Maybe you're sick of losing deals to competitors who offer multiple trades,or maybe you've hit a ceiling in your plumbing business, and you need a way to grow or, maybe you have an HVAC business with a massive list of customers, and you want to capitalize on it.

Either way, you're probably asking yourself "Should I add another trade to my home service business?"

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Adding another trade could be the edge you need to grow your business, and reach your financial goals. It could also be a big mistake that keeps your business stuck for years to come.

So in this article, we'll look at 4 big factors to consider, and get you on your way to making a "yes" or "no" decision on that question.

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FOUR VARIABLES

1. MANAGEMENT CAPACITY

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To successfully start a new division, you'll need to have the bandwidth to manage and grow it. You need management depth. So your current division, whether it's HVAC, plumbing, or electrical, should be pretty much running itself already. Here's why:

Let's say this circle represents your time. Your focus is split between recruiting, retention, training, payroll, sales, marketing. And that's just for one trade. So when you add a new trade, now you have double the amount of things to focus on, and your time is divided up even more.

Plus, context switching takes up energy too. So the more things you need to switch between, the less you can actually get done.

On the other hand, if your core trade already has a management team, you can put almost all of your focus on developing the new trade and bringing all the different pieces together. And that management time is important. Because you can't expect the new trade to be profitable all on it's own.

Customers aren't going to choose to buy from YOU specifically just because you offer the service. You need to be able to compete in that service. And competing in a trade means you need to put consistent time and effort into that trade to make it valuable for the homeowner.

Plus, the new trade you're thinking of adding is probably going to require a lot more work than you think, since very trade has it's own nuances.

HVAC, for example, is more much more seasonal, you need space for inventory, and it's more of a sales game. Plumbing is much more service based. So if you're thinking of having your plumbing techs upsell for you, you might run into some culture shock. High ticket electrical services like panel replacements and home rewiring are more of a discretionary purchase for homeowners. If there's an economic down turn, work can really slow down.
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There's a guy named Chris Hunter who owns a company called HVAC Super techs. They have 5 locations that each include HVAC, plumbing, and electrical. According to an article on ACHR News, Chris said that although he started the new divisions from scratch, if he had to do it all over again he would rather acquire the other divisions rather than build them from scratch. Because you need to figure out marketing, sales systems, recruitment, and everything else for the new trade, starting a new trade is pretty much like starting a new business.

Now, all of that is definitely manageable; my point is just that it takes time and effort, and you need to have the bandwidth and management depth to make it happen. And whether you acquire the trade or build the trade within your business, you're going to need access to cash.

2. ACCESS TO CASH

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Whether you do decide to build the division from scratch, or you decide to acquire one, you need access to cash. You need cash for rebranding your company so homeowners know you offer other services. Maybe even some new marketing campaigns.

If you're starting an HVAC division, you'll need extra padding and marketing budget for shoulder seasons. The new division may take time to start making money, and you'll need to be able to cash flow the business while you wait for it to start producing returns. You might imagine yourself acquiring a plumbing division that runs itself but just needs some cleaning up, and going in and hacking and whacking to make it profitable fast.

What you need to account for, however, is people. People don't like change - they want their stable, predictable job and schedule. Think about it from their perspective. They got bought by a new company they don't know. Things start changing all of a sudden. Maybe they're working more hours.

Why kind of conversations will they have at home with their wives? What kind of pressure does that put on home life?

It's PEOPLE your success relies on. So as you flex the business and make changes, you need to be careful that the people don't break in the process.

My point is that it's might take time to make the adjustments you need to the new division to make it profitable. So you need the cashflow, to be able to afford to wait for the new division to start producing returns. How much cash you have, or at least have access to, is a big determining factor of how successful your new division will be.

3. HORIZONTAL GROWTH POTENTIAL

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• Let's change gears and look at the potential.
  You've got horizontal growth potential, which is adding new trades, and you've got vertical growth potential, which is scaling one service in your market.
  
  
• Let's start with horizontal.
  So let's say you already have an email list of thousands of HVAC customers, and a growing list of maintenance subscriptions.

In that case, you have an audience that you can immediately start promoting your plumbing services to, for free!

Now, don't expect the phone to start ringing off the hook, but it could give you a significant boost in the short term. In the long term, what adding another division really does is give the opportunity to increase your average customer lifetime value.

Mrs. Jones may call you to fix a plumbing leak, and then 1-2 years down the line, call you back for HVAC work. And vice versa. That means that on average, you get a higher return on every customer you acquire.

That being said, this takes time. You can't assume that you'll immediately start getting that work just because you offer the service. To really help increase the average ticket, you'll need to invest in training your techs how to cross-sell between your services. And as you grow to be a trusted authority in the new trade, it will become more common for customers to ask about it on their own.

If right now you're doing HVAC, another advantage of adding a plumbing division is that it tends to be less seasonal. That can help when HVAC dips in the shoulder season.

4. VERTICAL GROWTH POTENTIAL

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Now we come to vertical growth potential. Again, vertical growth potential is how far you can scale with one service in your local market. 

It depends on the population of your local service area, and the level of competition.

If there's not much room to scale vertically, that's when scaling horizontally by adding another trade, might make more sense. But if there is room - maxing out your vertical scaling first might be low hanging fruit and might be a huge opportunity. Here's why.

Let's say you currently run a home service business with HVAC only, and your goal is only to scale revenue. If each of your techs asked customers directly if they had any referrals after each job - how many more referrals do you think you would get?

With a CSR coaching program, how many more calls do you think your CSRs could book? If you paid for a professional rebrand and truck wraps, how much do you think you would increase your average ticket? If you upped the spend on all your lead sources, how many more leads do you think you could get? And how many more sales could you get as a result?

If you already have an email list of thousands of HVAC customers, and you start deliberately and consistently connecting with them over email, how many more sales do you think you could make. Those are questions for you to answer, but if you really break down the math, you might be surprised at how much you can grow vertically.

Plus, all those things combined are WAY easier to implement, than starting a new division of the business.

There's a company called Redwood Services that invests in the HVAC space and they have about 15 business partners, all of them proving HVAC, plumbing, and electrical.

Conclusion

In an ACHR news article, Shaun Hardick, the CEO of Redwood Services, recommends businesses get to about $10 million in revenue before they start thinking about adding other trades. And if your market is too small to expand vertically, you could potentially expand into other markets before going horizontal. In my personal opinion, that would be easier and more cost effective than adding a trade.

At least until you build real management depth in your business and can put a lot of focus into the new division.

If you found this article helpful, and you want to do more research, I'll include a link to the various resources mentioned in the article description.

Thanks for reading, and I sincerely hope this article helps you. We'll see you next time!