How to diversify your business

Many successful companies have numerous sources of income. The benefits of diversification were fully and firmly substantiated due to the recent pandemic shutdowns. Now, as many business owners are beginning to emerge from the COVID-19 lockdown, concerns regarding futureproofing are asked. How can you ensure your business back on track when borders are closed? Do your current offerings make sense in the ‘new normal‘? Most importantly what can you do to be prepared in the event that we are forced to enter lockdown once more? It could be in business diversification.

Why diversify?

Experts have witnessed unfold in the first quarter of the strange year known as 2020.

Diversification of your business is a strategic way to minimize your risk when operating within an unpredictable economy. It means you have a backup plan in case anything go wrong.

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

There are plenty of diversification opportunities on the market, however there’s plenty to consider before diving in fully.

We don’t suggest to anybody that you take a risk and do anything crazy, like spending lots of money on something you’re not familiar with. But if you think about their current business environment and know-how - there are always other areas that they’re not necessarily in that could be huge opportunities for them since it’s 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 particularly if you’re moving into a market that isn’t yet established.

If, for instance, you’re producing machinery to be used in the industry of food, a safe source could be consumables. In a good economic environment, the machinery will be selling however, in a not very good economic situation, such as the present, people still buy the consumables.

When you’re lacking experience of the market you’re trying enter, it’s like driving on the highway with your blindfold on.

It’s suggested to stay with what you’re familiar with particularly if it’s your first time trying your toe into the pool of diversification.

If you’re considering diversifying into a field that’s not within your business expertise or skills and you’re looking for someone who can help, be smart about getting someone who has that knowledge. There are many things and not so good in other areas. Therefore, it is important to hire individuals with the experience and expertise you require. If you’re not able to do that then you’re adding to the risk.

The risks to be considered

Diversifying your business also requires diversifying your focus.

Your aim is to satisfy your customers and increase your base of clients. The problem when diversifying your company is that you’re spending staff to develop your new product. If you’re not careful, you’ll could end up spending all of your effort on the new opportunities , leaving the old ones behind.

It’s crucial to ensure that you’re satisfied with the customers you already have, while also growing the number of customers you have.

Be careful not to chew more than you are able to chew.

Make sure you take the time to accomplish this. I’ve observed a multitude of businesses over the years that have gone bankrupt by doing an unwise thing… and that includes the largest, most sophisticated ones.

That’s the challenge of being a small-scale company owner, he states. You’re faced with many of the same challenges like big companies, but with less resources to react to and learn from your mistakes, which is why you need to be careful.

Any business change or any investment in business comes with not without risk, but it is possible to take good risks and make some extremely smart decisions, earning yourself a lot of money and have a great time… when you’re smart about it.

Scooping up opportunity

Diversification became an imperative in some industries, like a gelato manufacturer who operates primarily as a wholesaler to restaurants and sellers of gelato. But by February of this year, they began to notice problems appearing in the near future.

"I did not think that it would affect us too much, seeing the news from outside the United States"

But then one of their largest customers, whose business relied heavily on tourists from overseas, stopped making orders.

At this stage, they were one week in lockdown and realized that they required a diversification strategy for them to survive.

"I began looking to see if there were any other businesses we could buy that might complement our current business"

"I discovered a different business that was actually supplying to supermarkets. I began to work on purchasing part of that business over lockdown and ended up buying 50percent of the business."

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

"Their manufacturing was performed by an unrelated contractor. Thus, by purchasing it, we’ve purchased the manufacturing contract"

"If we enter another lockdown or something else happens, then we’ve still got the retail side of the company that will carry on."

It was the perfect illustration of a company taking an opportunity to grow on its strengths that it already had.

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

"Part of the problem is that, when people get in trouble, they take the wrong choices. Particularly now, with the effects of COVID-19" he states. "So I would suggest to seek non-emotional advice from someone who’s not associated with your business.

"If you’re experiencing emotional distress or financially and stress is piling up, it’s time to find some assistance. Pick up the phone and speak to someone. There are plenty of intelligent individuals who can assist, so don’t try to do it all by yourself."