How to diversify your business

A lot of successful businesses have multiple income streams, and the benefits of diversification have been well and truly reinforced by the recent pandemic shutdowns. Now as a lot of business owners start to reappearing from the COVID-19 lockdown, concerns about futureproofing are being asked. How do you make sure your business thriving again when the borders are closed? Does your previous offering work in the ‘new normal‘? Perhaps, most importantly how can you be prepared in the event that we are forced to enter lockdown again? The answer might lie in diversification of your business.

Why diversify?

This is something experts have witnessed unfold over the first half of this unusual year that was 2020.

Diversification of your business is a way to reduce your risk when operating within an unpredictable economy. It means you have a backup plan should an event occur.

Diversification protects you not just from unanticipated shocks , like COVID-19, but also from common issues like when competitors come along.

There are plenty of diversification options to choose from, but plenty to be aware of before deciding to dive in fully.

We’re not going to suggest to embark on a journey to do something crazy – like invest huge sums of money into something that you’re not familiar with. But if you think about their current work environment and experience, they will find that there are always peripherals which they’re not necessarily and that offer huge potential for them, because it’s still in their comfort space.

Getting started

Before you embark on your journey to diversify, it’s essential to do your homework.

Know where you’re going and know who your competitors are especially if you’re going into a new area.

For instance, if you’re a manufacturer of machinery for the food industry, then a safe place to go to might be consumables. In a good economy, the machinery is selling however in a not very good economic situation, such as right now, people are still purchasing the consumables.

When you’re lacking knowledge of the market you’re trying to enter then you’re like driving down the road with a blindfold on.

It’s suggested to stay with what you’ve learned particularly if it’s your first time dipping your toe into the pool of diversification.

If you’re considering diversifying into a market that’s outside your capabilities or your knowledge in business it’s best to take the time to find someone who does have that experience. We’re all adept at certain things but not as good at others. So, make sure you hire employees who have the experience and expertise you need. If you don’t have that you’re only increasing the risk.

Risks to consider

Diversifying your business involves diversifying your focus.

Your goal is to please your customer and grow the number of customers you serve. This means that the issue you face with diversifying your company is that you’re using the resources of your current offering. If you’re not careful, you’ll end up using all your manpower on the new opportunities , and leaving the old ones behind.

It’s essential to ensure your customers are satisfied with the ones you already have, while also growing the number of customers you have.

Do not chew more than you’re able to chew.

Be aware of taking the time to accomplish this. I’ve seen countless businesses throughout the years that go broke by doing things wrong… and that includes the big, smart ones.

That’s the difficulty of being a small company owner, he states. You face many of the same issues that big companies face, but with less resources to react to and repair your mistakes, so you need to be careful.

Changes in the business or any investment in business is very risky. However, it is possible to take risk-free opportunities and make really smart moves, make yourself a lot of money and have a great time… If you’re prepared.

Seizing opportunities

Diversification became an imperative for some business such as one that makes gelato, which operates predominantly as a wholesaler of restaurants and sellers of gelato. However, by February of this year, they began to see problems in the near future.

"I did not really believe it would affect us much, but I did see the news coming from abroad"

Then one of their major customers, whose business relied heavily on foreign tourists, stopped making orders.

At this point, they were one week into lockdown and realised they needed a diversification plan if they were going to make it through.

"I started to look around for other businesses we could purchase that would be complementary to what we are doing"

"I discovered a different business that was actually providing to supermarkets. I began looking into buying part of the company during lockdown and ended up buying 50percent of the business."

The move didn’t only bring in a new client base; it also allowed them to start a new business.

"Their manufacturing was performed by a third-party contractor. By buying it, we’ve bought the manufacturing contract"

"If we are forced to go through another lockdown, or something happens it’s still the grocery side of the business to continue to operate."

It was the perfect way for a business to take an opportunity to grow on a strength they already have.

It can feel like a do-or-die scenario. But rushing into things could hurt you in the end.

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

"If you’re experiencing emotional distress or financially and stress is piling up, then get some help. Get on the phone and speak to someone. There are plenty of intelligent people around who could assist you, so don’t attempt to do it all yourself."