How to diversify your business

Many strong businesses have diverse sources of income, and the advantages of diversification have been well and truly reinforced by the recent pandemic shutdowns. Now when many entrepreneurs begin to emerge from the COVID-19 lockdown concerns regarding futureproofing are asked. How can you ensure your business to be successful once boundaries are shut? Do your current offerings make sense in the ‘new normal‘? And, maybe most importantly is how do you get ready should we be forced to go into lockdown once more? It could be in business diversification.

Why diversify?

This is something experts have observed unfolding in the first quarter of the strange year that was 2020.

Diversification of business operations is a way to reduce your risk when working in an unstable economy. This means that you are prepared should things go wrong.

Diversification safeguards you not only from unexpected shocks such as COVID-19 However, it also shields you from problems you are familiar with, such as when new competitors appear.

There are plenty of diversification options out there but says there’s plenty to keep in mind before you decide to dive with both feet.

We don’t suggest to anybody that you undertake something crazy – like invest large sums of money in something you’re not comfortable with. However, if they think about their current business space and their expertise, there are always peripherals around that they’re not necessarily in that could be huge opportunities for them, since it’s still in their comfort space.

Getting started

Before starting your diversification journey it is essential to complete the research.

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

For instance, if you’re a manufacturer of machinery for the food industry, then the best location to look for could be for consumables. In a strong economic environment, the machinery will be selling however, in a not so good economy, like right now, people are buying consumables.

If you don’t have the experience of the market you’re trying to enter then it’s like driving down the road with a blindfold on.

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

If you’re considering diversifying into a field that’s not within your business expertise or skills and you’re looking for someone who can help, make sure you find someone who has that expertise. We’re all adept at certain things but not as good at other things. Therefore, it is important to hire individuals with the experience and expertise you require. If you’re not able to do that you’re only increasing the risk.

The risks to be considered

Diversifying your business means diversifying your attention.

Your goal is to please the customer and increase the number of customers you serve. So, the issue when diversifying 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 resources on new opportunities , and leaving the existing ones in place.

It’s crucial to ensure your customers are satisfied with the ones you already have while growing your customer base.

Be careful not to chew more than you’re chewing.

Be aware of taking the time in doing this. I’ve seen thousands of businesses in the past who went broken because of doing things wrong… and that includes the big, smart ones.

This is the problem of being a small business owner, he adds. You face many of the same issues as the big corporations but less funds to react to and learn from your mistakes. Therefore, you must be cautious.

Any change in your business or investment in business comes with a risk, but you can get some really good risks and make some extremely smart decisions, earning your cash and make it successful… if you’re smart about it.

Seizing opportunities

Diversification became a necessity for certain businesses, such as a gelato producer that operates principally as a wholesaler to Gelato vendors and restaurants. However, by February of this year, had begun to notice problems appearing in the near future.

"I didn’t really think it was going to affect us too much, seeing the news coming from abroad"

However, one of their largest customers, whose business relied heavily on overseas tourists had stopped taking orders.

At this point they were one week into lockdown and realised that they required a diversification strategy if they were going to survive.

"I started looking around to see if there were any other businesses we could invest in that might be complementary to the work we’re doing"

"I found another business which was actually supplying supermarkets. I began looking into buying part of the company during lockdown. In the end, I bought 50% of the business."

This move didn’t just bring in a new client base. It also gave them to start a new business.

"Their manufacturing was carried out by an unrelated contractor. Thus, by purchasing it, we’ve purchased the manufacturing contract"

"If we enter another lockdown or something else happens and something happens, we’ll have the retail side of the business which will continue."

It was an excellent illustration of a company taking an opportunity to grow on its strengths that the company already had.

It can feel like a do-or-die scenario. However, jumping into the wrong things could be detrimental in the long run.

"Part of the issue is that, when people get in trouble, they make the wrong decisions. Particularly with the current effects of COVID-19" He declares. "So my suggestion is to seek out non-emotional guidance from someone who’s not associated with your business.

"If you’re struggling emotionally or financially and stress is piling up, then go and get some help. Take the phone and speak to someone. There are plenty of intelligent people who are able to assist you, so don’t attempt to do the whole thing by yourself."