The call to diversify your business is an alluring one. By having services that span a wide spectrum, you not only increase the number of revenue sources feeding into your company, but you protect it from a catastrophic downturn should a crisis affect your sole market.
There is a lot to consider when attempting to diversify, however. Why is now a good time to diversify? How do you choose which markets to break into? How do you prepare your company and your employees for that change? And how do you maintain a strong foothold in this new industry? Let’s break it down.
Deciding to Diversify
Perhaps the biggest challenge in diversifying your business is knowing when to “press the button” and begin the process. It’s important to take an honest inventory of the strengths and weaknesses of your company, and determine the viability of making a change such as this. How much will current operations be affected by the addition of another service? Should this venture fail, does your company have the infrastructure to absorb the loss? Perhaps your board of directors is pushing for this change. Are they willing to invest in fostering new partnerships with entities that might split your net revenue in exchange for a stronger foothold on the market? Sometimes diversification takes years to become truly successful. Does your business have the tools to help you “go the distance” in the shortest amount of time?
Which Market Needs Your Company?
This is the golden question when it comes to diversifying your business. Note that it is not “which market does our company need to break into?” but rather “which market needs your company?” Indeed there is money to be made anywhere, and in every business, there will be competition. So, what are you offering that is different enough from what’s currently on offer? Identifying these “blind spots” in the market is essential to your success, and your company’s ability to provide similar or better service at greater convenience to the client is proof of your business’s viability.
How Do You Prepare Your Business For the Transition?
There is a lot of ground to cover when it comes to establishing an infrastructure that’s ready for change. First off, identify key associates within or without your organization that will be essential to the expansion. Usually, diversification calls for new branches within the operation to be created; do you need to bring in experts, or can you move people up from within? There’s also the question of your company’s operational systems. Diversification means keeping apprised of all new regulations and best practices, as well as increasing the reliability of your operational pipeline. The integration of a competent enterprise resource planning software (ERP) will help mitigate rough patches during the transition. Finally, you should be prepared to train all relevant employees on what’s needed to make this venture successful.
Remaining a Real Player
After you’ve diversified your company’s services, there’s more to the business than to simply remain in business. You are going to want to justify the change by making a real impact on the market. You are likely familiar with what this entails, as your company has already been successful in other areas. But your ability to forecast which way the winds of business are blowing will come down to the quality of data you are getting each day, and the flexibility of your company to pivot areas of focus within your new wheelhouse. The beauty of a capitalistic market is that success is rewarded by how well you play chess with your competitors. Having healthy data that is stringently protected, promotes collaboration with essential partners, and is (if the business calls for it) lucratively appealing, is your queen piece.