Successful spin-offs - taking elements of an existing business and spinning them off into new products - includes related article on 12 spin-off ideas - Industry Trend or Event

Home Office Computing,  Jan, 1997  by Jill Robbins Israel

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DOES YOUR BUSINESS HAVE HIDDEN MONEY MAKERS?

HERE'S HOW TO TURN A PROFIT FROM RESOURCES YOU HAVE ON HAND

Let's say you own a catering company. Your schedule is booked with parties and weddings, but you've taken the business as far as it can go. So you write a book with your recipes and party-planning ideas. Before you know it, you're the home decorating/cooking/gardening guru of the 1990s with your own line of books, a magazine, and a TV show.

OK, you may not want to be the next Martha Stewart. But taking elements from your existing business and spinning them off into new products can be a profitable endeavor. In fact, sometimes a spin-off becomes so lucrative it overtakes the original business.

To help you take stock of your resources and turn them into revenues, we talked to a handful of entrepreneurs who've made it happen.

TURN YOUR SERVICE INTO A PRODUCT

When you're in a one-person consulting business, your success is automatically limited--you can single-handedly service only so many clients. But if you can somehow turn your service into a product, you've got a great way to increase your bottom line.

Chuck Green of Glen Allen, Virginia, discovered this soon after he started his design business, Logic Arts, in 1990. He specialized in designing documents that help enhance a small business's marketing efforts. In the course of his work he noticed that the sample documents included in desktop publishing and word processing programs were clunky, and he began exploring an idea that would lead him to a successful spin-off. He contacted Lotus Corp. in Boston and asserted that the company's sample templates could be much better designed and more useful to the end user. The folks at Lotus agreed and contracted with Green for 30 new style sheets (design templates) for their word processor, AmiPro (now Word Pro).

But Green realized that the potential market for templates went far beyond just what could be included within a program, and he convinced Lotus that it would be better to produce a separate package. Taking designs that he originally created for his clients, Green simplified and refined them until they worked as templates. His first product, Page Greats, consisted of 50 templates on floppy disk plus a 125-page manual; it sold for $49.

Although he expended a lot of hours creating the templates and spent some money on disks and materials for the book, Green made enough money on the product to justify developing a second set of templates, the Design Kit for AmiPro, which contains more sophisticated designs. This product has 100 templates and a 125-page manual; it sells for $79.

Green continues to modify client designs and turn them into template products. His line now consists of three packages, two for AmiPro and one for PageMaker. Currently, he's working on a new set of templates for PageMaker and a template collection for Microsoft Publisher. In fact, the templates have been so successful--accounting for 25 percent of Green's current profits--that he now does considerably less client work.

"Creating a salable product is far more profitable than having your income directly correspond to the number of hours you can work" Green relates. "You create the product one time, then sell it an infinite number of times."

To successfully spin off a product from your service, you need two things: a great product and a new marketing plan. Although not all businesses lend themselves to creating computer software, Green suggests that this is a profitable market, if you can find a way to tap into it.

Software publishers encourage third-party developers, says Green. "They look upon a product like mine as a niche category that wouldn't be profitable for them. But add-ins ultimately add value to the main program, so they're open to new ideas and marketing efforts."

No matter what type of product you create, you must make a commitment to marketing it. Remember, you're no longer talking about promoting a single-entity consulting business--you'll need to research the market and develop an effective plan. Says Green, "If there's one thing I've learned about sidelines [businesses], it's that you have to focus and stick to the marketing."

CLONE YOURSELF

A more common way to create a product from your service is to take your knowledge and package it--in a book, newsletter, audiotape, videotape, or all four.

Nancy Michaels chose audiotape. "To make a small consulting business profitable, you've got to come up.with a way to make money without being there," says Michaels, a marketing consultant and the author of How to Be a Big Fish in Any Pond, an audiotape information package she sells directly to customers.

"The Big Fish audiotape evolved because I've always done speaking engagements and seminars to promote my consulting business," says Michaels, whose company is located in Concord, Massachusetts. "I began to realize that there were many people who wanted the information I was providing [at seminars], especially those in microbusinesses, who either couldn't afford to hire me or for whom geography was a problem. I needed a way to clone myself."