How to diversify your business

Many strong businesses have diverse income streams, and the advantages of diversification have been fully and firmly substantiated by the recent pandemic shutdowns. Now when many business owners are beginning to emerge from the COVID-19 lockdown concerns about futureproofing are being asked. How can you ensure your business thriving again when borders are closed? Does your existing product work 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? The answer may lie in diversification of business.

Why should you diversify?

This is something experts have observed unfolding over the first half of the unusual year that was 2020.

Diversification of business operations is a method to reduce your risk when operating in an unpredictable economic environment. This means that you are prepared should something go wrong.

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

There are plenty of diversification options to choose from, but plenty to keep in mind before diving in the deep end.

We’re not suggesting to anyone to take a risk and do something outrageous, like investing lots of money on something that you’re not comfortable with. However, if they think about their current work environment and expertise - there’s always a plethora of peripherals that they’re not obligated to be in that could be huge opportunities for them since it’s still within their comfort zone.

Getting started

Before you embark on your journey to diversify, it is essential to complete the research.

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

If, for instance, you’re a manufacturer of machinery that is used for food production, the best source could be for consumables. In a good economic environment, the machinery will be selling, but in a not too good one, like today, people are still purchasing the consumables.

If you’re not equipped with the expertise of the market that you’re trying to get into, you’re like driving down the road with a blindfold on.

It’s best to stay with what you’re familiar with particularly if this is the first time you’ve dipped your toes into the pool of diversification.

If you’re seeking to diversify into a new market that’s beyond your business expertise or skills is a must, so you should take the time to find someone who has that expertise. Everyone is good at certain aspects, but not great at others. So, make sure you hire employees who have the experience and expertise you require. If you don’t have it, you’re just adding to the risk.

The risks to be considered

Diversifying your business also involves diversifying your focus.

Your goal is to please your client and expand your client base. The problem when you expand your company is that you’re spending staff to develop your new product. If you’re not careful, you will end up spending all your manpower on the new opportunities , leaving the old ones behind.

It’s vital to make sure you’re satisfied with the customers you already have while growing those who are your customers.

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

Be smart about taking your time to complete this. I’ve observed a multitude of businesses in the past who went broken because of doing the wrong thing… all the way to the biggest, most intelligent ones.

That’s one of the challenges of being a small-scale business owner, he adds. There are many of the same issues as the big corporations but less funds to react to and repair your mistakes, so you must be cautious.

Any change in business or any decision to invest in business is very risky. However, there are some great risks and make very smart decisions, earn yourself a lot of money and be successful… when you’re smart about it.

Exploiting opportunities

Diversification was a must for some business such as a gelato producer that operates predominantly as a wholesaler of eateries and vendors of gelato. But by February of this year, had begun to notice problems appearing on the horizon.

"I wasn’t sure it would affect us too much, seeing the news from overseas"

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

At this stage the group was one week into lockdown and realised they needed to have a plan of diversification for them to survive.

"I started to look around for any other businesses that we could invest in that might be a good match to what we are doing"

"I found another business which was actually supplying supermarkets. I started working on buying the majority of the business on lockdown, and eventually bought half of the business."

The move didn’t only create a new customer base, but also enabled them to take on new business.

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

"If we enter 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 illustration of a company taking a chance to build on an advantage 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 find themselves into trouble they make the wrong decisions. Particularly now, with the effects of COVID-19," He says. "So my advice is to seek advice that isn’t emotional from someone who’s not connected to your company.

"If you’re experiencing emotional distress or financially and the stress is piling up, you should seek help. Pick up the phone and talk to someone. There are plenty of intelligent people who are able to assist you, so don’t attempt to do the whole thing by yourself."