad they're no longer hidden!

Thanks also for your booklist - really great reference tool.

Simon

simran said...

Very interesting article... what is your opinion on the line between what you do and what you help get done.

You have mentioned, "...when a travel site sells a flight, the buyer might also be booking a hotel room, hire car and travel insurance..." ... are there not too many examples where businesses stretch themselves too far and end up doing a lot of stuff, all of it rather average!

I think recommending something to someone would be very different to "assisting" someone getting the "before and after" done, and if you want to generate extra income, you would have to "assist"... which would also bias the recommendation as we will not be able to recommend "the best" out there but will recommend our affiliate...

I see even Google now suffering the same issue... i find myself looking for a search engine that again provides very relevant search results... google is still good, but they have lost the "great" - and to think that that is what they call their main speciality... undoubtedly they have a massive team enhancing "search" but now that team is no longer _completely_ independant ... it must remember that what it does will impact gmail, calendar, (the web search of course), groups, froogle, picasa, ... the list goes on and on... as a result, innovation has become slower...

I believe its a fine line focusing on "the speciality of your business and helping the customer on a specific issue, vs, solving the customers complete issue" ... would love to hear your thoughts on it :-)

simran.

Scott Hannan said...

Simran, thanks for your comments and questions. I agree that focus is one of the keys to success and there is always one thing that a business should do better than any other.

However, rather than a “diworsification strategy” (as the great investor Peter Lynch named it) this is a sales strategy and directly targets those most qualified to purchase your product or service. The bottom line is that you don’t have to “assist” with the other company’s function to grow your own revenues. I am suggesting a string of alliances/partnerships (or whatever you want to call them) with the “before and after” companies to drive these highly qualified for your business.

How you structure these alliances varies from industry to industry. Some involve cash and I am fine with that if it is disclosed. The opposite end of the spectrum is a simple referral although this arrangement needs to be systematic, built into your marketing system so that it is working for you 24 x7. If left to chance, it will fail.

The concept does not translate well to say, a Google. I am not suggesting building/creating all that comes before and after you, as they appear to be doing. I am simply suggesting identifying these parties as you know (almost for sure) that the people they are serving also need your product or service.

simran said...

Thanks Scott. Makes sense. I guess it is important to keep proactive reviewing who/how you work with the companies that provide the before after as otherwise, if their principles diverge from yours over time, it will become a purely short term financial gain thing and we will end up not working with the best companies for the before/after us.