Page 83 - Paulisms: Gold Nuggets for Small Business

existing opportunity and the diversified new opportunity both suffer. It’s expensive diversifying: marketing, technical, stock, displays, training, and lack of time for sales. Think carefully!
I remember back in the mid-2000s when we took our network and tried to use it to diversify into popular competitors’ products that operated in our industry. Our network was already successful but I wanted more sales and thought it was a good idea to add another product line that was still early into its life cycle. There were various issues. One was the training required to turn ourselves and the existing installer network into the diversified product experts. It was a very expensive exercise, as poor training and understanding resulted in quality issues and having to pull out installed product. We might have got some extraordinary growth out of going into the new line, but it was at a far lower margin. With the increased marketing cost, lower margin and higher sales taking up resource, it took our eye off the ball. It took us away from what we were really good at and our high-margin product. It also meant that when the licensees were trying to do both products, their focus often went to the higher-priced cash flow product. As they were so busy, their main product sales deteriorated. Our turnover went up but our margins went down. In reflection, it was a poor cocktail.