How to diversify your business

Many strong businesses have diverse sources of income. The benefits of diversification have fully and firmly substantiated due to the recent pandemic shutdowns. Now as a lot of entrepreneurs begin to emerge from the COVID-19 blockade, concerns regarding futureproofing are discussed. How can you ensure your business thriving again when borders are closed? Does your existing product make sense in the ‘new normal? Perhaps most important what can you do to be prepared in the event that we are forced to enter lockdown again? The answer may lie in diversification for business.

Why diversify?

Experts have observed play out over the first half of this unusual year that was 2020.

Diversification in your business is a method to decrease your risk when operating in an unpredictable economic environment. This means that you have a back-up plan should an event occur.

Diversification helps you protect yourself not only from shocks that aren’t anticipated, such as COVID-19 however, it also protects you from the more common problems that arise when new competitors crop up.

There are plenty of diversification opportunities on the market, however there’s plenty to think about before diving in headfirst.

We wouldn’t advise anyone to undertake something outrageous, like investing large sums of money in something that you’re not comfortable with. But if people think about their current business space and expertise - there are always peripherals around that they’re probably not in that could be huge opportunities for them, because it’s still their home.

Getting started

Before starting your diversification journey it’s important to do the research.

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

If, for instance, you’re making machinery that is used for food production, a safe source could be for consumables. In a strong economic environment, the machinery will be selling however in a not very good economic situation, such as today, people still buy the consumables.

When you’re lacking the experience of the market you’re attempting to enter, it’s like driving on the highway while wearing a blindfold on.

It’s suggested to stay with what you’ve learned particularly if this is your first time trying your toe into the pool of diversification.

If you’re planning to diversify into a market that’s outside your capabilities or your knowledge in business and you’re looking for someone who can help, take the time to find someone who does have that knowledge. We’re all adept at certain things but not as good at other things. So, make sure you hire employees who have the expertise and experience you require. If you’re not equipped with that then you’re just increasing the risk.

There are risks to take into consideration

Diversifying your business also means diversifying your attention.

Your objective is to satisfy your customers and increase your customer base. Therefore, the problem you face with diversifying your business is that you’re using the resources of your current offering. If you’re not carefulyou’ll end up using all your staff on the new opportunities , and leaving those you’re currently working on.

It’s essential to ensure your customers are satisfied with the ones you already have, while also growing that customer list.

Do not chew more than you’re able to chew.

Make sure you take the time to accomplish this. I’ve observed a multitude of businesses over the years who go broke because they did something wrong… and that includes the most reputable, well-known ones.

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

Any change in business or business venture is a risk, but there are some good risks and make some really smart moves, make your money and succeed… when you’re prepared.

Finding opportunities

Diversification became a necessity for certain businesses, such as the gelato maker who works predominantly as a wholesaler of restaurants and gelato sellers. But by February of this year, it was beginning to see problems that were looming.

"I didn’t really think it would impact us that much, after seeing the news from outside the United States"

Then one of their biggest customers, whose business relied heavily on tourists from abroad and tourists, stopped accepting orders.

At this point they were a week into lockdown and realised they needed to have a plan of diversification in order to be able to get through.

"I started looking around for other businesses we could acquire that could be in a similar way to what we do"

"I found another company that actually supplied supermarkets. I started working on buying part of the company during lockdown, and eventually bought 50% of the business."

The move didn’t only create a new customer base, but also enabled the company to expand their business.

"Their manufacturing was carried out by an unrelated contractor. By buying it, we’ve actually taken over the manufacturing contract"

"If we go into another lockdown, or something happens and something happens, we’ll have the supermarket aspect of the business which will continue to operate."

It was an excellent example of a business taking an opportunity to capitalize on a strength the company already had.

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

"Part of the issue is that when people find themselves out of the woods, they take poor decisions. Particularly with the current effects of COVID-19" He declares. "So my advice is to get some non-emotional advice from someone who isn’t tied to your business.

"If you’re struggling emotionally or financially and the stress is piling up, then go and get some help. Get on the phone and talk to someone. There are plenty of intelligent people out there who can aid, so don’t take on it all yourself."