How to diversify your business

Many strong businesses have diverse income streams, and the benefits of diversification have been amply emphasized by the recent pandemic shutdowns. Now as a lot of business owners start to reappearing from the COVID-19 lockdown, questions around futureproofing are being discussed. How can you ensure your business to be successful once the borders are closed? Does your old offering still work in the ‘new normal? And, maybe most importantly how can you be prepared in the event that we are forced to enter lockdown once more? The answer might lie in business diversification.

Why diversify?

This is something experts have seen play out during the first half of this unusual year that was 2020.

Diversification of your business is a method to decrease your risk when working in an unstable economy. It’s a sign that you have a back-up plan should an event occur.

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

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

We don’t suggest to anybody that you embark on a journey to do anything crazy, like spending huge sums of money into something you are just not comfortable with. However, if they think about their current industry 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 they’re still their home.

Getting started

Before beginning your journey into diversification, it is essential to complete your homework.

Know where you’re heading and who your rivals are particularly if you’re moving into a market that isn’t yet established.

As an example, if you’re producing equipment to be used in the industry of food, a good source could be for consumables. In a healthy economy, machinery is selling however, in a not too good one, like today, people are buying 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 highway while wearing a blindfold on.

It is recommended to stay with what you’re familiar with, especially if this is your first time dipping your toe in the diversification pool.

If you’re seeking to diversify into a field that’s not within your capabilities or your knowledge in business it’s best to take the time to find someone with the knowledge. We’re all adept at certain things and not so good in other areas. So, hire people with the experience and expertise you require. If you don’t have that you’re only increasing the risk.

There are risks to take into consideration

Diversifying your business also involves a broader focus.

Your goal is to please your client and expand your customer base. So, the issue when you diversify your business is that you’re putting in manpower on your new offering. If you’re not careful, you’ll end up using all your manpower on the new opportunities , and leaving those you’re currently working on.

It’s incredibly important to make sure your business is satisfying the customers that you already have while growing those who are your customers.

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

Be aware of taking the time to complete this. I’ve seen countless businesses throughout the years that go broke by doing the wrong thing… even the largest, most sophisticated ones.

This is the problem of being a small business owner, says the owner. You have similar problems as the big corporations but with less resources to react to and repair your mistakes. Therefore, you have to be extra cautious.

Any change in your business or decision to invest in business is not without risk, but there are some excellent risks and make very smart decisions, earn your cash and make it successful… If you’re smart about it.

Exploiting opportunities

Diversification was a must for certain businesses, such as one that makes gelato, which operates primarily as a wholesaler to Gelato vendors and restaurants. However, in February of this year, had begun to notice problems appearing that were looming.

"I didn’t really think it was going to affect us too much, seeing the news from overseas"

However, they noticed that one of their major customers, whose business relied heavily on tourists from abroad, stopped making orders.

At this point, they were one week in lockdown and realized they required a plan for diversification if they were going to be able to get through.

"I began looking to see if there were any other businesses we could buy that might be in a similar way to our current business"

"I found another company which was actually supplying supermarkets. I began looking into buying the business during lockdown and ended up buying 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 done by an unrelated contractor. So, by us buying it, we’ve purchased the manufacturing contract"

"If we enter another lockdown, or something goes wrong that’s not the end of the story, but we’ve got the supermarket side of the business to continue to operate."

It was an excellent instance of a business taking the chance to improve its strengths that it already had.

It can feel like a do-or-die scenario. However, jumping into the wrong things could cause harm in the long run.

"Part of the problem is that when people get out of the woods, they take the wrong choices. Particularly with the current effects of COVID-19" the expert says. "So, my advice is to seek non-emotional advice from someone who’s not tied to your business.

"If you’re struggling emotionally or financially, and stress is piling up, then go and seek help. Take the phone and speak to someone. There are lots of clever individuals who can help, so don’t do it all by yourself."