Five Ways to Diversify Your Business
One of the challenges of growing your business is to understand that even when it is going really well, you can never just sit back and nurse the status quo.
That doesn’t mean you have to run right out and expand, diversify, or add a whole new business without seriously weighing the pros and cons.
Wait until your core business is stable before you start to test your wings in other directions. Otherwise you run a high risk of over-extending yourself and failing.
But once you are on solid ground, diversification looks attractive. It gives you a chance to extend your services over a broader market as well as to garner more sales from current customers. It broadens your brand and can push your winning reputation into high gear.
A great way to start this growth and diversification process is simply to add a service to your existing package of services, or add a related product to your current catalogue.
Think about what problem your current service or product is solving for your clients, and that will lead you to a logical extension of what you can offer. Perhaps you clean chimneys…could you clean the gutters as well? Perhaps you mow lawns…could you prepare the flower beds as well? Perhaps you do bookkeeping…could you do tax preparation as well? If you do food catering, could you add cooking courses? If you deliver keynote addresses, could you add full-day seminars? Or on-line courses?
You can see how one idea will lead to the next and so on.
When you are considering diversifying your business, remember that the easiest customer to sell to is your current customer, so adding a better package for them is a great way to increase business rapidly.
The other way is to reach out to new markets. For example, you might currently operate a website design company and that’s your only offering. Could you also offer a sales training program opening up a whole new market and perhaps finding an innovative way to blend the two?
If you offer life coaching for individuals, could you add a special program geared solely to helping people find the best career to match their skillset and personality? Could you package a separate package on debt counselling?
If you run a massage therapy practice, could you partner with an esthetician and add manicures and pedicures to your business? Could you offer yoga classes or tai chi?
When you grow this way, you can supercharge your growth.
Diversification is also done by adding a completely different business to your package of entrepreneurial ventures. This is more challenging, but the advantage is that if one industry sector is impacted by an economic downturn, the other business will help you sustain yourself.
For example, a professional tutor might decide to open an essential oils business as well. An accountant might decide to build an app to showcase his passion for fitness.
The most important thing to remember about diversification is that it is best not to spread yourself too thin, especially at the start of your entrepreneurial career. Make sure that your core business is stable before you start to branch out, or you face a real danger of over-extending yourself and failing on two business counts because you cannot devote the attention a growing business needs.
You also need to be aware that like all growth practices, diversification comes with some risks attached. For example, if you take the profits from your healthy initial business and sink them into your second business and it fails, it can cost you a lot of money. It will also increase your costs of doing business, and even if your revenue increases, your profits could slide.
That is why is it so important to do excellent research and planning before going down the diversification road.
Here are some serious questions to be answered before you make the jump:
- Do I have the right people on my team to make this diversification successful?
- If I am extending myself into an area of business that is not part of my core knowledge base, do I have a manager I trust that can fill in those gaps for me?
- Do I have the time to devote to growing more than one business concurrently?
- Can I extend my core values of business into my new company?
- Will the culture I create in my business be adaptable to this new venture?
- Do I have a passion for this second business, or am I doing it solely because I think it is time I should think this way?
- Is my first business strong enough to allow me to divert some of my time and energy away from it?
- How do my business interests converge? Can I find ways to ensure that I am not spread across too broad an expanse of interests?
- Ask the two essential questions about your new business that guide the establishment of your current business. That is: What will my customers buy? What am I producing or selling? If your answers are not aligned, you are heading for trouble.
Finally, it is a good idea to spend a little time studying some of the most successful examples of diversification that exist today. Think about Disney Corporation with their amusement parks and cruise line. Think about Johnson and Johnson blending their Band-Aids with antibiotics. Think about Google acquiring Urchin and Measure Map, web data analysis tools.
In all cases you can see a natural growth of how one thing simply leads to another. Can your second idea blend as seamlessly with your first business?
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Paula Morand, CSP is a leadership building, revenue boosting, strategy expanding keynote speaker, author and visionary. This dreaming big and being bold leadership expert and brand strategist brings her vibrant energy, humor and wisdom to ignite individuals, organizations and communities to lead change, growth and bold impact. 24 years, 27,000 clients, 34 countries, 15 books, former radio personality, 11x award winning entrepreneur and humorous emcee.
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