How to diversify your business

Many strong businesses have diverse sources of income. The advantages of diversification have been really emphasized by the recent pandemic shutdowns. Now when many entrepreneurs begin to emerge from the COVID-19 lockdown, questions around futureproofing are being addressed. How can you ensure your business back on track when borders are closed? Do your current offerings make sense in the ‘new normal‘? Most importantly is how do you get ready should we be forced to go into lockdown again? The answer might lie in diversification of business.

Why diversify?

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

Diversification of business operations is a smart way to decrease your risk when working in an unstable economy. It’s a sign that you have a backup plan should an event occur.

Diversification can protect you not only from shocks that aren’t anticipated, such as COVID-19 however, it also protects you from the more common problems that arise the emergence of new competitors.

There are plenty of diversification options available, but there’s plenty to think about before you decide to dive with both feet.

We’re not suggesting to anyone that you embark on a journey to do anything crazy, like spending large sums of money in something that you’re not familiar with. If people consider their current industry and their expertise, there are always peripherals around that they’re not necessarily in that could be huge opportunities for them, since it’s still within their comfort zone.

Getting started

Before embarking on your diversification journey, it’s crucial to complete your homework.

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

As an example, if you’re producing machinery that is used for food production, a secure source could be for consumables. In a prosperous economy, machinery is selling, but in a not too good one, like currently, consumers are still buying the consumables.

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

It’s best to stick with what you know particularly if this is the first time you’ve dipped your toe into the diversification pool.

If you’re seeking to diversify into a market that isn’t within your business expertise or skills is a must, so you should consider hiring someone who does have that knowledge. We’re all good at some things , but not so great at other things. Therefore, you should hire employees with the expertise and experience you need. If you don’t have that then you’re just increasing the risk.

There are risks to take into consideration

Diversifying your business also involves diversifying your focus.

Your aim is to satisfy the customer and increase your customer base. So, the issue with diversifying your company is that you’re using people to create your new service. If you’re not cautious, you’ll could end up spending all of your resources on new opportunities , leaving the existing ones in place.

It’s vital to ensure your business is satisfying the customers that you already have, while also growing your customer base.

Don’t bite off more than you can chew.

Be aware of taking the time to do this. I’ve seen thousands of businesses throughout the years that go broken because of doing things wrong… even the big, smart ones.

That’s the challenge of being a small-scale business owner, he says. There are many of the same problems that big companies face, but with less resources to react to and learn from your mistakes, which is why you need to be careful.

Changes in the business or investment in business is not without risk, but you can get some really great risks and make really smart moves, make your own money and have a great time… provided you’re prepared.

Finding opportunities

Diversification was a must for certain businesses, such as the gelato maker who works principally as a wholesaler to Gelato vendors and restaurants. However, by February this year, the company was beginning to notice problems appearing on the horizon.

"I did not really believe that it would affect us in any way, based on the news from overseas"

Then one of their major clients, whose business relied heavily on tourists from overseas had stopped taking orders.

At this stage they were a week into lockdown , and they realized they needed a diversification plan if they were going to be able to get through.

"I started to look around for other companies we could buy that might be complementary to the work we’re doing"

"I found another company that actually supplied supermarkets. I started working on buying the business during lockdown. In the end, I bought 50percent of the business."

This move did more than bring in a new client base; it also allowed the company to expand their business.

"Their manufacturing was carried out by a third-party contractor. So, by us buying it, we’ve actually bought their manufacturing contract"

"If we enter another lockdown, or something goes wrong that’s not the end of the story, but we’ve got the grocery side of the business which will carry on."

It was the perfect example of a business taking a chance to build on its strengths that it already had.

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

"Part of the issue is that, when people get out of the woods, they make mistakes. Particularly, now with the impact of COVID-19" the doctor says. "So my suggestion is to get some non-emotional advice from someone who isn’t associated with your business.

"If you’re experiencing emotional distress or financially and stress is piling up, you should find some assistance. Pick up the phone and talk to someone. There are lots of clever people out there who can assist, so don’t try to do it all by yourself."