How to diversify your business

A lot of successful businesses have multiple sources of income. The benefits of diversification were fully and firmly substantiated due to the recent pandemic shutdowns. Now as a lot of business owners are beginning to emerge from the COVID-19 blockade, questions around futureproofing are being asked. How can you ensure your business to be successful once borders are closed? Does your previous offering 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 diversification of your business.

Why diversify?

This is something experts have observed play out in the first quarter of the year known as 2020.

Diversification in your business is a strategic way to lower your risk while operating within an unpredictable economy. It is a way to have a back-up plan should things go wrong.

Diversification helps you protect yourself not only from unexpected shocks such as COVID-19, but also from the more common problems that arise the emergence of new competitors.

There are plenty of diversification opportunities on the market, however there’s plenty to think about prior to diving with both feet.

We’re not going to suggest that you take a risk and do something crazy – like invest lots of money on something you’re just not familiar with. However, if they think about their current work environment and their expertise, there are always peripherals which they’re not necessarily, which are huge opportunities for them since it’s still their home.

Getting started

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

Know where you’re heading and who your competitors are especially if you’re entering into a new market.

If, for instance, you’re a manufacturer of machinery specifically for use in food processing, a good source could be for consumables. In a healthy economic environment, the machinery will be selling however, in a not so good economy, like right now, people are still buying the consumables.

If you don’t have the expertise of the market that you’re trying enter, it’s just like driving down the highway while wearing a blindfold on.

It’s best to remain with the things you are familiar with particularly if this is your first time trying your toes into the diversification pool.

If you’re considering diversifying into a field that’s not within your capabilities or your knowledge in business is a must, so you should take the time to find someone who has that know-how. There are many things , but not so great at others. So, hire people with the skills and knowledge you need. If you don’t have it then you’re just increasing the risk.

Risks to consider

Diversifying your business involves a broader focus.

Your goal is to please your customers and increase 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 carefulyou’ll could end up spending all of your manpower on the new opportunities , and leaving those you’re currently working on.

It’s vital to make sure you’re satisfied with the customers you already have, and also expanding your customer base.

Make sure you don’t chew more than you can chew.

Take your time to accomplish this. I’ve observed a multitude of businesses in the past who went broke by doing something wrong… and that includes the biggest, most intelligent ones.

That’s the difficulty of being a small company owner, he states. You have many of the same challenges similar to big corporations, however, you have less money to respond to and recover from your mistakes. Therefore, you must be cautious.

Any change in your business or business venture is an investment that is risky, however it is possible to take risk-free opportunities and make truly smart choices, and earn your money and have a great time… if you’re prepared.

Exploiting opportunities

Diversification became an imperative for some business such as the gelato maker who works primarily as a wholesaler to restaurants and gelato sellers. However, by February of this year, it was beginning to notice problems appearing that were looming.

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

However, one of their biggest clients, whose business depended heavily on overseas tourists had stopped taking orders.

At this point, they were one week into lockdown when they realized that they required a diversification strategy for them to be able to get through.

"I started looking around for any other businesses that we could invest in that might complement what we are doing"

"I found another business that was actually supplying to supermarkets. I started working on buying the majority of the business on lockdown, and eventually bought 50% of the business."

This move did more than bring in a new client base, but also enabled them to start a new business.

"Their manufacturing was handled by an outside contractor. Therefore, by 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 supermarket aspect of the company that will continue."

It was the perfect way for a business to take a chance to build on an advantage the company already had.

It can feel like a do-or-die scenario. However, jumping into the wrong things could harm you in the long run.

"Part of the issue is that when people find themselves into trouble they take poor decisions. Especially now with the impacts of COVID-19," the expert states. "So I would suggest to get some non-emotional advice from someone who isn’t tied to your business.

"If you’re experiencing emotional distress or financially, and the stress is piling up, you should get help. Get on the phone and speak to someone. There are lots of clever individuals who can help, so don’t do the whole thing by yourself."