How to diversify your business

Many great businesses have multiple income streams, and the benefits of diversification were really emphasized by the recent pandemic shutdowns. Now when many business owners begin to re-emerge from the COVID-19 blockade, questions around futureproofing are being addressed. How can you get your business back on track when boundaries are shut? Does your existing product work in the ‘new normal‘? Most importantly, how can you be ready should we be forced to go into lockdown once more? The answer might lie in business diversification.

Why should you diversify?

Experts have witnessed unfold in the first quarter of the strange year that was 2020.

Diversification of your business is a strategic way to lower your risk while working in an unstable economy. It’s a sign that you have a back-up plan should anything go wrong.

Diversification can protect you not only from shocks that aren’t anticipated, such as COVID-19 as well as from problems you are familiar with, such as when new competitors crop up.

There are plenty of diversification options available, but there’s plenty to think about prior to diving the deep end.

We’re not going to suggest that you go out and do anything crazy, like spending massive amounts of money in something you’re not familiar with. If people consider their current industry and know-how - there’s always a plethora of peripherals that they’re not necessarily in, which are huge opportunities for them, since it’s still within their comfort zone.

Getting started

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

Know where you’re going and who your competition is particularly if you’re moving into a brand new market.

If, for instance, you’re producing equipment that is used for food production, a safe source could be for consumables. In a strong economic environment, the machinery will be selling however in a not very good economic situation, such as currently, consumers are still buying the consumables.

If you’re not equipped with understanding of the market you’re trying to enter then you’re like driving down the highway with your blindfold on.

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

If you’re considering diversifying into a market that’s outside your capabilities or your knowledge in business and you’re looking for someone who can help, be smart about getting someone who has that knowledge. We’re all adept at certain things and not so good at other things. So, make sure you hire employees who have the expertise and experience you need. If you don’t have it then you’re adding to the risk.

The risks to be considered

Diversifying your business involves a broader focus.

The goal is to please your customers and increase your customer base. Therefore, the problem you face when you diversify your business is that you’re putting in staff to develop your new product. If you’re not carefulyou’ll will end up spending all your staff on the new possibilities and leaving the old ones behind.

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

Make sure you don’t chew more than you’re able to chew.

Make sure you take the time to complete this. I’ve witnessed a lot of companies in the past who went bankrupt by doing something wrong… including the biggest, most intelligent ones.

This is the problem of being a small business owner, he adds. You’re faced with many of the same challenges similar to big corporations, but with less resources to react to and correct your mistakes, therefore it’s important to be aware.

Any business change or any business venture is very risky. However, there are some great risks and make truly smart choices, and earn you a significant amount of money and succeed… when you’re prepared.

Scooping up opportunity

Diversification became an imperative in some industries, like a gelato manufacturer who operates predominantly as a wholesaler of eateries and vendors of gelato. However, in February of this year, it was beginning to see problems ahead.

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

But then one of their main customers, whose company relied heavily on foreign tourists and tourists, stopped accepting orders.

At this point they were one week into lockdown and realised they needed to have a plan of diversification if they were going to be able to get through.

"I started to look around for other companies we could acquire that could be in a similar way to what we are doing"

"I discovered a different business which was actually supplying supermarkets. I began looking into buying part of that business over lockdown. I ended up purchasing 50% of the company."

The move didn’t only open up a new customer base, but also enabled them to enter into new business.

"Their manufacturing was carried out by a third-party contractor. By buying it, we’ve actually bought their manufacturing contract"

"If we get into another lockdown, or something happens that’s not the end of the story, but we’ve got the grocery side of the business which will continue."

It was an excellent example of a business taking a chance to build on an advantage the company already had.

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

"Part of the issue is that when people get in trouble, they make the wrong decisions. Particularly with the current effects of COVID-19" he states. "So my suggestion is to seek out non-emotional guidance from someone who isn’t connected to your company.

"If you’re struggling emotionally or financially, and the stress is piling up, it’s time to find some assistance. Pick up the phone and speak to someone. There are many smart people who are able to help, so don’t do it all by yourself."