How to diversify your business

Many successful companies have numerous sources of income, and the benefits of diversification were amply emphasized due to the recent pandemic shutdowns. Now as many business owners are beginning to emerge from the COVID-19 lockdown questions around futureproofing are being discussed. How do you make sure your business to be successful once the borders are shut? Does your old offering still fit into the new normal‘? Perhaps, most importantly is how do you get prepared in the event that we are forced to enter lockdown again? The answer might lie in diversification for business.

Why should you diversify?

This is something experts have witnessed unfold over the first half of this unusual year that has been 2020.

Diversification of your business is a method to reduce your risk when operating within an unpredictable economy. It means you have a backup plan should anything go wrong.

Diversification can protect you not only from unexpected shocks such as COVID-19 as well as from common issues like the emergence of new competitors.

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

We’re not going to suggest that you embark on a journey to do anything crazy, like spending massive amounts of money in something you’re not comfortable with. But if people think about their current industry and expertise - there are always peripherals around which they’re not necessarily and that offer huge potential for them, since it’s still within their comfort zone.

Getting started

Before beginning your journey into diversification, 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 new market.

For instance, if you’re producing machinery for the food industry, then a good source could be consumables. In a healthy economy, machinery is selling, but in a not that good economy, as the present, people are buying consumables.

In the event that you do not have expertise of the market that you’re trying to get into, it’s like driving down the highway while wearing a blindfold on.

It’s suggested to stay with what you’ve learned, especially if this is the first time you’ve dipped your toe in the pool of diversification.

If you’re seeking to diversify into a new market that’s beyond your business expertise or skills and you’re looking for someone who can help, be smart about getting someone who has that expertise. Everyone is good at certain things and not so good at other things. So, hire people with the experience and expertise you require. If you don’t have that then you’re adding to the risk.

Consider the risks

Diversifying your business involves diversifying your focus.

Your goal is to please your customers and increase your base of clients. The problem when you expand your business is that you’re putting in the resources of your current offering. If you’re not careful, you will end up spending all your staff on the new possibilities and leaving the current ones behind.

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

Don’t bite off more than you are able to chew.

Be aware of taking the time to do this. I’ve seen countless businesses over the years who go broken because of doing things wrong… including the biggest, most intelligent ones.

That’s the challenge of being a small-scale business owner, he adds. You have many of the same problems similar to big corporations, but with less resources to react to and recover from your mistakes, so you need to be careful.

Any change in your business or investment in business is very risky. However, it is possible to take excellent risks and make very smart decisions, earn yourself a lot of cash and make it successful… If you’re prepared.

Scooping up opportunity

Diversification was an essential requirement for certain businesses, such as one that makes gelato, which 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 ahead.

"I did not really believe it would impact us that much, after seeing the news from outside the United States"

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

At this point, they were one week in lockdown and realized they needed a diversification plan if they were going to make it through.

"I began looking for any other businesses that we could buy that might be a good match to the work we’re doing"

"I discovered another company that was actually supplying to supermarkets. I started working on buying the business during lockdown. I ended up purchasing 50percent of the business."

That move didn’t just open up a new customer base. It also allowed the company to expand their business.

"Their manufacturing was handled by an outside contractor. By buying it, we’ve bought their manufacturing contract"

"If we get into another lockdown or something else happens that’s not the end of the story, but we’ve got the supermarket aspect of the company that will continue to operate."

It was an excellent illustration of a company taking the chance to improve an advantage it already had.

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

"Part of the problem is that when people get out of the woods, they take the wrong choices. Particularly now, with the effects of COVID-19," the doctor declares. "So my suggestion is to seek out non-emotional guidance from someone who’s not tied to your business.

"If you’re experiencing emotional distress or financially and you’re feeling stressed and piled up, then go and get some help. Pick up the phone and talk to someone. There are a lot of smart individuals who can aid, so don’t take on it all yourself."