How to diversify your business

Many great businesses have multiple sources of income. The benefits of diversification have been well and truly reinforced by the recent pandemic shutdowns. Now, as many business owners begin to re-emerge from the COVID-19 lockdown, concerns regarding futureproofing are discussed. How do you make sure your business back on track when the borders are shut? Does your previous offering work in the ‘new normal? And, maybe most importantly is how do you get prepared in the event that we are forced to enter lockdown again? The answer could lie in business diversification.

Why should you diversify?

This is something experts have seen play out during the first half of the strange year known as 2020.

Diversification in your business is a strategic way to lower your risk while operating within an unpredictable economy. It’s a sign that you have a back-up plan should things go wrong.

Diversification protects you not just from unanticipated shocks like COVID-19 as well as from common issues like when new competitors crop up.

There are plenty of diversification options on the market, however there’s plenty to consider before you decide to dive the deep end.

We’re not going to suggest to embark on a journey to do anything crazy, like spending massive amounts of money in something you’re just not comfortable with. But if you think about their current industry and know-how - there’s always a plethora of peripherals that they’re probably not in, which are huge opportunities for them, because it’s still in their comfort space.

Getting started

Before beginning your journey into diversification, it’s crucial to complete your research.

Know where you’re heading and who your rivals are - especially if you’re going into a brand new market.

In this case, if you’re a manufacturer of machinery specifically for use in food processing, a good option could be consumables. In a prosperous economy, the machinery is selling and is in high demand, however in a less so good economy, like right now, people still buy the consumables.

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

It’s recommended that you stick with what you know particularly if it’s your first time to dip your toes in the pool of diversification.

If you’re seeking to diversify into a field that’s not within your business expertise or skills and you’re looking for someone who can help, consider hiring someone with that expertise. We’re all good at some aspects, but not great at others. Therefore, it is important to hire individuals with the experience and expertise you require. If you don’t have that then you’re just increasing the risk.

The risks to be considered

Diversifying your business means diversifying your attention.

The goal is to please your client and expand your customer base. So, the issue when you expand your company is that you’re using manpower on your new offering. If you’re not careful, you’ll will end up spending all your manpower on the new possibilities and leaving the existing ones in place.

It’s incredibly important to ensure your business is satisfying the customers that you already have while growing your customer base.

Don’t bite off more than you’re able to chew.

Be smart about taking your time to accomplish this. I’ve witnessed a lot of companies throughout the years that go bankrupt by doing something wrong… and that includes the most reputable, well-known ones.

That’s the challenge of being a small-scale company owner, he states. You have many of the same issues as the big corporations however, you have less money to respond to and learn from your mistakes. Therefore, it’s important to be aware.

Changes in the business or any business venture is not without risk, but it is possible to take excellent risks and make truly smart choices, and earn your own money and be successful… If you’re smart about it.

Finding opportunities

Diversification became a necessity for some businesses like a gelato manufacturer who operates primarily as a wholesaler to restaurants and sellers of gelato. However, in February of this year, they began to see issues on the horizon.

"I wasn’t sure that it would affect us in any way, based on the news coming from outside the United States"

However, one of their biggest clients, whose business relied heavily on overseas tourists had stopped taking orders.

At this stage they were a week into lockdown , and they realized 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 purchase that would be complementary to what we are doing"

"I found another business that actually supplied supermarkets. I began working on buying part of the company during lockdown. I ended up purchasing half of the business."

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

"Their manufacturing was handled by an outside contractor. Thus, by purchasing it, we’ve actually bought their manufacturing contract"

"If we enter another lockdown or something happens, then we’ve still got the supermarket aspect of the business that will continue to operate."

It was the perfect example of a business taking an opportunity to grow on the strengths it already had.

It can feel like a do-or-die scenario. But rushing into things could harm you over the long term.

"Part of the issue is that when people get out of the woods, they make the wrong decisions. Particularly with the current effects of COVID-19" he declares. "So, my advice is to seek advice that isn’t emotional from someone who’s not directly connected to your business.

"If you’re struggling emotionally or financially and you’re feeling stressed and piled up, it’s time to get some help. Pick up the phone and talk to someone. There are plenty of intelligent people who are able to aid, so don’t take on it all yourself."