How to diversify your business

Many great businesses have multiple sources of income. The benefits of diversification have been really emphasized through the recent epidemic shutdowns. Now as many business owners are beginning to emerge from the COVID-19 lockdown questions about futureproofing are addressed. How can you ensure your business back on track when the borders are closed? Does your existing product make sense in the ‘new normal? Most importantly what can you do to be prepared should we have to go back into lockdown once more? The answer could lie in diversification of business.

Why diversify?

Experts have witnessed unfold during the first half of the year that has been 2020.

Diversification of your business is a strategic way to decrease your risk when working in an uncertain economy. It means you have a back-up plan should an event occur.

Diversification safeguards you not only from unanticipated shocks like COVID-19 as well as from the more common problems that arise when new competitors appear.

There are plenty of diversification options out there but says there’s plenty to be aware of before you decide to dive fully.

We’re not suggesting to anyone that you undertake anything crazy, like spending lots of money on something you’re just not comfortable with. If people consider their current industry and expertise - there are always peripherals around that they’re not obligated to be in which could offer enormous opportunities for them, because it’s still within their comfort zone.

Getting started

Before embarking on your diversification journey, it’s important to do your homework.

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

In this case, if you’re making machinery for the food industry, then a good place to go to might be for consumables. In a healthy economic environment, the machinery will be selling however in a not that good economy, as the present, people still buy the consumables.

In the event that you do not have the expertise of the market that you’re trying to enter then it’s like driving on the highway with a blindfold on.

It’s suggested to stick with what you know particularly if this is your first time dipping your toe in the pool of diversification.

If you’re seeking to diversify into a field that’s not within your business expertise or skills is a must, so you should be smart about getting someone with the know-how. Everyone is good at certain things but not as good in other areas. Therefore, it is important to hire individuals with the experience and expertise you require. If you don’t have that then you’re adding to the risk.

Risks to consider

Diversifying your business also means diversifying your attention.

Your goal is to please your customers and increase your base of clients. This means that the issue you face when you diversify your business is that you’re putting in people to create your new service. If you’re not carefulyou’ll end up using all your staff on the new opportunities and leave the current ones behind.

It’s crucial to ensure your business is satisfying the customers that you already have and growing the number of customers you have.

Make sure you don’t chew more than you are able to chew.

Be aware of taking the time in doing this. I’ve observed a multitude of businesses throughout the years that go broke because they did something wrong… even the most reputable, well-known ones.

This is the problem of being a small business owner, he says. You’re faced with many of the same challenges that big companies face, but you’re not able to have the resources to respond to and correct your mistakes, which is why you need to be careful.

Any change in business or business venture is an investment that is risky, however you can get some really great risks and make really smart moves, make your own money and be successful… if you’re smart about it.

Exploiting opportunities

Diversification became a necessity for some businesses like a gelato manufacturer who operates principally as a wholesaler to restaurants and sellers of gelato. However, 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 much, but I did see the news coming from outside the United States"

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

At this point they were one week into lockdown when they realized they needed to have a plan of diversification in order to survive.

"I started looking around to see if there were any other businesses we could buy that might complement the work we’re doing"

"I found another company that was actually providing to supermarkets. I started working on buying part of the company during lockdown and ended up buying half of the business."

The move didn’t only bring in a new client base. It also gave them to take on new business.

"Their manufacturing was performed by an unrelated contractor. Therefore, by buying it, we’ve bought the manufacturing contract"

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

It was an excellent way for a business to take the chance to improve a strength its already has.

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

"Part of the problem is that when people get into trouble they make poor decisions. Especially now with the impacts of COVID-19," the doctor states. "So my advice is to get some non-emotional advice from someone who isn’t directly connected to your business.

"If you’re experiencing emotional distress or financially, and stress is piling up, then go and find some assistance. Get on the phone and speak to someone. There are a lot of smart people around who could assist, so don’t try to do it all yourself."