How to diversify your business

Many strong businesses have diverse sources of income. The advantages of diversification have been really emphasized by the recent pandemic shutdowns. Now, as many business owners begin to re-emerge from the COVID-19 lockdown questions about futureproofing are discussed. How can you get your business to be successful once the borders are closed? Does your old offering still fit into the new normal‘? And, maybe most importantly how can you be prepared if we’re forced into lockdown once more? The answer could lie in diversification of business.

Why diversify?

Experts have observed play out over the first half of the strange year that has been 2020.

Diversification of your business is a smart way to lower your risk while working in an unstable economy. It is a way to have a backup plan in case anything go wrong.

Diversification helps you protect yourself not only from unanticipated shocks like COVID-19, but also from more familiar problems like when new competitors appear.

There are plenty of diversification opportunities on the market, however there’s plenty to keep in mind before deciding to dive in fully.

We’re not going to suggest that you undertake something crazy – like invest huge sums of money into something that you’re not comfortable with. But if people think about their current business space and their expertise, there are always other areas that they’re not obligated to be in and that offer huge potential for them, because it’s still within their comfort zone.

Getting started

Before starting your diversification journey it’s essential to do your research.

Find out where you’re going and who your competition is especially if you’re going into a brand new market.

If, for instance, you’re producing machinery to be used in the industry of food, a secure source could be consumables. In a strong economy, the equipment is selling and is in high demand, however in a less too good one, like today, people are still purchasing the consumables.

In the event that you do not have the understanding of the market you’re trying to get into, it’s like driving down the highway while wearing a blindfold on.

It’s suggested to stick with what you know particularly if this is the first time you’ve dipped your toes in the diversification pool.

If you’re seeking to diversify into a field that’s not within your expertise or knowledge of business and you’re looking for someone who can help, make sure you find someone who does have that know-how. We’re all good at some things and not so good at other things. Therefore, you should hire employees with the expertise and experience you require. If you don’t have that you’re only increasing the risk.

Consider the risks

Diversifying your business involves a broader focus.

Your objective is to satisfy your client and expand your client base. The problem when diversifying your business is that you’re putting in people to create your new service. If you’re not cautious, you’ll end up using all your effort on the new opportunities , and leaving those you’re currently working on.

It’s incredibly important to make sure you’re satisfying the customers you already have while growing that customer list.

Be careful not to chew more than you’re able to chew.

Make sure you take the time to accomplish this. I’ve witnessed a lot of companies over the years that have gone broke by doing an unwise thing… and that includes the most reputable, well-known ones.

That’s the challenge of being a small business owner, he says. You have many of the same problems that big companies face, but you’re not able to have the resources to respond to and correct your mistakes, therefore you need to be careful.

Any change in business or business venture is a risk, but there are some excellent risks and make truly smart choices, and earn you a significant amount of money and have a great time… If you’re prepared.

Finding opportunities

Diversification was an essential requirement for some businesses like a gelato manufacturer who operates mostly as a wholesaler for eateries and vendors of gelato. However, by February of this year, it was beginning to see problems that were looming.

"I wasn’t sure it was going to affect us too much, seeing the news from abroad"

Then one of their major customers, whose company relied heavily on tourists from abroad was unable to fulfill orders.

At this point, they were one week into lockdown and realised that they required a diversification strategy in order to make it through.

"I started to look around to see if there were any other businesses we could invest in that might be a good match to what we do"

"I discovered a different business that was actually providing to supermarkets. I began to work on purchasing part of the company during lockdown and ended up buying 50percent of the business."

This move didn’t just create a new customer base; it also allowed the company to expand their business.

"Their manufacturing was performed by a third-party contractor. So, by us buying it, we’ve purchased their manufacturing contract"

"If we go into another lockdown or something happens that’s not the end of the story, but we’ve got the retail side of the company that will continue to operate."

It was the perfect way for a business to take an opportunity to grow on an advantage it already had.

It can feel like a do-or-die scenario. However, jumping into the wrong things could be detrimental in the long run.

"Part of the issue is that when people find themselves out of the woods, they make mistakes. Especially now with the impacts of COVID-19" the doctor declares. "So my advice is to get some non-emotional advice from someone who’s not connected to your company.

"If you’re struggling emotionally or financially and you’re feeling stressed and piled up, you should get some help. Take the phone and talk to someone. There are lots of clever people out there who can assist you, so don’t attempt to do everything by yourself."