How to diversify your business

A lot of successful businesses have multiple income streams, and the benefits of diversification have amply emphasized through the recent epidemic shutdowns. Now as a lot of entrepreneurs begin to emerge from the COVID-19 blockade, questions about futureproofing are asked. What can you do to ensure that your business to be successful once boundaries are shut? Does your previous offering fit into the new normal‘? Most importantly how can you be prepared if we’re forced into lockdown once more? The answer might lie in diversification for business.

Why should you diversify?

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

Diversification of your business is a smart way to lower your risk while operating in an unpredictable economic environment. It means you have a back-up plan should things go wrong.

Diversification helps you protect yourself not only from shocks that aren’t anticipated, such as COVID-19 however, it also protects you from more familiar problems like when competitors come along.

There are plenty of diversification opportunities available, but there’s plenty to keep in mind before deciding to dive in the deep end.

We wouldn’t advise anyone to embark on a journey to do something insane, such as investing lots of money on something you’re just not comfortable with. However, if they think about their current business space and experience, they will find that there’s always a plethora of peripherals which they’re not necessarily and that offer huge potential for them, because it’s not yet their normal space.

Getting started

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

Be aware of where you’re headed and who your competitors are particularly if you’re moving into a new area.

As an example, if you’re producing equipment for the food industry, then a secure location to look for could be for consumables. In a healthy economy, the machinery is selling and is in high demand, however in a less too good one, like today, people are buying consumables.

If you’re not equipped with the expertise of the market that you’re trying to get into, you’re like driving down the highway with your blindfold on.

It’s suggested to stick with what you know particularly if this is your first time trying your toe into the diversification pool.

If you’re planning to diversify into a market that isn’t within your expertise or knowledge of business it’s best to make sure you find someone who does have that knowledge. Everyone is good at certain things but not as good at other things. Therefore, you should hire employees with the expertise and experience you need. If you don’t have it you’re only increasing the risk.

There are risks to take into consideration

Diversifying your business also involves a broader focus.

The goal is to please your client and expand your customer base. This means that the issue you face when diversifying your business is that you’re using staff to develop your new product. If you’re not cautious, you’ll are likely to use all your resources on new opportunities , leaving the existing ones in place.

It’s incredibly important to ensure your customers are satisfied with the ones you already have, while also growing those who are your customers.

Don’t bite off more than you’re chewing.

Be aware of taking the time to complete this. I’ve observed a multitude of businesses over the years who go bankrupt by doing an unwise thing… including the most reputable, well-known ones.

That’s the challenge of being a small business owner, says the owner. There are similar problems similar to big corporations, but you’re not able to have the resources to respond to and recover from your mistakes, therefore you must be cautious.

Changes in the business or any investment in business is a risk, but you can take some excellent risks and make extremely smart decisions, earning your money and succeed… provided you’re smart about it.

Finding opportunities

Diversification became a necessity in some industries, like a gelato producer that operates principally as a wholesaler to restaurants and gelato sellers. But by February of this year, it was beginning to notice issues appearing that were looming.

"I did not really believe it was going to affect us in any way, based on the news from abroad"

Then one of their main clients, whose business relied heavily on tourists from abroad was unable to fulfill orders.

At this stage the group was one week in lockdown and realized they required a plan for diversification for them to make it through.

"I began looking to see if there were any other businesses we could acquire that could be a good match to what we do"

"I discovered another company that was actually providing to supermarkets. I started working on buying the majority of the business on lockdown and ended up buying 50% of the company."

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

"Their manufacturing was done by an unrelated contractor. So, by us buying it, we’ve actually bought their manufacturing contract"

"If we are forced to go through another lockdown or something happens, then we’ve still got the supermarket aspect of the business which will continue."

It was the perfect illustration of a company taking a chance to build on a strength it already had.

It can feel like a do-or-die scenario. However, over-reacting to situations could harm you in the end.

"Part of the problem is that, when people get caught in trouble, they take poor decisions. Particularly with the current effects of COVID-19" he says. "So my advice is to seek advice that isn’t emotional from someone who isn’t directly connected to your business.

"If you’re experiencing emotional distress or financially and your stress is building up, you should get some help. Get on the phone and speak to someone. There are many smart people who are able to aid, so don’t take on it all by yourself."