Broadening the scope of your business could be worthwhile, or it could backfire.
It’s no secret that life is not easy for many businesses these days. One need only drive through the commercial districts in town to realize the number of establishments that have gone under in recent months. And even though I shed a tear when the Monical’s Pizza in East Peoria shut its doors for the last time, some all-you-can-eat lunch buffets are simply too good to last—or too inexpensive to be profitable!
At times like these, when companies in all industries are struggling to attract customers, it is tempting to broaden one’s scope in the hopes of scraping together enough revenue to keep the ship afloat. But beware! Attempting to lure customers outside your core target market might just be the worst thing you can do for your floundering business.
Take my industry, for example. As you are probably aware, there are many different practice areas within the broad field of legal services. It is impossible to be an expert in more than a handful of practice areas, but it is certainly feasible to acquire sufficient experience to become competent in quite a few areas, whether or not they have any relation to one another. Thus, as an attorney practicing primarily in the fields of business law, real estate and estate planning, I do not currently handle matters such as divorce or personal injury, but there’s nothing to prohibit me from taking on such a case, assuming I am able to bring myself up to speed enough to competently represent my client.
It may not surprise you to learn that fewer business deals and real estate transactions are undertaken when the economy is sputtering than when it is firing on all cylinders. For many business and real estate lawyers, the result of a weak economy is a slowdown in work. If the slowdown is severe enough, the temptation to expand one’s practice areas in the hopes of maintaining a stable revenue stream might become quite strong. And to be sure, there are certain practice areas that suffer less from a down economy than others. For instance, people still get divorced when times are tough, and people still get injured, so expanding into family law or personal injury work could be appealing to the struggling business attorney.
While this strategy may indeed solve the short-term cash crunch, there are risks to be considered, and not just for attorneys, but for any business that seeks a shake-up in its target market in response to economic difficulties. The issue boils down to a question of what you want your business to be. When you were first starting up, you undoubtedly had ideas of the niche you would fill and the customers you would reach. Certainly, this is a key component of the planning process in any successful new venture. But when those plans start to unravel, do you stay the course or chart a new one?
I obviously can’t answer that question for you, but it is not one that you should answer without serious consideration. The instant gratification of an immediately increased revenue stream might result in a hugely successful business model that perfectly ties your original marketing plan to your new scope of products or services. However, it could also backfire on you. By moving outside your niche, your customers (both current and potential) might now see you in a different light that could cause them to look elsewhere.
Going back to our example of the business lawyer, adding divorce or personal injury services (neither of which is necessarily good or bad in its own right) to his or her repertoire could have one of several long-term effects. Family law is pretty unrelated to business law, so many business or real estate clients would probably be just fine hiring an attorney who practiced in both areas. However, it is possible that some clients might see the diversification as an indication of a lack of focus or a lack of expertise in a single area, and they might seek out someone who specializes solely in the area in which they seek representation. Likewise, some business clients might not care if their attorney does personal injury work on the side, but some might question their attorney’s allegiance, since businesses are typically the ones getting sued in injury cases.
Whether you run a catering company, a hot dog stand or a management consulting business, it is imperative that you know the customers you are trying to reach and understand their motivations. When times are tough, any customer often seems like the right customer, but if you are truly concerned about building for the future, you must choose your customers carefully. The good ones will be with you for a very long time, and when it’s all said and done, your business is just that—yours. Do not let the economy or the changing winds dictate what your business will look like. iBi