During uncertain times, it’s tempting to chase new market opportunities for your staffing firm — especially if margins appear to be higher and the work seems easier. Maybe the grass appears greener in IT, finance or even light industrial.

Before you do so, however, consider this true-life cautionary tale.

A successful staffing executive in the light industrial space wanted to diversify into other staffing segments that would, in theory, lead to more profitable growth. With that in mind, he opened three separate practices: finance, IT and executive search. After all, he came from one of the Big Five consultancies, so transitioning to more professional staffing seemed to make sense.

On paper, all these businesses are highly desirable. They typically have better margins than light industrial, are less operationally challenging and can lead to better multiples on exit. It made sense that someone with his background would expand into these sectors.

This expansion was one of his biggest strategic mistakes: The company diverted from what it was great at instead of sticking to its core in commercial staffing. At only $40 million in revenue, it found itself with four separate divisions.

Fortunately, the firm had a strong board, which insisted the company refocus.

So during a tough market, when other staffing firms were trying to find business wherever they could, this executive instead started divesting divisions. Unshackled by distraction, the firm quickly became a $100 million business.

The lesson here? Focus drives greatness.

To fully appreciate the magnitude of this story, consider how difficult it is to unravel three separate business units. How many people were impacted? How much was written off in sunk costs? How many clients needed to be contacted? These changes can cause a massive amount of disruption for the business and the remaining team members.

But a firm with a focused strategy — if properly executed — will outperform one with no clear vision.  Jettison your belief that growth only comes with new businesses: For the vast majority of staffing firms, available market share will grow if you execute properly.

Here’s another way of thinking about it: Beware of shiny objects that distract you from what you are good at, even if they promise easier revenue. Every market in this business is rife with competition. Clarity and focus win.

The Right Way to Expand

Does this mean you should never expand your strategy? No. However, you should stay close to the space you’re in currently. When you do expand, make sure you have capable leadership you can trust.

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