How to diversify your business

Many strong businesses have diverse sources of income. The benefits of diversification have been well and truly reinforced by the recent pandemic shutdowns. Now, as many business owners are beginning to emerge from the COVID-19 lockdown, concerns regarding futureproofing are addressed. What can you do to ensure that your business thriving again when the borders are shut? Do your current offerings be relevant in the current normal‘? Perhaps most important what can you do to be ready should we be forced to go into lockdown once more? The answer could lie in diversification of business.

Why should you diversify?

Experts have seen play out throughout the first two months of the year that was 2020.

Diversification of your business is a smart way to reduce your risk when operating within an unpredictable economy. It’s a sign that you have a back-up plan should anything go wrong.

Diversification can protect you not only from shocks that aren’t anticipated, such as COVID-19, but also from problems you are familiar with, such as the emergence of new competitors.

There are plenty of diversification possibilities out there but says there’s plenty to think about before diving in the deep end.

We’re not suggesting to anyone to go out and do something outrageous, like investing large sums of money in something you are just not familiar with. But if you think about their current industry and experience, they will find that there’s always a plethora of peripherals that they’re not necessarily in which could offer enormous opportunities for them because they’re still their home.

Getting started

Before you embark on your journey to diversify, it’s crucial to complete your homework.

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

For instance, if you’re producing equipment for the food industry, then a secure option could be for consumables. In a strong economy, the machinery is selling however in a not too good one, like the present, people are buying consumables.

When you’re lacking experience of the market you’re attempting to enter, you’re like driving down the highway with your blindfold on.

It’s suggested to remain with the things you are familiar with particularly if this is your first time to dip your toes in the diversification pool.

If you’re considering diversifying into a new market that’s beyond your skillset or business knowledge is a must, so you should make sure you find someone with that experience. There are many things and not so good at other things. So, make sure you hire employees who have the knowledge and skills that you require. If you’re not able to do that you’re only increasing the risk.

Consider the risks

Diversifying your business also involves diversifying your focus.

Your objective is to satisfy your client and expand the number of customers you serve. This means that the issue you face when you diversify your company is that you’re spending staff to develop your new product. If you’re not careful, you are likely to use all your resources on new opportunities , leaving those you’re currently working on.

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

Don’t bite off 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 by doing things wrong… and that includes the big, smart ones.

That’s the difficulty of being a small business owner, says the owner. You face many of the same issues like big companies, but you’re not able to have the resources to respond to and learn from your mistakes. Therefore, it’s important to be aware.

Any change in your business or investment in business is an investment that is risky, however you can take some excellent risks and make truly smart choices, and earn your money and succeed… when you’re smart about it.

Scooping up opportunity

Diversification became a necessity for some businesses like one that makes gelato, which operates primarily as a wholesaler to restaurants and gelato sellers. However, by February this year, it was beginning to notice issues appearing that were looming.

"I did not think it would impact us much, but I did see the news from abroad"

However, one of their major clients, whose business relied heavily on tourists from abroad, stopped making orders.

At this point they were a week into lockdown , and they realized that they required a diversification strategy if they were going to survive.

"I started looking around to see if there were any other businesses we could buy that might be complementary to our current business"

"I found another business which was actually supplying supermarkets. I began working on buying the majority of the business on lockdown, and eventually bought 50% of the company."

This move did more than open up a new customer base. It also gave 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 are forced to go through another lockdown, or something goes wrong, then we’ve still got the grocery side of the business which will carry on."

It was an excellent instance of a business taking a chance to build on a strength its already has.

It can feel like a do-or-die scenario. However, over-reacting to situations could cause harm over the long term.

"Part of the issue is that when people get in trouble, they take the wrong choices. Especially now with the impacts of COVID-19" the expert says. "So, my advice is to get some non-emotional advice from someone who’s not associated with your business.

"If you’re struggling emotionally or financially, and your stress is building up, it’s time to get help. Take the phone and talk to someone. There are many smart people around who could assist you, so don’t attempt to do the whole thing by yourself."