Beermat Club:
Ask Mike
Pushing your business's boundaries to the limits
Q. I set up Electrowarm, a direct sales company, nearly two years ago to sell energy-efficient storage heating systems. Based initially only in the south-west of England, the company has grown nearly 200 per cent. I am now considering selling the products nationwide and I am also using the internet to push more sales. Given my limited resources, what suggestions you can offer? Joseph Taylor, Electrowarm, www.electrowarm.info.
A. You have a successful business and have reached a crucial stage: expanding outside your home territory. This is where many companies over-extend and struggle, so plan carefully.
This is a significant milestone and requires the involvement and personal growth of your three "cornerstones", as we describe them in The Beermat Entrepreneur: sales, delivery and finance.
First there is the sales challenge. You mention the internet, and it is indeed excellent for selling simple products such as CDs and airline tickets. But for a potentially more complex product such as yours the last thing you want is to stimulate too much early demand and later customer support challenges many miles away from your base in Plymouth.
Selling at a distance typically involves the setting up of an indirect sales channel, involving local people such as distributors or franchisees who sell and maintain your products. Managing these channels requires specific managerial skills, and you may want to hire a specialist in this area.
You should first look to expand your business to known customer types or vertical markets. I see that you sell to housing associations, so I suggest you specifically target a large order from a large housing association, or similar type of customer such as a hospital group or local authority, just outside your geographical area in the south-west.
This will help develop your sales model and also begin to address the challenges facing the other two cornerstones.
According to your website, you currently offer a "FREE no obligation demonstration, survey and price quotation" as well as a ten-year guarantee: "If there are any defects in the first 10 years, then we exchange the radiator right away."
Your delivery cornerstone needs to replicate this service nationwide and will therefore have to set up a demonstration and maintenance facility in each region. This expanded service should be tested in the closest new region first, ideally to a sympathetic business-to-business customer, as detailed above.
And finally your finance cornerstone should look carefully at all the new costs, including the cost of sale as well as the maintenance costs of your business when you're working nationally.
Mike Southon, co-author of The Beermat Entrepreneur and Sales on a Beermat
First published in the Financial Times: 10th June 2006