How to diversify your business
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Many great businesses have multiple sources of income. The benefits of diversification have amply emphasized by the recent pandemic shutdowns. Now, as many business owners begin to re-emerge from the COVID-19 lockdown concerns about futureproofing are being asked. What can you do to ensure that your business thriving again when the borders are closed? Do your current offerings make sense in the ‘new normal‘? And, maybe most importantly what can you do to be prepared should we have to go back into lockdown once more? The answer might lie in diversification of business.
Why diversify?
This is something experts have witnessed unfold in the first quarter of the year that was 2020.
Diversification of your business is a smart way to reduce your risk when working in an unstable economy. It means you have a backup plan in case an event occur.
Diversification can protect you not only from unanticipated shocks like COVID-19 as well as from problems you are familiar with, such as the emergence of new competitors.
There are many diversification opportunities on the market, however there’s plenty to keep in mind prior to diving with both feet.
We don’t suggest to anybody that you embark on a journey to do anything crazy, like spending huge sums of money into something you’re not familiar with. But if people think about their current business environment and know-how - there are always peripherals that they’re not necessarily in that could be huge opportunities for them, since it’s still in their comfort space.
Getting started
Before beginning your journey into diversification, it’s crucial to complete the research.
Be aware of where you’re headed and know who your competitors are particularly if you’re moving into a market that isn’t yet established.
For instance, if you’re producing machinery for the food industry, then the best source could be for consumables. In a good economy, machinery is selling and is in high demand, however in a less so good economy, like today, people are still buying the consumables.
In the event that you do not have the experience of the market you’re trying enter, it’s like driving down the highway while wearing a blindfold on.
It is recommended to stay with what you’re familiar with particularly if this is your first time trying your toes in the pool of diversification.
If you’re planning to diversify into a field that’s not within your capabilities or your knowledge in business and you’re looking for someone who can help, make sure you find someone with the experience. We’re all adept at certain aspects, but not great at others. So, make sure you hire employees who have the knowledge and skills that you need. If you’re not equipped with that then you’re just increasing the risk.
Consider the risks
Diversifying your business also requires diversifying your focus.
Your goal is to please your client and expand the number of customers you serve. So, the issue when you expand your business is that you’re using the resources of your current offering. If you’re not careful, you’ll are likely to use all your manpower on the new opportunities and leave the existing ones in place.
It’s incredibly important to make sure you’re satisfied with the customers you already have, and also expanding the number of customers you have.
Be careful not to chew more than you’re able to chew.
Be smart about taking your time to do this. I’ve seen countless businesses over the years who go broke by doing things wrong… even the most reputable, well-known ones.
That’s the difficulty of being a small-scale business owner, he says. You have many of the same problems as the big corporations but you’re not able to have the resources to respond to and recover from your mistakes, which is why you must be cautious.
Changes in the business or investment in business comes with a risk, but there are some excellent risks and make really smart moves, make you a significant amount of cash and make it successful… If you’re smart about it.
Seizing opportunities
Diversification became an imperative for certain businesses, such as the gelato maker who works predominantly as a wholesaler of Gelato vendors and restaurants. But by February of this year, the company was beginning to see problems that were looming.
"I did not really believe it would affect us much, but I did see the news coming from abroad"
Then one of their largest customers, whose business relied heavily on tourists from abroad was unable to fulfill orders.
At this point they were a week in lockdown and realized that they required a diversification strategy for them to be able to get through.
"I started looking around for any other businesses that we could buy that might be in a similar way to our current business"
"I found another business that was actually supplying to supermarkets. I started working on buying the majority of the business on lockdown. In the end, I bought 50% of the company."
That move didn’t just bring in a new client base. It also allowed them to start a new business.
"Their manufacturing was performed by an unrelated contractor. So, by us buying it, we’ve actually assumed the manufacturing contract"
"If we enter another lockdown or something happens and something happens, we’ll have the retail side of the business which will continue to operate."
It was an excellent way for a business to take an opportunity to capitalize on an advantage the company 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 problem is that when people get into trouble they make the wrong choices. Particularly with the current effects of COVID-19," He says. "So my advice is to seek non-emotional advice from someone who’s not tied to your business.
"If you’re experiencing emotional distress or financially, and the stress is piling up, you should get some help. Call the number and speak to someone. There are a lot of smart individuals who can help, so don’t do it all by yourself."