How to diversify your business

Many great businesses have multiple sources of income. The benefits of diversification have been really emphasized due to the recent pandemic shutdowns. Now, as many business owners are beginning to emerge from the COVID-19 lockdown, concerns about futureproofing are being addressed. What can you do to ensure that your business to be successful once the borders are shut? Does your previous offering make sense in the ‘new normal? And, maybe most importantly is how do you get prepared should we have to go back into lockdown once more? The answer could lie in business diversification.

Why diversify?

Experts have observed play out over the first half of this unusual year that was 2020.

Business diversification, is a smart way to decrease your risk when operating within an unpredictable economy. It is a way to have a back-up plan should an event occur.

Diversification safeguards you not only from unanticipated shocks like COVID-19 however, it also protects you from problems you are familiar with, such as when new competitors appear.

There are plenty of diversification possibilities out there but says there’s plenty to keep in mind before you decide to dive fully.

We’re not going to suggest that you undertake something crazy – like invest lots of money on something you are just not familiar with. But if you think about their current work environment and know-how - there’s always a plethora of peripherals that they’re not obligated to be in and that offer huge potential for them because they’re still their home.

Getting started

Before you embark on your journey to diversify, it’s essential to do your homework.

Know where you’re going and who your competitors are especially if you’re entering into a market that isn’t yet established.

For instance, if you’re producing equipment to be used in the industry of food, a good source could be consumables. In a healthy economy, the equipment is selling and is in high demand, however in a less that good economy, as today, people still buy the consumables.

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

It’s recommended that you remain with the things you are familiar with, especially if this is the first time you’ve dipped your toe in the diversification pool.

If you’re considering diversifying into a market that’s outside your capabilities or your knowledge in business is a must, so you should be smart about getting someone who has that knowledge. Everyone is good at certain things but not as good in other areas. Therefore, you should hire employees with the experience and expertise you need. If you don’t have it then you’re adding to the risk.

Consider the risks

Diversifying your business also means diversifying your attention.

Your objective is to satisfy your customers and increase the number of customers you serve. The problem with diversifying your company is that you’re spending people to create your new service. If you’re not careful, you will end up spending all your manpower on the new opportunities , leaving the existing ones in place.

It’s crucial to make sure you’re satisfied with the customers you already have, while also growing that customer list.

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

Take your time to accomplish this. I’ve witnessed a lot of companies in the past who went broke by doing an unwise thing… even the most reputable, well-known ones.

That’s one of the challenges of being a small-scale business owner, he says. You face many of the same challenges that big companies face, but less funds to react to and learn from your mistakes, so you have to be extra cautious.

Changes in the business or investment in business comes with not without risk, but it is possible to take great risks and make really smart moves, make your own money and succeed… If you’re smart about it.

Scooping up opportunity

Diversification became an imperative for some businesses like one that makes gelato, which operates principally as a wholesaler to eateries and vendors of gelato. However, by February this year, they began to notice problems appearing on the horizon.

"I didn’t really think it would impact us much, but I did see the news coming from out of the country"

However, one of their biggest clients, whose business relied heavily on tourists from overseas was unable to fulfill orders.

At this stage the group was one week into lockdown and realised that they required a diversification strategy for them to be able to get through.

"I started looking around for any other businesses that we could purchase that would complement the work we’re doing"

"I found another company that was actually providing to supermarkets. I began working on buying part of the company during lockdown and ended up buying 50percent of the business."

That move didn’t just bring in a new client base; it also allowed them to enter into new business.

"Their manufacturing was carried out by a third-party contractor. Therefore, by 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 supermarket side of the company that will continue."

It was an excellent illustration of a company taking an opportunity to capitalize on an advantage the company already had.

It can feel like a do-or-die scenario. However, rushing into things can cause harm over the long term.

"Part of the issue is that when people find themselves in trouble, they make the wrong choices. Particularly with the current effects of COVID-19" He says. "So my suggestion is to get some non-emotional advice from someone who isn’t tied 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. Get on the phone and talk to someone. There are many smart people out there who can assist you, so don’t attempt to do it all by yourself."