One of the things that I realized once I owned a DJ business is the seasonality of it. I’m sure each and every one of you can understand this. There are times when you are steady, times when you wish you had 40 more DJs and times when you barely think you are going to pay the bills. I can tell you exactly when those moments will hit each year. Especially the slow times!
Once you have been through that cycle enough times, you realize how important it is to expand your offerings; to be more than just a one dimensional business. Thus, many of us are offering a plethora of different options or services to help add revenue and value for our customers. I wanted to take some time to share my experiences with expanding your business offerings. We have tried lots of things, so I think I can help you just a little.
The biggest thing you need to do is decide what services you actually are going to offer. This may sound silly, but you really need to focus on the right services for you and your company’s culture. Let’s look at the photo booth service, for example. Some of you may want to add photography or lighting or video; doesn’t matter what you choose, as long as it makes sense for you and the growth of the company. When I was looking to add something to our company’s offerings, the photo booth wasn’t something that I thought would be a service I wanted to do. I didn’t like it. It didn’t get me excited. It wasn’t my cup of tea. So we tried things other than photo booths. Musicians, drummers, new lighting packages, all sorts of stuff that seemed more fun. They didn’t flop, but they didn’t make money. They just settled into a “Yeah, we do that” state. All the while, more and more companies were offering photo booths. So I really had no other choice than to get on this service.
When you do finally make a decision on what options you are going to offer, you need to plan on how you are going to do it. I have seen so many companies fail at the “other” things they offer because they just say they are doing it without any thought behind the “how.”
Here are my four key questions you need to answer to be successful when offering other services.
How are you going to generate a profit from it?
2) How much is it going to cost you to take on this endeavor?
3) Who is going to manage it? The marketing, sales, operations, etc. all need to be thought out.
4) When do you expect to break even? Unless this new service is going to be a loss-leader, i.e.
Something you are doing to stimulate other sales of more profit- able services, you need to make money at it. You need to figure out your pricing so you are at a gross profit of at least 50%. This has been and always will be my number for sustaining a profitable business. In order to set the price, the costs are going to dictate a good part of that. So you need to really drill down on the operational side of things. Can you do things differently to keep operations costs low, so you can offer a lower price? Is your booth going to be fancy and require more work to manage, therefore costing more to clients? Can you cut down on other costs associated with it to keep the price down? Is your booth going to be an elite type of booth that warrants top dollar because of its style and options? The way you go about setting up your operation is really going to dictate the success of the new service. Every time I have spent the proper amount of time thinking through things like this, we’ve been successful.
Next up would be the way you enter the market. And this just isn’t the cost of the physical service. You have the marketing costs, the new hires costs, the administrative costs, etc. All these costs need to be reviewed and thought about so you can make an informed decision on what you are going to bill, so you can turn a profit. Remember, turning a profit is what we want.
The human element is important to consider. You can’t do everything yourself. And a big mistake we made was expecting existing staff to be able to take on the new work. That wasn’t going to fly, when two months later people were booking and needed more attention. We also didn’t think about the additional work that was going to be required of the warehouse, the scheduling and the operations of getting a booth prepped. From the jump, we should have hired one person to handle only photo booth options. One reason why we weren’t as prepared as we could be was that we didn’t jump right in with us buying, managing and going all sorts of crazy with it. We reached out to a third party and had them be a supplier for us. All we did was sell it, they managed everything else. I suggest this way of starting out. It allows you to see what is really involved with the new service you want to offer, as well as giving you time to slowly create the plan as you go along (if its working of course), without any out-of-pocket costs. We still had problems the first few months, as you saw above, but we were able to quickly address them.
One of the best reasons for using a third party first is to have a trial period. If the service offering is strong and people are booking, then you can take the plunge after you have a solid foundation of using the third party. If the service isn’t booking, you haven’t lost any money and you can focus your attention on trying another service.
My biggest piece of advice is to only have two or three key extra services that you offer. Our “3-D business” involves entertainment, lighting/AV and photo booth. If I continue to offer more and more services, I run the risk of diluting our brand and potentially not doing them all well. For many of you, running one business can be hard enough and adding more and more options just takes away from the key reason you founded your company. Be great at the few things you do, and your customers will appreciate it and come back to you.
By Jason Weldon
Originally published in Mobile Beat issue #169 – link to http://www.mobilebeat.com/emagscurrent/169