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Although, I am not suggesting that the entire expansion of your company should be limited to a five-mile radius. Rather, that's where you start and shoot for maximum market penetration. Eventually, your customer base will spiral outwards. Once you have a substantial customer base beyond 10 miles from your shop, you will find that it is difficult to increase your business at a rate of say, 10-15% annually. The additional territory coverage becomes drag on your resources.

So, what do you do? Suppose most of your long-distance business (beyond 10 miles) comes from the west of your shop. In this case, you would split the original shop into two stand-alone stores or open a satellite office about 20 miles to the west of the original shop location. Why 20 miles? Because ultimately, your goal is to never drive more than 10 miles from the shop to hit a job. Place it within easy reach of where your existing, (but far away) customers are. Now the process begins again for the new shop — a 5-mile radius and shoot for heavy penetration. The two shops should not overlap their zones of coverage. Rather, the first shop pulls back a bit and the second shop takes those (formerly) distant calls. That saves a bundle of money and road time.

I use "10 miles" as an example only. It's really a matter of population density and potential customers within your selected radius of coverage. In my area, Los Angeles, there is a high population density and traffic is a nightmare. It may take an hour to travel 10 miles. In a rural area your radius will widen, but be careful. Don't fall into the trap of believing you can only survive by driving to the ends of the earth to acquire and service customers.

It is far easier to raise two shops that generate $100,000 per month each by 15% annually than it is to raise one shop that earns that same $200,000 per month that same 15%. This is how the big boys do it — grow/split, grow/split, grow/split. This is perhaps the most valuable lesson they taught me!

It's much like vegetable gardening. You want to maximize the productivity of the available soil, yet you don't want to put the plants so close together where they'll compete for the same nutrients and stifle each other's growth. On the other hand, you don't want to spread out your plants farther than necessary — it lowers the yield. You must try to determine the right spacing (radius) for your plants (shops), give them plenty of fertilizer (training and motivation) and water them consistently, (market your services.) Oh, I almost forgot.... pull out the weeds (bad attitudes) and rake regularly, (take good care of your people).

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Peter Morici

"Plumbers Protect The Health Of The World."

Peter Morici - [Intro] | [Articles] | [Email] | [Website]

The views expressed in this article are those of the individual author and do not necessarily reflect the views of the management or staff of MasterPlumbers.com


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