Diversifying your business can create new income streams, helping it to grow and become more profitable. So how do you go about doing it?
Services and products
The simplest way is to add complimentary services and products to those you already offer. So, if you are a copywriter, you might offer editing or layout design services. If you sell men’s ties, you might try adding shirts and cufflinks. Business owners from all kinds of industries have successfully diversified their income by writing and selling books, monetising blogs and by public speaking.
Or, you could diversify your customer base. This involves brainstorming other groups of customers who might be interested in your products, and specifically marketing to them, with a view to increasing your overall market. Some companies have successfully implemented a social media program to specifically target a younger consumer base. Others have decided to pursue a larger geographic footprint.
This is done by adding product lines totally unrelated to your existing lines. This is easiest if there is potential among your existing customer base for take-up of the new offering – it is a much tougher road if you have a new product and no prospects at all. Having said that, it can certainly be successfully done.
Perform a pivot
This is a term coined in Silicon Valley, where you realise a small branch of the company actually has more potential than the direction you were going in, and so you totally change direction to pursue the other opportunity. Some well known companies who pivoted are Groupon (who started off as a platform for political advocacy) and Twitter (which started off as a podcast-finding service).
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Or, you could perform the mother of all diversification – adding another company to your existing company. Completely starting from the ground up with a brand-new company in a brand-new market. The benefit of this is that you have your existing business – your ‘cash cow’ – to sustain you during the growth phase of the new business.
A word of advice…
While diversification brings many benefits to business, it should always follow a well-thought-out plan. Don’t just jump into something new without having considered the effect on your core business, the money you will need to spend to market and promote the new line, group or business, and the amount of time it will take for the new line, group or business to break even.
If you don’t have a stable and profitable core business, work on improving that before you consider diversification – new products and services could prove to be nothing more than a distraction from your core business, leading you to drop the ball. Wait until your core business is profitable and stable, then think about how you can diversify. Unless you plan to pivot.
Have you tried to diversify your business? What’s your advice?