How to diversify your business

A lot of successful businesses have multiple income streams, and the benefits of diversification were really emphasized due to the recent pandemic shutdowns. Now, as many business owners are beginning to emerge from the COVID-19 blockade, questions around futureproofing are being discussed. How do you make sure your business thriving again when the borders are shut? Does your previous offering fit into the new normal? And, maybe most importantly what can you do to be prepared should we have to go back into lockdown again? The answer may lie in diversification of business.

Why should you diversify?

This is something experts have seen play out throughout the first two months of the strange year known as 2020.

Diversification in your business is a strategic way to reduce your risk when operating in an unpredictable economic environment. This means that you have a backup plan should an event occur.

Diversification safeguards you not only from unanticipated shocks , like COVID-19 However, it also shields you from common issues like when new competitors crop up.

There are many diversification opportunities out there but says there’s plenty to think about before you decide to dive fully.

We’re not going to suggest that you go out and do something outrageous, like investing huge sums of money into something you’re just not familiar with. But if people think about their current business space and know-how - there are always other areas that they’re not obligated to be in and that offer huge potential for them because they’re still within their comfort zone.

Getting started

Before you embark on your journey to diversify, it’s crucial to complete the research.

Find out where you’re going and who your competition is especially if you’re going into a market that isn’t yet established.

For instance, if you’re a manufacturer of machinery for the food industry, then a secure place to go to might be for consumables. In a healthy economy, machinery is selling however in a not so good economy, like right now, people still buy the consumables.

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

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

If you’re planning to diversify into a new market that’s beyond your skillset or business knowledge it’s best to make sure you find someone who does have that experience. There are many things and not so good at other things. So, make sure you hire employees who have the knowledge and skills that you need. If you don’t have it then you’re adding to the risk.

There are risks to take into consideration

Diversifying your business means diversifying your attention.

Your goal is to please the customer and increase your client base. The problem when diversifying your business is that you’re putting in people to create your new service. If you’re not carefulyou’ll are likely to use all your resources on new opportunities , leaving the existing ones in place.

It’s incredibly important to make sure your customers are satisfied with the ones you already have, and also expanding those who are your customers.

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

Make sure you take the time to complete this. I’ve seen thousands of businesses in the past who went bankrupt by doing something wrong… and that includes the largest, most sophisticated ones.

This is the problem of being a small-scale company owner, he states. You’re faced with similar problems similar to big corporations, but with less resources to react to and learn from your mistakes, so it’s important to be aware.

Changes in the business or decision to invest in business is very risky. However, there are some excellent risks and make very smart decisions, earn your cash and make it successful… when you’re prepared.

Seizing opportunities

Diversification became an imperative for some businesses like a gelato producer that operates predominantly as a wholesaler of eateries and vendors of gelato. But by 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 from overseas"

Then one of their biggest clients, whose business depended heavily on tourists from overseas had stopped taking orders.

At this point they were one week in lockdown and realized that they required a diversification strategy for them to make it through.

"I started to look around for other businesses we could acquire that could complement the work we’re doing"

"I found another company which was actually supplying supermarkets. I began to work on purchasing the majority of the business on lockdown and ended up buying 50% of the business."

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

"Their manufacturing was done by an unrelated contractor. Therefore, by buying it, we’ve purchased their manufacturing contract"

"If we are forced to go through another lockdown or something happens and something happens, we’ll have the supermarket side of the company that will continue."

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

It can feel like a do-or-die scenario. However, jumping into the wrong things could harm you over the long term.

"Part of the issue is that when people are in trouble, they take the wrong decisions. Especially now with the impacts of COVID-19," he states. "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, it’s time to get some help. Take the phone and speak to someone. There are a lot of smart people who are able to help, so don’t do it all yourself."