How to diversify your business

Many successful companies have numerous income streams, and the benefits of diversification have been really emphasized by the recent pandemic shutdowns. Now as many business owners are beginning to emerge from the COVID-19 lockdown, concerns about futureproofing are being raised. How do you make sure your business thriving again when the borders are closed? Does your old offering still fit into the new normal‘? Perhaps, most importantly what can you do to be ready should we be forced to go into lockdown once more? It could be in business diversification.

Why should you diversify?

Experts have observed unfolding during the first half of this unusual year of 2020.

Diversification of business operations is a way to decrease your risk when operating within an unpredictable economy. This means that you have a backup plan in case anything go wrong.

Diversification helps you protect yourself not only from shocks that aren’t anticipated, such as COVID-19 However, it also shields you from more familiar problems like when new competitors crop up.

There are plenty of diversification opportunities available, but there’s plenty to consider before you decide to dive the deep end.

We wouldn’t advise anyone to undertake anything crazy, like spending large sums of money in something you are just not comfortable with. However, if they think about their current business environment and know-how - there are always peripherals around that they’re not necessarily in, which are huge opportunities for them because they’re not yet their normal space.

Getting started

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

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

As an example, if you’re making machinery specifically for use in food processing, a good location to look for could be consumables. In a good economy, machinery is selling however in a not too good one, like the present, people are still buying the consumables.

If you don’t have understanding 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 it’s the first time you’ve dipped your toe in the pool of diversification.

If you’re seeking to diversify into a market that’s outside your business expertise or skills and you’re looking for someone who can help, be smart about getting someone with the knowledge. Everyone is good at certain things and not so good at other things. So, make sure you hire employees who have the knowledge and skills that you require. If you don’t have that then you’re just increasing the risk.

Risks to consider

Diversifying your business requires diversifying your focus.

The goal is to please the customer and increase the number of customers you serve. This means that the issue you face when diversifying your business is that you’re putting in staff to develop your new product. If you’re not cautious, you’ll end up using all your manpower on the new opportunities , and leaving the current ones behind.

It’s essential to ensure that your customers are satisfied with the ones you already have and growing the number of customers you have.

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

Take your time to accomplish this. I’ve seen thousands of businesses over the years that have gone broke because they did the wrong thing… even the most reputable, well-known ones.

That’s the challenge of being a small-scale business owner, says the owner. You have many of the same issues that big companies face, but less funds to react to and recover from your mistakes, therefore you must be cautious.

Any change in business or investment in business is very risky. However, it is possible to take excellent risks and make really smart moves, make your money and be successful… provided you’re smart about it.

Finding opportunities

Diversification became a necessity for some business such as a gelato manufacturer who operates principally as a wholesaler to Gelato vendors and restaurants. But by February of this year, it was beginning to notice problems appearing ahead.

"I did not really believe it would impact us too much, seeing the news from out of the country"

But then one of their biggest clients, whose business depended heavily on tourists from overseas and tourists, stopped accepting orders.

At this stage the group was one week into lockdown when they realized they needed to have a plan of diversification if they were going to survive.

"I started looking around for other companies we could purchase that would complement what we do"

"I discovered a different business that actually supplied supermarkets. I began looking into buying the majority of the business on lockdown, and eventually bought 50% of the business."

This move did more than create a new customer base. It also gave the company to expand their business.

"Their manufacturing was performed by an outside contractor. By buying it, we’ve assumed their manufacturing contract"

"If we are forced to go through another lockdown or something else happens, then we’ve still got the supermarket aspect of the business that will continue to operate."

It was the perfect instance of a business taking a chance to build on a strength the company already had.

It can feel like a do-or-die scenario. However, rushing into things can be detrimental in the end.

"Part of the issue is that when people find themselves in trouble, they take poor 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 directly connected to your business.

"If you’re experiencing emotional distress or financially and the stress is piling up, you should get help. Pick up the phone and speak to someone. There are lots of clever individuals who can assist, so don’t try to do it all by yourself."