You got a customer. Then another one.
Money is coming in irregularly and you are thrilled and terrified in alternating waves, sometimes inside the same hour. Some weeks are good. Some weeks nothing happens at all and you cannot tell whether that means something.
And here is where the classic mistake arrives, dressed as strategy.
What happens
You get scared.
The revenue is lumpy and lumpy is frightening, and a man who cannot predict next month is a man who lies awake doing arithmetic. So you decide the answer is more options.
Another service line. Another market. A second product. A different type of customer.
And you tell yourself you are diversifying, and diversifying is a real word that real businesses use, so the whole thing sounds correct.
It is not diversification. It is anxiety with a spreadsheet.
You are taking the one thing that was starting to work, cutting its resources in half, and starting a second thing from zero, at precisely the moment the first thing needed all of you.
Why it feels so reasonable
Because the logic is not stupid. That is what makes it dangerous.
If one offer produces uneven revenue, two offers should smooth it out.
That is true for a mature company with two functioning systems. It is false for a man in Stage Two, and the reason is that you do not have one working thing yet. You have one thing that has worked a few times.
Those are entirely different objects and men confuse them constantly.
A working thing is repeatable. You know why it worked, you can do it again on purpose, and you can predict roughly how often. A thing that has worked a few times is a series of events you have not yet explained.
Adding a second unexplained thing to your first unexplained thing does not produce stability. It produces two half-attended experiments and a man who is busier and no clearer.
The real source of the lumpiness
Here is the diagnosis, and it changes what you do about it.
Lumpy revenue in Stage Two is almost never a product problem. It is a volume problem.
You have too few customers for the law of averages to smooth anything. At four customers a month, one cancellation is a twenty-five percent swing. At forty, it is noise.
The cure for lumpiness is more of the same thing, not a different thing.
But more of the same thing requires you to keep doing the uncomfortable activity from Chapter Five, and starting a second product line lets you feel productive while doing something safe.
Diversification in Stage Two is almost always avoidance of selling. That is the honest version and I have watched it in myself.
The math of splitting
Here is what adding the second offer actually does, and it is worse than it feels.
A man has one offer producing eight thousand a month. He has roughly twenty hours a week of selling and delivery attention to allocate, which is the real constraint rather than money.
Before the split. Twenty hours on offer one. Eight thousand a month.
After the split. Ten hours on offer one, ten on the new thing.
Offer one drops to about five thousand, because it is not perfectly linear but it is closer than he wants to believe.
The new offer produces roughly nothing for four to six months, because it is at Stage One and Stage One takes forty conversations and he is doing ten hours a week.
| | Month 1 | Month 3 | Month 6 |
|—|—|—|—|
| Offer one, undivided | $8,000 | $9,500 | $12,000 |
| Split across two offers | $5,000 | $5,800 | $7,200 |
Six months in he is worse off by nearly five thousand dollars a month than if he had done nothing except keep going.
And he is busier, and he is more confused, and he has two things that are each half-learned instead of one thing he understands.
That table is why the discipline in the next chapter matters more than any tactic in this book.
The four signals that say go
I said the exception is a customer asking repeatedly. Here is the fuller test, because at some point expanding is correct and a man needs to know when.
All four of these should be true before you add anything.
One: the first offer is predictable. You can forecast next month within about twenty percent. If you cannot, you are not stable, you are just currently busy.
Two: the request came from outside you. Existing customers, unprompted, more than three times. You did not think of it.
Three: it serves the same customer. Same person, adjacent need. A bathroom remodeler adding kitchen work is expanding. A bathroom remodeler adding lawn care is starting a second company.
Four: it uses most of what you already have. Same crew, same tools, same suppliers, same sales conversation. If it needs a new everything, it is a new business and it deserves its own Stage One rather than a ride on this one.
Four yeses and it is expansion. Three or fewer and it is Chapter Seven wearing an opportunity's coat.
The list
Practical, because you will be tempted before you are ready.
Keep a running list of every adjacent thing somebody asks you for. One line, with a date and the customer's name.
Two things it does.
It gets the idea out of your head, which is most of what the itch actually wants. A written idea stops circulating.
And it produces evidence. Ninety days later you look at the list, and if the same request appears four times from four different people, that is the market talking and you should listen.
Once is a customer with a different need. Four times is a business.
That list is the difference between disciplined expansion and anxious expansion, and it costs you eleven seconds per entry.
The three symptoms
You can catch this early. Watch for these.
You are excited about the new thing and not the current thing. Novelty produces energy. Energy feels like signal. It is not signal, it is the same mechanism as Chapter Three of The Forge, and the new thing is exciting precisely because nothing has failed at it yet.
You cannot state why your current customers bought. If you cannot answer that in a sentence, you have not finished learning the first offer, and starting a second one guarantees you never will.
You are describing your business with the word "and." I do X and Y and I also do Z. Every "and" is a fraction of your attention and a fraction of your customer's understanding.
The exception
I will be fair. There is a legitimate version of expanding and it looks different.
A customer asks for the second thing, repeatedly, unprompted.
That is not diversification. That is the market telling you something, and the tell is that you did not think of it. It arrived from outside, from people already paying you, about a need adjacent to the one you are already serving.
Even then, the timing matters. Add it when the first thing is predictable, not when it is scary. If you cannot forecast next month on offer one, you have no business starting offer two.
An excerpt from The First Million. The free course is based on this material and is not the same thing.