How to diversify your business

Many strong businesses have diverse 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 concerns regarding futureproofing are addressed. How can you ensure your business back on track when boundaries are shut? Does your previous offering be relevant in the current normal‘? Perhaps, most importantly how can you be prepared in the event that we are forced to enter lockdown once more? The answer may lie in diversification of business.

Why should you diversify?

This is something experts have observed unfolding over the first half of the unusual year that was 2020.

Business diversification, is a strategic way to decrease your risk when working in an uncertain economy. It’s a sign that you have a backup plan should an event occur.

Diversification safeguards you not only from shocks that aren’t anticipated, such as COVID-19, but also from the more common problems that arise when competitors come along.

There are many diversification opportunities out there but says there’s plenty to keep in mind before you decide to dive with both feet.

We don’t suggest to anybody to take a risk and do something insane, such as investing lots of money on something that you’re not comfortable with. But if people think about their current industry and know-how - there are always other areas that they’re probably not in and that offer huge potential for them, because it’s still in their comfort space.

Getting started

Before beginning your journey into diversification, it is essential to complete your homework.

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

As an example, if you’re a manufacturer of machinery to be used in the industry of food, a good place to go to might be for consumables. In a good economy, machinery is selling however, in a not very good economic situation, such as currently, consumers are buying consumables.

If you don’t have the understanding of the market you’re trying enter, it’s like driving down the highway with your blindfold on.

It is recommended to stay with what you’ve learned particularly if it’s your first time dipping your toe into the diversification pool.

If you’re looking to diversify into a market that isn’t within your business expertise or skills is a must, so you should make sure you find someone who does have that experience. There are many things and not so good in other areas. Therefore, you should hire employees with the expertise and experience you require. If you’re not equipped with that you’re only increasing the risk.

Risks to consider

Diversifying your business also involves diversifying your focus.

Your objective is to satisfy the customer and increase your customer base. So, the issue when you expand your business is that you’re putting in staff to develop your new product. If you’re not carefulyou’ll will end up spending all your staff on the new opportunities , and leaving the existing ones in place.

It’s vital to ensure that you’re satisfied with the customers you already have, while also growing the number of customers you have.

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

Take your time to complete this. I’ve witnessed a lot of companies over the years that have gone broken because of doing an unwise thing… and that includes the big, smart ones.

This is the problem of being a small-scale business owner, says the owner. You have many of the same challenges like big companies, but with less resources to react to and recover from your mistakes. Therefore, you have to be extra cautious.

Any change in your business or any investment in business is very risky. However, you can take some good risks and make some very smart decisions, earn yourself a lot of cash and make it successful… provided you’re smart about it.

Scooping up opportunity

Diversification became an imperative for certain businesses, such as the gelato maker who works primarily as a wholesaler to restaurants and sellers of gelato. However, by February this year, the company was beginning to see issues on the horizon.

"I did not really believe it was going to affect us in any way, based on the news coming from overseas"

Then one of their largest customers, whose business relied heavily on overseas tourists was unable to fulfill orders.

At this point the group was one week into lockdown , and they realized they needed a diversification plan for them to make it through.

"I began looking to see if there were any other businesses we could buy that might complement our current business"

"I found another company which was actually supplying supermarkets. I began looking into buying the majority of the business on lockdown and ended up buying half of the business."

This move did more than provide a new customer base. It also gave them to start a new business.

"Their manufacturing was handled by an unrelated contractor. By buying it, we’ve actually bought the manufacturing contract"

"If we enter another lockdown or something else happens it’s still the supermarket side of the company that will continue to operate."

It was the perfect way for a business to take the chance to improve the strengths it already had.

It can feel like a do-or-die scenario. However, over-reacting to situations could hurt you in the end.

"Part of the problem is that when people get into trouble they take the wrong choices. Particularly now, with the effects of COVID-19," the doctor declares. "So, my advice is to seek non-emotional advice from someone who’s not directly connected to your business.

"If you’re struggling emotionally or financially and the stress is piling up, then get help. Take the phone and talk to someone. There are plenty of intelligent individuals who can help, so don’t do the whole thing by yourself."