How to diversify your business
Many great businesses have multiple sources of income, and the advantages of diversification have been well and truly reinforced by the recent pandemic shutdowns. Now when many business owners begin to re-emerge from the COVID-19 lockdown, concerns about futureproofing are being asked. What can you do to ensure that your business thriving again when borders are closed? Does your existing product work in the ‘new normal? Perhaps, most importantly what can you do to be prepared should we have to go back into lockdown again? The answer may lie in diversification of your business.
Why diversify?
This is something experts have observed play out in the first quarter of the unusual year that has been 2020.
Diversification in your business is a way to decrease your risk when operating in an unpredictable economic environment. It is a way to have a back-up plan should things go wrong.
Diversification can protect you not only from shocks that aren’t anticipated, such as COVID-19 as well as from common issues like when new competitors crop up.
There are many diversification opportunities on the market, however there’s plenty to be aware of before deciding to dive in fully.
We don’t suggest to anybody to undertake something crazy – like invest massive amounts of money in something you are just not comfortable with. But if people think about their current business environment and know-how - there are always peripherals around that they’re not obligated to be in which could offer enormous opportunities for them because they’re still their home.
Getting started
Before beginning your journey into diversification, it’s crucial to complete your homework.
Know where you’re heading and who your rivals are - especially if you’re going into a market that isn’t yet established.
In this case, if you’re producing machinery for the food industry, then the best source could be consumables. In a healthy economic environment, the machinery will be selling, but in a not so good economy, like right now, people are buying consumables.
In the event that you do not have knowledge of the market you’re attempting to enter, it’s like driving on the highway with your blindfold on.
It is recommended to remain with the things you are familiar with particularly if it’s your first time to dip your toe into the pool of diversification.
If you’re planning to diversify into a market that isn’t within your business expertise or skills is a must, so you should consider hiring someone with that experience. We’re all adept at certain things and not so good in other areas. Therefore, it is important to hire individuals with the expertise and experience 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 a broader focus.
The goal is to please your client and expand your client base. This means that the issue you face when you expand your business is that you’re putting in staff to develop your new product. If you’re not careful, you’ll end up using all your staff on the new opportunities and leave the existing ones in place.
It’s essential to make sure your business is satisfying the customers that you already have while growing those who are your customers.
Don’t bite off more than you are able to chew.
Be aware of taking the time in doing this. I’ve observed a multitude of businesses over the years who go broken because of doing the wrong thing… even the biggest, most intelligent ones.
That’s the difficulty of being a small company owner, he states. You face many of the same challenges like big companies, but you’re not able to have the resources to respond to and recover from your mistakes, so you need to be careful.
Changes in the business or investment in business comes with not without risk, but there are some excellent risks and make really smart moves, make you a significant amount of money and succeed… when you’re prepared.
Seizing opportunities
Diversification was an essential requirement for certain businesses, such as one that makes gelato, which operates predominantly as a wholesaler of restaurants and gelato sellers. But by February of this year, they began to notice issues appearing in the near future.
"I did not think it would impact us that much, after seeing the news coming from outside the United States"
But then one of their major customers, whose business relied heavily on tourists from abroad 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 in order to be able to get through.
"I started to look around to see if there were any other businesses we could invest in that might be a good match to what we do"
"I found another company that actually supplied supermarkets. I began to work on purchasing part of the company during lockdown and ended up buying 50percent of the business."
This move didn’t just provide a new customer base. It also gave the company to expand their business.
"Their manufacturing was performed by a third-party contractor. So, by us buying it, we’ve actually bought their manufacturing contract"
"If we are forced to go through another lockdown, or something goes wrong, then we’ve still got the supermarket aspect of the business which will continue."
It was the perfect illustration of a company taking the chance to improve its strengths that its already has.
It can feel like a do-or-die scenario. However, jumping into the wrong things could hurt you in the end.
"Part of the problem is that when people get caught in trouble, they take the wrong choices. Particularly, now with the impact of COVID-19," He says. "So I would suggest to seek out non-emotional guidance from someone who’s not associated with your business.
"If you’re experiencing emotional distress or financially, and stress is piling up, then get some help. Pick up the phone and talk to someone. There are a lot of smart people around who could assist you, so don’t attempt to do the whole thing by yourself."
