How to make your business more diverse

Many strong businesses have diverse sources of income. The advantages of diversification have been well and truly reinforced through the recent epidemic shutdowns. Now, as many entrepreneurs begin to emerge from the COVID-19 blockade, questions about futureproofing are raised. What can you do to ensure that your business thriving again when the borders are closed? Does your existing product make sense in the ‘new normal‘? Perhaps most important is how do you get ready should we be forced to go into lockdown again? The answer might lie in diversification of business.

Why should you diversify?

This is something experts have observed unfolding over the first half of the year that was 2020.

Diversification of business operations is a strategic way to minimize your risk when working in an uncertain economy. It’s a sign that you have a backup plan should anything go wrong.

Diversification helps you protect yourself not only from unexpected shocks such as COVID-19, but also from the more common problems that arise the emergence of new competitors.

There are plenty of diversification options available, but there’s plenty to be aware of before deciding to dive in the deep end.

We’re not suggesting to anyone to take a risk and do something crazy – like invest huge sums of money into something you’re just not comfortable with. But if people think about their current work environment and their expertise, there are always peripherals around that they’re probably not in and that offer huge potential for them, because it’s not yet their normal space.

Getting started

Before starting your diversification journey it’s important to do your homework.

Find out where you’re going and who your rivals are - especially if you’re going into a new market.

If, for instance, you’re producing machinery to be used in the industry of food, a safe option could be consumables. In a strong economic environment, the machinery will be selling and is in high demand, however in a less too good one, like right now, people are still purchasing the consumables.

In the event that you do not have understanding of the market you’re trying to enter then it’s like driving down the road with a blindfold on.

It’s best to remain with the things you are familiar with particularly if it’s your first time trying your toe into the diversification pool.

If you’re considering diversifying into a new market that’s beyond your skillset or business knowledge it’s best to be smart about getting someone who has that know-how. Everyone is good at certain things and not so good at others. Therefore, you should hire employees with the expertise and experience you need. If you’re not able to do that, you’re just adding to the risk.

There are risks to take into consideration

Diversifying your business also means diversifying your attention.

Your aim is to satisfy your customer and grow the number of customers you serve. Therefore, the problem you face when diversifying your business is that you’re putting in manpower on your new offering. If you’re not cautious, you’ll could end up spending all of your effort on the new opportunities , and leaving those you’re currently working on.

It’s crucial to ensure that you’re satisfying the customers you already have, and also expanding the number of customers you have.

Make sure you don’t chew more than you’re able to chew.

Be smart about taking your time to do this. I’ve seen thousands of businesses over the years that have gone broke by doing something wrong… all the way to the largest, most sophisticated ones.

That’s the difficulty of being a small-scale company owner, he states. You have many of the same issues as the big corporations but with less resources to react to and correct your mistakes. Therefore, you must be cautious.

Changes in the business or any investment in business comes with a risk, but you can take some great risks and make truly smart choices, and earn yourself a lot of cash and make it successful… when you’re prepared.

Exploiting opportunities

Diversification was a must in some industries, like a gelato producer that operates predominantly as a wholesaler of restaurants and sellers of gelato. However, by February of this year, had begun to notice problems appearing ahead.

"I did not think that it would affect us much, but I did see the news coming from outside the United States"

Then one of their largest customers, whose company relied heavily on tourists from abroad, stopped making orders.

At this stage, they were one week into lockdown , and they realized they needed to have a plan of diversification for them to survive.

"I began looking for other businesses we could buy that might complement our current business"

"I found another business that actually supplied supermarkets. I began to work on purchasing part of the company during lockdown and ended up buying 50% of the company."

This move did more than provide a new customer base; it also allowed them to start a new business.

"Their manufacturing was performed by an outside contractor. Thus, by purchasing it, we’ve actually taken over the manufacturing contract"

"If we go into another lockdown or something happens it’s still the supermarket aspect of the business that will carry on."

It was the perfect example of a business taking an opportunity to capitalize on its strengths that its already has.

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 problem is that when people get caught in trouble, they make the wrong decisions. Especially now with the impacts of COVID-19" the doctor declares. "So my advice is to seek out non-emotional guidance from someone who’s not associated with your business.

"If you’re struggling emotionally or financially and your stress is building up, it’s time to get some help. Pick up the phone and talk to someone. There are a lot of smart people around who could aid, so don’t take on it all yourself."