How to diversify your business

Many strong businesses have diverse sources of income. The benefits of diversification were really emphasized by the recent pandemic shutdowns. Now when many entrepreneurs begin to emerge from the COVID-19 lockdown questions about futureproofing are discussed. How do you make sure your business to be successful once boundaries are shut? Do your current offerings make sense in the ‘new normal‘? Most importantly, how can you be prepared should we have to go back into lockdown again? The answer may lie in diversification of your business.

Why diversify?

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

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

Diversification safeguards you not only from unexpected shocks such as COVID-19 however, it also protects you from more familiar problems like when new competitors crop up.

There are plenty of diversification opportunities out there but says there’s plenty to keep in mind before you decide to dive fully.

We’re not suggesting to anyone to undertake anything crazy, like spending large sums of money in something that you’re not comfortable with. If people consider their current industry and experience, they will find that there are always peripherals around which they’re not necessarily, which are huge opportunities for them, since it’s still their home.

Getting started

Before starting your diversification journey it’s crucial to complete your homework.

Be aware of where you’re headed and know who your competitors are especially if you’re going into a market that isn’t yet established.

In this case, if you’re producing machinery specifically for use in food processing, a secure source could be for consumables. In a prosperous economy, machinery is selling, but in a not very good economic situation, such as today, people are still buying the consumables.

If you’re not equipped with the knowledge of the market you’re trying to get into, it’s just like driving down the highway while wearing a blindfold on.

It is recommended to remain with the things you are familiar with particularly if this is your first time dipping your toe in the pool of diversification.

If you’re planning to diversify into a market that’s outside your business expertise or skills and you’re looking for someone who can help, make sure you find someone who does have that expertise. We’re all good at some aspects, but not great at other things. Therefore, it is important to hire individuals with the knowledge and skills that you require. If you’re not able to do that then you’re adding to the risk.

Risks to consider

Diversifying your business also involves a broader focus.

Your goal is to please the customer and increase your customer base. So, the issue when you diversify your company is that you’re spending manpower on your new offering. If you’re not careful, you are likely to use all your effort on the new opportunities , leaving the existing ones in place.

It’s crucial to ensure your business is satisfying the customers that you already have while growing those who are your customers.

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

Be smart about taking your time to do this. I’ve seen countless businesses over the years that have gone broke because they did something wrong… even the most reputable, well-known ones.

That’s the difficulty of being a small business owner, he says. You face many of the same issues that big companies face, but you’re not able to have the resources to respond to and correct your mistakes, so you must be cautious.

Any business change or any business venture is not without risk, but there are some risk-free opportunities and make really smart moves, make yourself a lot of money and be successful… when you’re prepared.

Exploiting opportunities

Diversification was a must for certain businesses, such as one that makes gelato, which operates principally as a wholesaler to restaurants and sellers of gelato. But by February of this year, it was beginning to notice issues appearing ahead.

"I didn’t really think that it would affect us in any way, based on the news coming from outside the United States"

Then one of their biggest clients, whose business depended heavily on tourists from overseas and tourists, stopped accepting orders.

At this point they were one week in lockdown and realized that they required a diversification strategy in order to survive.

"I began looking for other companies we could purchase that would be a good match to the work we’re doing"

"I discovered another company that was actually providing to supermarkets. I began looking into buying part of the company during lockdown. In the end, I bought 50percent of the business."

This move didn’t just bring in a new client base; it also allowed them to enter into new business.

"Their manufacturing was done by a third-party contractor. Therefore, by buying it, we’ve bought their manufacturing contract"

"If we get into another lockdown or something happens, then we’ve still got the supermarket aspect of the business that will continue."

It was an excellent illustration of a company taking an opportunity to capitalize on an advantage the company already had.

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

"Part of the problem is that when people find themselves caught in trouble, they make the wrong decisions. Particularly now, with the effects of COVID-19" he says. "So my advice is to seek out non-emotional guidance from someone who isn’t connected to your company.

"If you’re struggling emotionally or financially and your stress is building up, then get help. Pick up the phone and talk to someone. There are plenty of intelligent individuals who can assist you, so don’t attempt to do it all yourself."