How to diversify your business

Many successful companies have numerous sources of income, and the benefits of diversification have amply emphasized due to the recent pandemic shutdowns. Now, as many business owners start to reappearing from the COVID-19 blockade, concerns regarding futureproofing are raised. How do you make sure your business to be successful once the borders are closed? Do your current offerings work in the ‘new normal? Perhaps, most importantly how can you be prepared if we’re forced into lockdown once more? The answer might lie in diversification for business.

Why should you diversify?

This is something experts have observed unfolding in the first quarter of the unusual year known as 2020.

Diversification of your business is a way to decrease your risk when operating in an unpredictable economic environment. It is a way to have a backup plan in case something go wrong.

Diversification can protect you not only from unanticipated shocks like COVID-19 as well as from more familiar problems like when competitors come along.

There are plenty of diversification opportunities to choose from, but plenty to keep in mind prior to diving fully.

We’re not going to suggest that you undertake something crazy – like invest huge sums of money into something you’re not familiar with. But if you think about their current business environment and experience, they will find that there are always peripherals around which they’re not necessarily that could be huge opportunities for them because they’re still within their comfort zone.

Getting started

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

Know where you’re heading and who your rivals are especially if you’re going into a new market.

For instance, if you’re producing machinery specifically for use in food processing, a safe place to go to might be for consumables. In a strong economy, the machinery is selling however in a not so good economy, like the present, people are still purchasing the consumables.

In the event that you do not have understanding of the market you’re trying enter, it’s like driving on the highway while wearing a blindfold on.

It’s best to stick with what you know particularly if this is your first time trying your toes into the pool of diversification.

If you’re looking to diversify into a market that’s outside your expertise or knowledge of business, then you need to consider hiring someone who has that expertise. We’re all adept at certain things and not so good at other things. Therefore, you should hire employees with the knowledge and skills that you need. If you don’t have it, you’re just adding to the risk.

There are risks to take into consideration

Diversifying your business also means diversifying your attention.

Your objective is to satisfy the customer and increase your base of clients. Therefore, the problem you face when diversifying your business is that you’re using manpower on your new offering. If you’re not careful, you’ll will end up spending all your manpower on the new opportunities and leave the existing ones in place.

It’s incredibly important to ensure that you’re satisfying the customers you already have, while also growing that customer list.

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

Be aware of taking the time to do this. I’ve witnessed a lot of companies over the years who go broken because of doing things wrong… including the most reputable, well-known ones.

That’s the challenge of being a small-scale company owner, he states. You’re faced with many of the same problems like big companies, but with less resources to react to and repair your mistakes, therefore you must be cautious.

Any change in business or any decision to invest in business is not without risk, but you can take some good risks and make some really smart moves, make your own money and succeed… if you’re prepared.

Seizing opportunities

Diversification was a must for certain businesses, such as the gelato maker who works principally as a wholesaler to eateries and vendors of gelato. However, by February this year, the company was beginning to see issues in the near future.

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

Then one of their biggest clients, whose business relied heavily on overseas tourists and tourists, stopped accepting orders.

At this point, they were one week into lockdown when they realized that they required a diversification strategy for them to be able to get through.

"I started looking around for other companies we could acquire that could be complementary to what we are doing"

"I discovered another company which was actually supplying supermarkets. I began working on buying the majority of the business on lockdown and ended up buying 50% of the business."

This move did more than bring in a new client base. It also gave them to start a new business.

"Their manufacturing was carried out by an outside contractor. Therefore, by buying it, we’ve bought their manufacturing contract"

"If we are forced to go through another lockdown, or something happens it’s still the grocery side of the business which will carry on."

It was an excellent illustration of a company taking a chance to build on the strengths it already had.

It can feel like a do-or-die scenario. However, jumping into the wrong things could hurt you over the long term.

"Part of the issue is that, when people get in trouble, they make mistakes. Particularly now, with the effects of COVID-19" He states. "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 you’re feeling stressed and piled up, you should seek help. Call the number and talk to someone. There are lots of clever people out there who can assist you, so don’t attempt to do the whole thing by yourself."