How to make your business more diverse

Many strong businesses have diverse sources of income. The benefits of diversification have really emphasized by the recent pandemic shutdowns. Now as a lot of entrepreneurs begin to emerge from the COVID-19 blockade, questions around futureproofing are being asked. How can you ensure your business running again after the borders are closed? Does your old offering still make sense in the ‘new normal? And, maybe most importantly how can you be prepared should we have to go back into lockdown again? The answer could lie in diversification for business.

Why diversify?

This is something experts have observed play out over the first half of this unusual year of 2020.

Business diversification, is a smart way to lower your risk while operating within an unpredictable economy. It means you have a backup plan in case things go wrong.

Diversification can protect you not only from unexpected shocks such as COVID-19 However, it also shields you from more familiar problems like the emergence of new competitors.

There are plenty of diversification opportunities available, but there’s plenty to keep in mind before you decide to dive with both feet.

We don’t suggest to anybody that you embark on a journey to do something insane, such as investing massive amounts of money in something you’re just not comfortable with. If people consider their current business space and expertise - there are always other areas that they’re not necessarily in, which are huge opportunities for them, since it’s still within their comfort zone.

Getting started

Before embarking on your diversification journey, it’s crucial to complete the research.

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

As an example, if you’re making machinery specifically for use in food processing, the best source could be for consumables. In a good economy, machinery is selling and is in high demand, however in a less very good economic situation, such as the present, people are still buying the consumables.

If you don’t have the experience of the market you’re trying enter, you’re like driving down the highway with a blindfold on.

It is recommended to stay with what you’ve learned, especially if this is the first time you’ve dipped your toe into the diversification pool.

If you’re looking to diversify into a new market that’s beyond your expertise or knowledge of business, then you need to be smart about getting someone who does have that know-how. We’re all good at some things and not so good at other things. Therefore, it is important to hire individuals with the expertise and experience you need. If you’re not able to do that, you’re just adding to the risk.

Risks to consider

Diversifying your business also involves diversifying your focus.

Your aim is to satisfy the customer and increase your customer base. Therefore, the problem you face with diversifying your company is that you’re using staff to develop your new product. If you’re not careful, you end up using all your staff on the new opportunities , leaving those you’re currently working on.

It’s crucial to ensure that you’re satisfying the customers you already have while growing the number of customers you have.

Make sure you don’t chew more than you can chew.

Be aware of taking the time to accomplish this. I’ve witnessed a lot of companies throughout the years that go broke by doing an unwise thing… and that includes the most reputable, well-known ones.

That’s the difficulty of being a small business owner, he adds. You have many of the same issues like big companies, but with less resources to react to and correct your mistakes. Therefore, you have to be extra cautious.

Any change in business or any decision to invest in business is a risk, but there are some risk-free opportunities and make extremely smart decisions, earning your own money and succeed… If you’re smart about it.

Seizing opportunities

Diversification was an essential requirement for certain businesses, such as the gelato maker who works mostly as a wholesaler for Gelato vendors and restaurants. However, in February of this year, it was beginning to see issues that were looming.

"I wasn’t sure it would impact us too much, seeing the news coming from abroad"

Then one of their biggest customers, whose business relied heavily on tourists from overseas was unable to fulfill orders.

At this point the group was one week in lockdown and realized they needed to have a plan of diversification for them to make it through.

"I started looking around for other companies we could invest in that might be a good match to what we are doing"

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

This move did more than provide a new customer base, but also enabled the company to expand their business.

"Their manufacturing was done by an unrelated contractor. By buying it, we’ve bought the manufacturing contract"

"If we get into another lockdown, or something happens, then we’ve still got the retail side of the business which will continue to operate."

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

It can feel like a do-or-die scenario. But rushing into things could be detrimental in the long run.

"Part of the problem is that when people find themselves caught in trouble, they take the wrong decisions. Particularly with the current effects of COVID-19" He says. "So, my advice is to seek non-emotional advice from someone who’s not associated with your business.

"If you’re struggling emotionally or financially, and stress is piling up, you should find some assistance. Get on the phone and speak to someone. There are plenty of intelligent people out there who can help, so don’t do it all yourself."