How to diversify your business

Many strong businesses have diverse income streams, and the benefits of diversification were well and truly reinforced due to the recent pandemic shutdowns. Now, as many business owners start to reappearing from the COVID-19 lockdown, concerns about futureproofing are being addressed. How can you ensure your business back on track when the borders are closed? Do your current offerings work in the ‘new normal? Perhaps, most importantly is how do you get prepared should we have to go back into lockdown again? The answer may lie in business diversification.

Why should you diversify?

Experts have witnessed unfold over the first half of this unusual year of 2020.

Business diversification, is a method to minimize your risk when working in an uncertain economy. This means that you have a backup plan should an event occur.

Diversification protects you not just from unanticipated shocks , like COVID-19 however, it also protects you from the more common problems that arise when competitors come along.

There are many diversification opportunities on the market, however there’s plenty to keep in mind before diving in headfirst.

We’re not going to suggest to undertake something outrageous, like investing massive amounts of money in something you’re not comfortable with. But if you think about their current business space and know-how - there are always other areas that they’re probably not in, which are huge opportunities for them because they’re still their home.

Getting started

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

Know where you’re going and who your competitors are especially if you’re entering into a market that isn’t yet established.

In this case, if you’re producing equipment that is used for food production, a good source could be for consumables. In a prosperous economy, the machinery is selling and is in high demand, however in a less very good economic situation, such as currently, consumers are still buying the consumables.

When you’re lacking the knowledge of the market you’re attempting to enter, it’s like driving on the highway with a blindfold on.

It is recommended to stay with what you’ve learned particularly if it’s your first time to dip your toes into the pool of diversification.

If you’re looking to diversify into a market that isn’t within your business expertise or skills it’s best to take the time to find someone who does have that experience. There are many things , but not so great in other areas. Therefore, you should hire employees with the knowledge and skills that you need. If you don’t have that, you’re just adding to the risk.

Risks to consider

Diversifying your business also means diversifying your attention.

Your objective is to satisfy the customer and increase your client base. This means that the issue you face when you expand your business is that you’re using manpower on your new offering. If you’re not cautious, you’ll could end up spending all of your effort on the new possibilities and leaving the existing ones in place.

It’s essential to ensure that you’re satisfied with the customers you already have while growing your customer base.

Be careful not to chew more than you’re able to chew.

Make sure you take the time to do this. I’ve seen thousands of businesses over the years who go broke by doing the wrong thing… including the largest, most sophisticated ones.

That’s the difficulty of being a small business owner, he says. There are similar problems as the big corporations but less funds to react to and recover from your mistakes, which is why it’s important to be aware.

Changes in the business or any investment in business is not without risk, but you can take some risk-free opportunities and make really smart moves, make yourself a lot of money and succeed… if you’re smart about it.

Exploiting opportunities

Diversification was an essential requirement for some businesses like one that makes gelato, which operates mostly as a wholesaler for restaurants and sellers of gelato. However, by February of this year, had begun to notice issues appearing that were looming.

"I did not think it was going to affect us in any way, based on the news coming from abroad"

But then one of their biggest customers, whose business relied heavily on overseas tourists was unable to fulfill orders.

At this stage, 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 looking around to see if there were any other businesses we could acquire that could complement our current business"

"I discovered another company that was actually providing to supermarkets. I began to work on purchasing the majority of the business on lockdown. I ended up purchasing 50% of the company."

That move didn’t just open up a new customer base; it also allowed them to enter into new business.

"Their manufacturing was performed by an unrelated contractor. So, by us buying it, we’ve purchased 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 retail side of the business which will continue."

It was the perfect instance of a business taking the chance to improve an advantage it already had.

It can feel like a do-or-die scenario. But rushing into things could be detrimental over the long term.

"Part of the issue is that, when people get in trouble, they take poor decisions. Particularly, now with the impact of COVID-19," He declares. "So, my advice is to seek non-emotional advice from someone who isn’t associated with your business.

"If you’re experiencing emotional distress or financially and you’re feeling stressed and piled up, then find some assistance. Pick up the phone and speak to someone. There are many smart individuals who can assist, so don’t try to do it all by yourself."