Question
My brother and I are starting a new business as partners, under an LLC. We both have had a diverse range of experiences, including project bidding and management, manufacturing, cabinetmaking and construction.
We would like to start up a company that could build everything from custom kitchens to houses. Some people say we need to specialize. Do one thing and do it well. Others say that narrow specialization limits your market and makes you more sensitive to market swings. I like diversity. In our current work, we are accustomed to multi-tasking and this isn't daunting to us. But is it an unrealistic dream to be a diverse company?
Forum Responses
I started my business about 21 years ago. I went to school for manufacturing eng., got a corp. job for a few years and quit. I started as a handyman, and built my own shop. In a few years, I was building additions and making and installing all the casework and trim. I have never been out of work. We now have a high production custom shop, but I'm not ready to give up that GC income for the love of woodwork. I don't know how a one to three man cabinet shop can make it. Be as diversified as you can and get some good sub contractors.
At the risk of sounding philosophical, if you want to offer all the services you mention in an effort to "corner the market," you're doing it for the wrong reason.
If, on the other hand, you assemble a group of reliable subcontractors, are determined to treat them fairly (i.e., don't finance your jobs on their backs -- that's what banks are for), and if you remain focused on doing the best job possible for your clientele, whatever their income range may be, you're thinking in a better direction.
That said, you are biting off a lot. Better to take small bites and be sure you can chew them. Do that, and growth will happen as it should. Force it, and you may be sorry.
Anthony Noel, forum technical advisor
I am going to specialize in a high-end niche product. I will then expand to other products directed at the same audience leveraging the existing equipment. It will allow savings on marketing and allow me to build a clientele and reputation.
One thing that is important is to look at how diversification effects your expenses.
GC and cabinets help because you are dealing with the same people and you can feed your own shop some work. The marketing is somewhat parallel. It hurts because the equipment is somewhat diverse. I do not know the answer to this question, but will the competition (other GC's) send you cabinet business?
When we began, we were so desperate for work that we would do anything. The problem was that we couldn't use furniture component samples to show contractors when bidding cabinet and molding jobs. By specializing in one area, we created our own niche market.
Now we boast the equipment and skills to get us into projects that are outside our niche. Advertising CNC capabilities is easier to sell than specific products. I think most customers are looking for companies who have a wide range of capability, but aren't scattered all over the globe on products. One difference for us is that we do a lot of production work for other companies who do final assembly. So our customer base is different then the custom cabinet or building industry.
My suggestion would be to start with a specialization, get your feet planted, then expand. Don't try to do too much. In terms of the LLC arrangement, talk with an accountant--you would probably be better off with an S-Corp.
Problems between the two go by different names but generally give you the same symptoms and same headaches. I don't necessarily prefer one over the other. Most of the people who have told me to diversify were people in the financial business. Most of the people in our business say to focus on what you do well and find profitable and continue to build and improve within that arena. I think that is the best advice.
