In business, diversification means spreading out into other marketplaces, industries, or product categories. Although it possesses some risk for a business, it’s often regarded as a good way to achieve growth.
In today’s highly competitive business world, entering into a market can be daunting. It requires a lot of time, effort and luck to find the right idea, to assemble a team, and to reach out to your ideal customers.
Even when you’ve established yourself, you still need to come up with new ideas to market what you’ve chosen to offer. You may need to find alternative methods of connecting with your customers, and also find innovative ways to be on top of current business trends.
However, over time, market share shrinks, customer habits change, and new competitors launch all the time; therefore, learning how to diversify is a crucial element within a growing business.
The value of diversifying
Diversity is one of the salient aspects of business today; it’s critical, especially for small businesses. According to a study, nearly 30% of companies fail to survive past their third year; only 50% survive after five years, and only one in three will make it to ten years or more. The formula behind the success of well-established companies lies in diversity. If you don’t aim to perpetually increase your profit, your business may be doomed. In contrast, diversifying can attract new customers and earn you more profit.
Diversification in your investments
Diversification in an investment strategy can reduce risk by spreading investment across different financial vehicles, companies and industries. Returns are maximised by allocating funds to different areas that react differently to the same event(s).
Why you shouldn’t rely on one income stream
In the current climate, building multiple streams is no longer a luxury; it’s become the need of the hour. With the uncertainty over the economy due to Covid, and various other factors, it’s critical to consider having at least one additional source of income.
Many businesses have had to significantly modify their daily operations, or they’ve even had to shut temporarily. New income streams can make up lost income and keep the business afloat.
How to find new income opportunities
Start by evaluating the market and cutting costs within your business
There’s no point earning more income if you’re not going to spend it wisely. Before looking for extra earning opportunities, ensure your business is as lean as possible, and that every cost is essential.
Stay true to your core business as much as possible to remain competitive
Whilst you may enter new markets in your diversifying adventure, don’t let this activity take you away from your core offering. You don’t want to risk your existing market share whilst trying to tap into other sectors.
Translate your business model to a similar industry
Capitalise on what you already know by replicating what you’ve already achieved in another, similar market.
Make new contacts
New opportunities may lie within your existing database/network of contacts; however, it’s likely that these will already have been explored or exhausted. Concentrate on connecting with new people and widening your network. Join new business groups, ask for introductions to your ideal client via your mutual connections, get out and about where other business owners hang out.
Identify the underlying need you serve
Perhaps there’s a new product/service you could sell that’s a natural complement to something you already offer. To determine if this is the case, rather than focus on the individual product(s), go back to the drawing board and focus on the need you serve and the problem you solve. How could you better your existing solution, and with what?
Turn to content creation and collaborations
New opportunities can come from simply being visible and having conversations with people. Don’t be afraid to stick your head above the parapet; create content that’s a little different to what you normally produce. Open up a stream of dialogue with your customer and indulge in some market research about their needs.
Aim to employ a diverse team
A diverse team can increase the number of specialisms your company could offer to clients. People from different backgrounds, and of different ages, will give you a diverse workforce. Ask your staff what they think you should do - with regards to diversifying, innovating and creating new income streams. After all, they know your business, they are in contact with your current clients, and they will likely have a more objective view of how you could move into new markets.
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