How to diversify your business

Many strong businesses have diverse sources of income, and the benefits of diversification have been amply emphasized due to the recent pandemic shutdowns. Now as a lot of entrepreneurs begin to emerge from the COVID-19 lockdown, questions around futureproofing are being raised. What can you do to ensure that your business thriving again when the borders are shut? Does your old offering still fit into the new normal? Perhaps, most importantly how can you be prepared in the event that we are forced to enter lockdown once more? The answer may lie in business diversification.

Why diversify?

Experts have observed unfolding throughout the first two months of the unusual year that was 2020.

Diversification of business operations is a method to minimize your risk when working in an unstable economy. It is a way to have a backup plan in case something go wrong.

Diversification protects you not just from shocks that aren’t anticipated, such as COVID-19 However, it also shields you from common issues like when new competitors appear.

There are plenty of diversification options out there but says there’s plenty to be aware of before diving in fully.

We’re not suggesting to anyone that you take a risk and do something crazy – like invest massive amounts of money in something you’re just not familiar with. But if you think about their current industry and their expertise, there are always peripherals which they’re not necessarily that could be huge opportunities for them, since it’s still within their comfort zone.

Getting started

Before starting your diversification journey it’s essential to do your research.

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

In this case, if you’re producing machinery to be used in the industry of food, a safe place to go to might be for consumables. In a good economic environment, the machinery will be selling however, in a not so good economy, like the present, people are buying consumables.

When you’re lacking the knowledge of the market you’re trying to enter then it’s like driving down the highway with a blindfold on.

It is recommended to stick with what you know particularly if it’s your first time dipping your toes into the diversification pool.

If you’re seeking to diversify into a market that isn’t within your expertise or knowledge of business, then you need to consider hiring someone with that know-how. We’re all good at some aspects, but not great at others. So, hire people with the experience and expertise you require. If you’re not able to do that then you’re adding to the risk.

Consider the risks

Diversifying your business means diversifying your attention.

Your aim is to satisfy your client and expand your client base. Therefore, the problem you face with diversifying your business is that you’re putting in staff to develop your new product. If you’re not careful, you end up using all your resources on new possibilities and leaving those you’re currently working on.

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

Do not chew more than you’re able to chew.

Be aware of taking the time to complete this. I’ve seen thousands of businesses over the years who go broke by doing something wrong… all the way to the big, smart ones.

That’s one of the challenges of being a small-scale business owner, he says. You have many of the same problems as the big corporations but less funds to react to and learn from your mistakes. Therefore, you have to be extra cautious.

Changes in the business or any investment in business is very risky. However, it is possible to take good risks and make some very smart decisions, earn yourself a lot of money and have a great time… when you’re prepared.

Exploiting opportunities

Diversification became an imperative in some industries, like the gelato maker who works predominantly as a wholesaler of Gelato vendors and restaurants. However, by February of this year, had begun to notice issues appearing ahead.

"I did not really believe it was going to affect us that much, after seeing the news coming from overseas"

But then one of their biggest customers, whose business relied heavily on tourists from overseas, stopped making orders.

At this point the group was one week in lockdown and realized they required a plan for diversification for them to survive.

"I started to look around to see if there were any other businesses we could purchase that would be in a similar way to our current business"

"I found another company that actually supplied supermarkets. I began to work on purchasing part of the company during lockdown, and eventually bought 50% of the company."

That move didn’t just provide a new customer base; it also allowed them to enter into new business.

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

"If we enter another lockdown or something happens it’s still the grocery side of the company that will continue to operate."

It was the perfect illustration of a company taking the chance to improve an advantage the company already had.

It can feel like a do-or-die scenario. However, jumping into the wrong things could cause harm over the long term.

"Part of the issue is that, when people get into trouble they take poor decisions. Particularly, now with the impact of COVID-19" he declares. "So my advice is to get some non-emotional advice from someone who’s not associated with your business.

"If you’re experiencing emotional distress or financially and you’re feeling stressed and piled up, then go and seek help. Pick up the phone and talk to someone. There are a lot of smart individuals who can help, so don’t do it all by yourself."