Door
by Tara Taffera
October 17th, 2011

Consider Diversification

Diversification. It’s something you hear a lot about as companies struggle to stay afloat. For example, I’ve written stories recently about residential companies moving into the light commercial market as a way to gain market share. We also hear often about window dealers that have expanded outside of windows, into areas such as gutters or roofing. Yes, windows are still their bread and butter , but adding these products has helped some companies survive.

I spoke to Jeff Nowicki recently, who was a silent co-owner of Winstrom Windows, based in Toluca, Ill., and he got me thinking about diversification. I called to talk to him about the fact that Winstrom closed and what might have led to this (the company ceased operations on June 11).

First, he said the reason for the closure was pretty simple.

“It was due to economic times,” says Nowicki. “We could not get enough volume to keep going.”

Winstrom had changed ownership a few times over the years and Nowicki purchased the company with Tom Rauscher, who served as president and handled the daily operations, almost five years ago. (Rauscher told DWM magazine he has no comment on the company’s closing.)

Nowicki continues to serve as owner of Beaver Dam, Wis.-based Hometown Glass, which he has been involved in for nearly 20 years. The company installs windows, including Winstrom ‘s products prior to its closure, in both residential and commercial applications.

I asked him what makes the two companies different.

“We are very diversified,” he says. “At Winstrom we built aluminum, double-hung, single-hung, etc., and vinyl replacement windows. Here, we do more than that—we offer all materials. We install every type of door that is made, three season and four season rooms, auto glass, decking, siding, etc. That’s the big difference.”

“That’s the key right now to any business,” he adds. “Adapt to the times.”

Diversification could make the crucial difference for many companies. But how much is too much? If you offer everything under the sun, are you an expert at anything? Does the fact that a company specializes in doors and windows give them a competitive edge?

I’d love to hear your thoughts. Also, please visit dwmmag.com to answer our latest poll regarding diversification.

Tags:


One comment
Leave a comment »

  1. Diversification is certainly a good thing, if one doesn’t lose sight of the things that buy the bread and butter. My company formerly sold 9 brands of windows, along with roofing, concrete for porches, siding, room additions, kitchen and bath remodels and more.

    Much of the diversification was performed by subcontractors who brokered the extras to us. We found that being a middle, middle person in the extras was not profitable in several ways. We lost our focus on what we do best (windows and doors) and spent too much time selling the low profit extras. If we had grown enough to handle the extras in house, we might have done well with them, but competing against companies who specialized in the extras held our profit margins down. We now sell only windows and doors, which have become quite complex with all the options out there today.

    There are other issues like having a sales force that is qualified to sell properly, all the extras. You can lose credibility by not being an expert with everything you sell. Today’s buyers are using the internet to find experts, as opposed to buyers who formerly looked for a one stop shop, like they used to. Yes, we lose a few orders to those people looking for a one stop shop and my sales people remind me of that each time it happens, but they don’t do the planning and buying and managing of such things.

    Diversification to a degree is certainly beneficial but it has to be minimized to be profitable and manageable, in my opinion. Just take a look at the box stores. They have huge revenues with tiny margins. Generally if you don’t know what you want, you are on your own. I promote my business to potential customers looking for best value and they know that they can buy windows for less, but want real value, not smoke and mirrors, so any diversification we have isn’t implemented until we know the product or service from inside out.

Leave Comment

Current day month ye@r *