By Ann Meyer
Adam Greenberg wasn’t aiming at bedbugs when his medical supply business began offering mattress protection in 2006.
Incontinence was the No. 1 problem his Northbrook-based company, NorthShore Care Supply, initially addressed. But when customers told Greenberg they were using the mattress encasements to guard against bedbugs, the entrepreneur saw a new opportunity.
He launched USBedBugs.com in 2007. Four years later, bedbug products command about one-third of the company’s $15 million in annual revenue, and Greenberg expects their sales to increase more than 200 percent this year. The company has added seven workers as a result, bringing its headcount to 20.
Clearly, Greenberg isn’t afraid to address pesky problems. But the markets for in-home medical supplies and bedbug prevention are distinct, with bedbug customers including travelers, day care providers, camps and lodges, as well as health care operators.
Temporary growing pains
Moving in a new direction caused temporary growing pains for the business, Greenberg acknowledged. “During the peak season, we almost doubled our business overnight,” he said. He added personnel and phone lines to handle a larger volume of sales.
While diversification is a time-tested strategy for large corporations, it’s less common among small businesses, said Rod Shrader, Denton Thorne chair in entrepreneurship at the University of Illinois at Chicago.
For business owners who already are stretched thin, it’s important to consider what offering the new service or product line will entail, he said. Entrepreneurs “see opportunity and want to respond. Sometimes they don’t stop to think about whether it is the right opportunity and the right mix of things to be doing,” Shrader said.
Greenberg added a third component in 2009 when he invented a new product, BugZip, which encases luggage to prevent bedbugs from coming home with travelers. He came up with the idea after taking a Caribbean cruise with his family and finding four bedbugs under a mattress. While the family switched rooms, Greenberg was concerned that a bedbug could have climbed into his suitcase and laid eggs. With lots of cracks and crevices, suitcases often attract bedbugs, he said.
A new solution for bedbugs
Drawing on that experience, Greenberg created BugZip, a large plastic bag that can be zipped tight around luggage to keep out the bugs. While the invention pushed Greenberg into manufacturing and distribution to retailers, he found some overlap because he sells BugZip on USBedBugs.com as well as at Bed, Bath & Beyond and other retail stores, where it is priced at $10 to $20, he said.
Likewise, the bedbug monitors and mattress encasements sold on USBedBugs.com also appeal to NorthShore Care Supply customers, he said. And he is able to leverage the company’s infrastructure by cross-training customer service representatives to handle calls from the three divisions, he said.
Launching a separate online business allowed Greenberg to add an online specialist and managers in marketing, human resources and operations, who work on both the medical supply and bedbug divisions, he said. “Those … positions have allowed us to gain control over the whole business,” he said. Greenberg now spends more of his own time focusing on products and customers instead of managing day-to-day operations.
With any form of expansion, business owners need to consider strategy and fit, Shrader said. To evaluate the opportunity, ask whether a market demand exists for the new product or service, Shrader said. Then consider whether you have the skill set to execute the idea without neglecting your core business, he said.
Most small businesses have limited resources, so entrepreneurs should analyze whether the new direction is the best use of their time and money. In addition, consider conducting a cost-benefit analysis by examining the cost of goods or services sold for the new line and the likely return on investment. Then compare the results with those for existing products or services. By quantifying the advantages and disadvantages of pursuing a new opportunity, entrepreneurs can make rational decisions, Shrader said.
“A lot of entrepreneurs don’t know which of their products are money makers,” Shrader said. “They don’t know the cost of goods sold product by product.”
At the same time, Shrader said, emotions often come into play when entrepreneurs see a new opportunity to solve an existing problem. “Not being able to separate the costs and benefits” is the greatest pitfall to expansion, Shrader said. Often, he said, entrepreneurs are “so busy doing, they don’t have time to stop and think.”