Diversifying site services offerings allow PROs to upsell existing customers and pursue new customers to build profitability. But you need to consider changes carefully.

Many of us in this industry have often wondered if we should expand our business into other areas beyond portable sanitation. This question is becoming more prevalent and we will address this idea this month.

Question: We have been in the portable sanitation business for seven years. Starting from scratch we are now well-established in our community. We are interested in diversifying our business into other areas but we would like an overview of the factors we should take into consideration before entering another market. What are your thoughts?

Answer: The old adage of doing one thing and doing it well has brought your company success. Diversification can be a sound business decision if you employ some of the same planning strategies you used when you began your business.

Business diversification is a sound strategy to build revenue streams from different market segments to guard against slowdown in one particular area. Adding products and services increases your appeal to potential customers. Diversifying your business may eliminate their need to look elsewhere for a variety of services.

There are a multitude of product areas to consider when expanding your business. Whether you look at septic, solid waste, fencing, barricades, temporary storage containers, tent rental or countless other areas, you should investigate and evaluate several issues.

Questions to Consider: What market are you looking to enter? The advice here is “research, research, research.” You need to be an expert in any new market just as you are with portable restrooms.

CUSTOMERS

Speak with some of your key customers in both the construction and special events areas. What are their needs in conjunction with your portable restrooms?

Initial construction setup usually requires an office trailer with a holding tank, portable restroom, roll-off container, power pole, fencing and a temporary storage trailer for tools and equipment. Larger special events typically require tents, tables and chairs, fencing or barricades for crowd control, portable restrooms, restroom trailers and stage or bleacher setup.

Do you want to serve both construction and special events or do you want to concentrate on one market segment?

Have existing customers asked if you provide certain services that go along with portable restrooms? Similar to the exercise above, customer input should be a key component in your research.

COMPETITORS

Do existing companies provide these products and services in your area? Be aware of your competition just as you are in the portable restroom industry. Research their pricing structure, terms and conditions, and the equipment that they offer. Who is their target market?

Is it possible to move into this new area by purchasing an existing company? Acquisition, if financially reasonable, allows you to immediately enter into that particular industry. Equipment, employees and loyal customers can save years of growth from scratch.

What is your goal in being in the new market? Do you want to be a participant in the market or do you want to become a dominant service provider? This answer will help determine the size of your new operation from employees to equipment inventory. How much revenue must be invested to establish the anticipated size of the new business offering?

PERSONNEL

Can you find the talent you need to diversify? If special skills are required such as a commercial driver’s license for roll-off or other equipment transport or OSHA training and licensing for tent installation, how will you recruit that talent and how long will this process take before the actual work can commence?

How will you organize employees’ work responsibilities after diversifying? Can workers be cross trained in all areas? For example, can portable restroom route technicians also pump septic tanks when needed?

Will you keep your experienced employees in your existing business and have new hires in the new business or will you move personnel and have new hires in all areas?

Who will train new hires in the business you just started?

Share plans and generate excitement in your existing employees. This can be an area of possible career growth and opportunity.

OTHER CONSIDERATIONS

Equipment and inventory needs: Will you have to make significant equipment and inventory purchases in order to start the new operation? This is part of the financial research you’ll need to complete.

Legal: Will you continue to operate as one business or one business with different divisions? Will you form separate businesses? Consult a business attorney and certified public accountant to assist with these questions.

Rules and regulations: As a part of your research, investigate the need for additional business permits, insurance requirements, safety training or required certifications.

Logistics: Will you be able to use the same yard for the new business? Is there ample room for more equipment and possibly vehicle storage?

Resources for industry knowledge: Are there associations or organizations that may be of help in your research? The American Rental Association, National Association of Wastewater Transporters, your local homebuilder’s association and chamber of commerce are just a few examples of networking resources.

Financial results: The most important consideration is last. Based on your company’s current financial position, do you have the resources to expand, regardless of the area? The answers to all of the previous research questions should provide the evidence for the financial analysis to be completed as accurately as possible. If the idea makes sense but the financial numbers do not, you should make another plan and begin to research that idea instead.

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Question: We are contemplating expanding our portable restroom company into temporary fencing. What factors do we need to consider?

Answer: Using the guide above as an outline, determine the type of fencing you would like to provide. Do you want to do fencing to actually enclose areas such as construction sites and the perimeter areas at a special event? Do you want to provide barricades for crowd control?

Once you decide on your product and your market, follow the questions above to assist with the financial analysis. One advantage to fencing some PROs have shared with us is that besides purchasing the fencing or barricades, a flat trailer can be used to transport this product which represents significant cost savings. Further, employees can be effectively cross trained in the proper installation of fencing without the need to hire specialists in this area.