How to diversify your business

A lot of successful businesses have multiple sources of income, and the benefits of diversification have really emphasized through the recent epidemic shutdowns. Now as many business owners start to reappearing from the COVID-19 lockdown, concerns about futureproofing are being discussed. How do you make sure your business thriving again when the borders are closed? Do your current offerings make sense in the ‘new normal? Most importantly how can you be prepared should we have to go back into lockdown again? The answer might lie in diversification of your business.

Why diversify?

Experts have observed play out throughout the first two months of the unusual year that has been 2020.

Business diversification, is a strategic way to decrease your risk when operating within an unpredictable economy. This means that you are prepared should something go wrong.

Diversification can protect you not only from unanticipated shocks like COVID-19 as well as from common issues like when new competitors appear.

There are plenty of diversification opportunities available, but there’s plenty to think about before deciding to dive in the deep end.

We wouldn’t advise anyone to embark on a journey to do anything crazy, like spending lots of money on something that you’re not comfortable with. But if people think about their current business space and their expertise, there are always peripherals around that they’re not obligated to be in that could be huge opportunities for them because they’re not yet their normal space.

Getting started

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

Find out where you’re going and who your rivals are particularly if you’re moving into a new market.

As an example, if you’re producing machinery that is used for food production, a good location to look for could be for consumables. In a healthy economy, the machinery is selling however, in a not too good one, like today, people are still purchasing the consumables.

If you’re not equipped with the experience of the market you’re trying enter, it’s just like driving down the highway with your blindfold on.

It’s suggested to stick with what you know particularly if it’s your first time trying your toe in the pool of diversification.

If you’re seeking to diversify into a field that’s not within your skillset or business knowledge it’s best to consider hiring someone with the knowledge. We’re all adept at certain things but not as good in other areas. Therefore, you should hire employees with the skills and knowledge you need. If you don’t have that, you’re just adding to the risk.

There are risks to take into consideration

Diversifying your business requires diversifying your focus.

Your aim is to satisfy the customer and increase your client base. This means that the issue you face when you expand your company is that you’re spending the resources of your current offering. If you’re not careful, you could end up spending all of your effort on the new opportunities and leave those you’re currently working on.

It’s crucial to ensure that you’re satisfied with the customers you already have, while also growing those who are your customers.

Do not chew 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 broke by doing an unwise thing… even the big, smart ones.

This is the problem of being a small business owner, he says. There are many of the same problems that big companies face, but you’re not able to have the resources to respond to and recover from your mistakes. Therefore, it’s important to be aware.

Any business change or any decision to invest in business is not without risk, but it is possible to take great risks and make extremely smart decisions, earning your own money and succeed… when you’re smart about it.

Scooping up opportunity

Diversification became a necessity in some industries, like the gelato maker who works predominantly as a wholesaler of restaurants and sellers of gelato. However, by February this year, had begun to see problems ahead.

"I did not think it would impact us that much, after seeing the news coming from overseas"

However, one of their largest customers, whose company relied heavily on overseas tourists, stopped making orders.

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

"I began looking to see if there were any other businesses we could buy that might be complementary to the work we’re doing"

"I found another company that was actually providing to supermarkets. I began looking into buying part of the company during lockdown. I ended up purchasing 50% of the company."

The move didn’t only create a new customer base, but also enabled them to start a new business.

"Their manufacturing was performed by a third-party contractor. Thus, by purchasing it, we’ve actually assumed their manufacturing contract"

"If we go into another lockdown or something happens, then we’ve still got the supermarket aspect of the business that will carry on."

It was the perfect 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, over-reacting to situations could harm you over the long term.

"Part of the issue is that, when people get in trouble, they make poor decisions. Particularly with the current effects of COVID-19" the doctor 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 you’re feeling stressed and piled up, then get help. Call the number and talk to someone. There are plenty of intelligent individuals who can assist you, so don’t attempt to do it all yourself."