How to diversify your business

Many great businesses have multiple sources of income, and the benefits of diversification were well and truly reinforced through the recent epidemic shutdowns. Now as many business owners start to reappearing from the COVID-19 lockdown concerns regarding futureproofing are asked. How can you get your business to be successful once boundaries are shut? Does your old offering still make sense in the ‘new normal‘? And, maybe most importantly, how can you be ready should we be forced to go into lockdown again? The answer might lie in diversification for business.

Why should you diversify?

This is something experts have observed unfolding during the first half of the strange year known as 2020.

Diversification in your business is a way to minimize your risk when working in an unstable economy. This means that you have a backup plan should an event occur.

Diversification helps you protect yourself not only from shocks that aren’t anticipated, such as COVID-19 however, it also protects you from common issues like when new competitors appear.

There are many diversification opportunities available, but there’s plenty to be aware of before diving in with both feet.

We wouldn’t advise anyone that you take a risk and do something insane, such as investing massive amounts of money in something you’re just not comfortable with. But if people think about their current business environment and know-how - there’s always a plethora of peripherals that they’re not necessarily in that could be huge opportunities for them because they’re still their home.

Getting started

Before you embark on your journey to diversify, it’s crucial to complete your homework.

Be aware of where you’re headed and who your rivals are especially if you’re entering into a brand new market.

As an example, if you’re a manufacturer of machinery that is used for food production, a secure location to look for could be for consumables. In a healthy economic environment, the machinery will be selling and is in high demand, however in a less too good one, like currently, consumers are still buying the consumables.

In the event that you do not have experience of the market you’re attempting to enter, it’s just like driving down the highway with a blindfold on.

It’s best to stay with what you’ve learned particularly if it’s your first time to dip your toe in the diversification pool.

If you’re seeking to diversify into a market that isn’t within your business expertise or skills, then you need to consider hiring someone with the knowledge. There are many things but not as good at other things. Therefore, you should hire employees with the knowledge and skills that you require. If you don’t have it then you’re adding to the risk.

The risks to be considered

Diversifying your business also involves a broader focus.

Your objective is to satisfy your customers and increase your base of clients. This means that the issue you face with diversifying your company is that you’re spending staff to develop your new product. If you’re not careful, you’ll will end up spending all your manpower on the new opportunities , leaving the existing ones in place.

It’s incredibly important to make sure you’re satisfied with the customers you already have, and also expanding those who are your customers.

Make sure you don’t chew more than you’re chewing.

Take your time to accomplish this. I’ve observed a multitude of businesses in the past who went broke by doing things wrong… all the way to the largest, most sophisticated ones.

That’s the challenge of being a small-scale business owner, he says. You face similar problems like big companies, but less funds to react to and recover from your mistakes, so you have to be extra cautious.

Any business change or decision to invest in business is very risky. However, you can get some really risk-free opportunities and make extremely smart decisions, earning your own money and have a great time… when you’re smart about it.

Seizing opportunities

Diversification became a necessity in some industries, like the gelato maker who works predominantly as a wholesaler of restaurants and gelato sellers. But by February of this year, the company was beginning to notice issues appearing that were looming.

"I didn’t really think it was going to affect us that much, after seeing the news from overseas"

Then one of their major customers, whose company relied heavily on foreign tourists had stopped taking orders.

At this stage, they were one week into lockdown and realised that they required a diversification strategy if they were going to be able to get through.

"I started to look around for other companies we could invest in that might be complementary to what we do"

"I found another company that was actually supplying to supermarkets. I began working on buying the majority of the business on lockdown, and eventually bought half of the business."

This move did more than provide a new customer base; it also allowed the company to expand their business.

"Their manufacturing was carried out by a third-party contractor. Thus, by purchasing it, we’ve actually purchased the manufacturing contract"

"If we enter another lockdown, or something goes wrong it’s still the supermarket side of the business to continue."

It was an excellent instance of a business taking an opportunity to grow on a strength the company already had.

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

"Part of the issue is that when people find themselves in trouble, they make the wrong choices. Particularly, now with the impact of COVID-19," he says. "So my suggestion is to seek advice that isn’t emotional 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, it’s time to find some assistance. Get on the phone and speak to someone. There are many smart people around who could aid, so don’t take on it all by yourself."