By now, you’ve read why extended warranty administrators should expand into related verticals worth an estimated $40 billion in untapped revenue.
And yes, we admit that’s easier said than done. If you’re serious about this expansion, you need to map things out.
Fortunately, we’ve done the planning for you. Keep reading for tangible next steps to follow and you’ll be on pace to see results in due time.
Step 1: Be Realistic
Theoretically, you could break ground in any vertical you want. But just because you could doesn’t mean you should.
The truth is:
- Some geographies are oversaturated for certain policies
- Some geographies are begging for your services
- You might not have the staff, specialists or vendor network to gain a foothold
- You might lack the technology to sell a VSC and an extended home warranty. Or an extended home warranty and an extended RV warranty.
For some of those challenges, that means conducting extreme due diligence into each vertical’s landscape. You want to fish where the fish are, but the rods and reels are lacking. At the same time, certain expansions will likely be easier (for example, managing RV claims if you already do the same for VSCs) than others (going from extended home warranties to RVs).
How Inline Admin Helps
Our system makes it possible to manage multiple types of extended warranties and service contracts during each fulfillment cycle, from claim submission to final resolution.
Step 2: Understand The Rules, Regulations and Reserve Requirements
If you’re already processing claims in multiple states, you’re likely aware each has its own compliance peculiarities — especially in terms of finances.
- Massachusetts requires each home contract provider to be licensed in addition to an annual $600 fee
- Alabama mandates $50 million in net worth and/or a reimbursement policy for certain coverages
- Oklahoma requires reserves of 40%, at minimum, of gross consideration received (the amount paid for the warranty minus claims)
Investing time to research the financial considerations will prove to be worth the effort. There’s no sense in charging ahead in a new market or vertical to find it won’t be fiscally feasible.
How Inline Admin Helps
Our system automatically places the financial component of each warranty — reserves, down payments and others — into specific buckets based on state requirements for each policy type.
Step 3: Specifying Contract Language & Pricing Models
You’re likely to choke on ambition when you bite off more than you can chew. And while some companies want to be all things to everyone, those that remain standing are a bit more selective.
The same philosophy should permeate what you will cover — and won’t.
- If you’re venturing into extended home warranties, will you cover 100% of HVAC issues? Condensers only?
- If you’re considering extended RV warranties, will you exclude powertrain repairs? Will you include associated appliances?
Start by looking at what your competitors are doing well in addition to what customers complain about online. Isolate what makes other companies stand out, fill in the gaps of what extended warranty buyers wish was offered or easier, and you’ll find a compelling sweet spot to hit on.
At the same time, you’ll want to do some analysis to learn if your proposed coverage can be profitable (or at least meet mandated reserves as you ramp up to enter green territory). What are customers currently paying for the coverage they have? More importantly, what would it cost for them to get what they want?
How Inline Admin Helps
You can create contract templates that detail coverage based on warranty type, tier, state of sale and other considerations to save time — and possible legal headaches.
Step 4: Build Your Network
You can’t manage claims if you don’t have people who can make repairs or vendors who can supply parts.
Fortunately, out of all the steps, this should prove to be easier because you’ve done this before with your existing product offering(s). You just might need to widen your net, depending on your expansion, to capture more trustworthy partners:
- OEM manufacturers
- Electronics stores
- RV repair shops
- Plumbers, electricians, HVAC
- Mechanics
And, just like the reserve mandates described in Step 2, you’ll want to make sure you follow mandates by only working with those who are licensed, insured and certified (especially when it comes to RV coverage).
That is, unless you want to open you and your clients up to potential ruin.
How Inline Admin Helps
You can incorporate your preferred vendors into our database to send messages, pay invoices, rate their service and track metrics, including average fulfillment time.
Step 5: Integrating Technology
Scaling requires simplification. The less bouncing back and forth between systems, the easier your job will be — and the more likely your profit margin is to grow.
Imagine how cumbersome it would be managing claims with different processes and different systems for:
- VSCs
- Home warranties
- Extended RV warranties
- Warranties for smart devices and electronics
The likelihood of an error, missed communication or delay in service grows exponentially with every additional system. Technological fractures like these are an avoidable form of self-inflicted harm if a central source of truth exists.
And it does.
How Inline Admin Helps
Our platform can manage all VSCs and extended warranties simultaneously. That means fewer licenses to pay, fewer vendors to deal with, centralized claims reporting and analysis, learning to use just one system…
The list goes on and on.
Step 6: Start Small
Stores and restaurants use “soft launches” for a reason: they show what works and what needs to improve before rolling out to a larger audience.
Expanding into a new space — both physically and conceptually — requires the same deliberate pacing.
By choosing one or two smaller test markets, you’ll be able to better manage everything from vendors and servicers to customer expectations while data and feedback start rolling in:
- Do clients understand their contract?
- Do you have competitive rates?
- Are claims fulfilled in a desired timeframe?
- Where are the bottlenecks?
Each piece of data allows you to improve before a) expanding into more markets or b) upping your marketing budget.
How Inline Admin Helps
You can create an unlimited number of reports, including those specific to your company or target KPIs, to find the high and low hanging fruit that needs your attention so you can expand with supreme confidence.
Why Do Multi-Vertical Expansions Fail?
There isn’t one single fail point. Usually, it’s a combination of:
- Expanding into too many markets, too fast
- Underestimating the costs associated with reserves, marketing and vendor/supplier negotiations
- Making compromises with technology by creating workarounds, using different systems for different verticals or waiting to invest in the appropriate tools
Replicate Your Success
You’ve already shown you know how to run a successful extended warranty company. And we’ve given you the roadmap to shift gears into related service offerings.
We’re here to provide the technology to make the process easier with a free demo of our all-in-one administration software. Schedule a walkthrough today.
