How to diversify your business

Many great businesses have multiple sources of income. The benefits of diversification have been amply emphasized due to the recent pandemic shutdowns. Now when many entrepreneurs begin to emerge from the COVID-19 lockdown, concerns regarding futureproofing are discussed. How can you get your business to be successful once boundaries are shut? Do your current offerings work in the ‘new normal? Perhaps most important what can you do to be ready should we be forced to go into lockdown again? It could be in diversification for business.

Why should you diversify?

This is something experts have observed play out during the first half of the unusual year that has been 2020.

Diversification in your business is a way to reduce your risk when operating within an unpredictable economy. It’s a sign that you have a backup plan in case something go wrong.

Diversification can protect you not only from unanticipated shocks like COVID-19, but also from common issues like the emergence of new competitors.

There are plenty of diversification possibilities available, but there’s plenty to consider before you decide to dive fully.

We’re not suggesting to anyone to go out and do something outrageous, like investing lots of money on something you’re not comfortable with. However, if they think about their current business space and know-how - there’s always a plethora of peripherals that they’re not necessarily in which could offer enormous opportunities for them because they’re still their home.

Getting started

Before embarking on your diversification journey, it’s important to do your homework.

Find out where you’re going and know who your competitors are especially if you’re entering into a new area.

As an example, if you’re a manufacturer of machinery that is used for food production, a safe place to go to might be for consumables. In a strong economy, machinery is selling however in a not that good economy, as today, people are buying consumables.

If you don’t have knowledge of the market you’re trying to get into, it’s like driving down the highway with your blindfold on.

It’s best to stay with what you’re familiar with, especially if this is your first time to dip your toe into the pool of diversification.

If you’re looking to diversify into a new market that’s beyond your business expertise or skills, then you need to consider hiring someone who has that expertise. We’re all good at some things and not so good at other things. So, hire people with the experience and expertise you need. If you’re not equipped with that then you’re just increasing the risk.

The risks to be considered

Diversifying your business also involves a broader focus.

The goal is to please your customers and increase your client base. This means that the issue you face when you diversify your business is that you’re using staff to develop your new product. If you’re not careful, you end up using all your manpower on the new opportunities and leave the current ones behind.

It’s incredibly important to make sure your customers are satisfied with the ones you already have while growing your customer base.

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

Make sure you take the time to accomplish this. I’ve seen thousands of businesses over the years that have gone broke by doing the wrong thing… even the largest, most sophisticated ones.

That’s one of the challenges of being a small-scale business owner, he adds. You’re faced with many of the same challenges like big companies, but with less resources to react to and correct your mistakes. Therefore, you must be cautious.

Any business change or any business venture is very risky. However, it is possible to take risk-free opportunities and make truly smart choices, and earn you a significant amount of money and have a great time… If you’re prepared.

Seizing opportunities

Diversification was a must for some businesses like a gelato manufacturer who operates primarily as a wholesaler to eateries and vendors of gelato. However, in February of this year, it was beginning to see issues that were looming.

"I did not really believe it would impact us in any way, based on the news coming from outside the United States"

But then one of their main customers, whose business relied heavily on tourists from abroad was unable to fulfill orders.

At this stage, they were one week into lockdown when they realized that they required a diversification strategy for them to be able to get through.

"I started to look around for any other businesses that we could buy that might complement what we are doing"

"I discovered another company which was actually supplying supermarkets. I started working on buying part of the company during lockdown. I ended up purchasing half of the business."

That move didn’t just provide a new customer base. It also allowed them to take on new business.

"Their manufacturing was performed by a third-party contractor. By buying it, we’ve assumed the manufacturing contract"

"If we get into another lockdown, or something happens and something happens, we’ll have the retail side of the business which will continue to operate."

It was the perfect instance of a business taking an opportunity to capitalize on an advantage its already has.

It can feel like a do-or-die scenario. But rushing into things could cause harm in the long run.

"Part of the problem is that when people find themselves caught in trouble, they make poor decisions. Especially now with the impacts of COVID-19" the expert declares. "So, my advice is to seek out non-emotional guidance from someone who isn’t tied to your business.

"If you’re struggling emotionally or financially, and you’re feeling stressed and piled up, then go and seek help. Get on the phone and talk to someone. There are many smart people who are able to assist, so don’t try to do everything by yourself."