How to diversify your business

Many great businesses have multiple sources of income. The benefits of diversification have been well and truly reinforced through the recent epidemic shutdowns. Now as many business owners are beginning to emerge from the COVID-19 lockdown questions around futureproofing are being discussed. How can you ensure your business back on track when the borders are shut? Do your current offerings fit into the new normal? Perhaps most important, how can you be prepared should we have to go back into lockdown again? The answer could lie in business diversification.

Why should you diversify?

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

Diversification of business operations is a method to reduce your risk when working in an uncertain economy. It means you have a backup plan should an event occur.

Diversification safeguards you not only from unexpected shocks such as COVID-19 however, it also protects you from problems you are familiar with, such as when competitors come along.

There are plenty of diversification options to choose from, but plenty to be aware of before you decide to dive the deep end.

We wouldn’t advise anyone to undertake something insane, such as investing large sums of money in something that you’re not comfortable with. But if you think about their current business space and experience, they will find that there are always peripherals around that they’re probably not in which could offer enormous opportunities for them because they’re not yet their normal space.

Getting started

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

Know where you’re heading and who your competitors are especially if you’re entering into a market that isn’t yet established.

In this case, if you’re producing equipment that is used for food production, a safe source could be consumables. In a prosperous economy, the 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.

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

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

If you’re looking to diversify into a new market that’s beyond your capabilities or your knowledge in business, then you need to be smart about getting someone who does have that expertise. There are many things and not so good at others. So, make sure you hire employees who have the skills and knowledge you need. If you’re not equipped with that then you’re adding to the risk.

There are risks to take into consideration

Diversifying your business involves diversifying your focus.

Your aim is to satisfy the customer and increase your customer base. So, the issue when you diversify your business is that you’re putting in manpower on your new offering. If you’re not cautious, you’ll could end up spending all of your effort on the new opportunities and leave the current ones behind.

It’s incredibly important to ensure that you’re satisfying the customers you already have, and also expanding the number of customers you have.

Make sure you don’t chew more than you’re able to chew.

Take your time in doing this. I’ve seen countless businesses over the years that have gone broke because they did something wrong… including the big, smart ones.

That’s the challenge of being a small-scale business owner, says the owner. You have many of the same problems like big companies, but with less resources to react to and learn from your mistakes, which is why you need to be careful.

Changes in the business or investment in business is very risky. However, you can take some great risks and make extremely smart decisions, earning your own money and succeed… if you’re prepared.

Scooping up opportunity

Diversification became an imperative in some industries, like a gelato producer that operates principally as a wholesaler to eateries and vendors of gelato. But by February of this year, they began to notice issues appearing that were looming.

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

However, one of their major 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 that they required a diversification strategy in order to make it through.

"I started to look around for any other businesses that we could invest in that might be complementary to what we do"

"I discovered another company which was actually supplying supermarkets. I began working on buying the business during lockdown, and eventually bought half of the business."

The move didn’t only bring in a new client base, but also enabled them to enter into new business.

"Their manufacturing was performed by a third-party contractor. By buying it, we’ve bought the manufacturing contract"

"If we get into another lockdown or something happens that’s not the end of the story, but we’ve got the grocery side of the company that will continue."

It was the perfect instance of a business taking an opportunity to grow on an advantage they already have.

It can feel like a do-or-die scenario. But rushing into things could harm you in the end.

"Part of the issue is that, when people get into trouble they take poor decisions. Especially now with the impacts of COVID-19," He states. "So, my advice is to seek out non-emotional guidance from someone who isn’t associated with your business.

"If you’re struggling emotionally or financially, and the stress is piling up, then get help. Pick up the phone and talk to someone. There are many smart people who are able to assist you, so don’t attempt to do everything by yourself."