If you can’t grow up – grow out!
Walt Disney said “dream, diversify and never miss an angle.”
Diversification – the act, or art, of increasing the range of products offered in similar of different fields.
The more products we sell the more people we help and the more money we make. But it comes at a cost – often discomfort, invariably time. Testing new products, new markets, learning new information can spice things up and means all our eggs aren’t in one basket.
There’s many advantages and disadvantages to diversification.
First up, why diversify? Let’s say you sell oranges. What else might your customers want? Apples, lemons, kiwifruit and other fruit. Do now you’re into most things fruit so why not move into vegetables as well? And why not add meat to the line up? Besides fresh produce, what about cereal? Keep going and you’ll turn into a supermarket and if we look around us we will see that those who stayed selling fruit, vegetables or meat have all but disappeared. Diversify or die was the catchy to their industry.
Take a camera store. At one time they sold camera’s, film and accessories. It was specialised, it still is and it still has a niche following for the enthusiast. But for the majority, photography needs have been swallowed up by the diversifying electronics stores with Digital Cameras, memory sticks and accessories plus computers, home appliances and much more.
On a smaller scale, A lot of this diversification came about because businesses were forced grow or slow. But diversification has advantages that shouldn’t only be utilised as a reaction – we should be on the lookout for opportunities all the time because it’s convenient for our customers and often our overheads increase much with more products or services, only our revenue! Diversification can be the best use of surplus capital or time and help keep us fresh and invigorated at the same time – but it doesn’t come without risk.
Diversification bring multiple revenue streams. In big business, diversification usually means hedging your bets. It’s a form of insurance that if one product slows another takes up the slack. Taken to the extreme, hedging is the investment in product opposites like sun lotion and umbrellas – one sells in the sun and no tin the rain and vice versa.
The disadvantages of diversification may include losing focus of your core product. You may start treading on peoples toes and damaging personal or business relationships. If resources need to be borrowed, will you spread yourself too thin? A serious question you need to ask is – can my existing business continue to operate effectively on less time, less money?
Diversification usually spreads out from your core business. A photographer may work with graphic designers, hair stylists, videographers, and wedding planners. What if they branched into these businesses? You could do he work yourself or form partnerships with those who do. Your payment, in the latter, would be by kick backs or commission. Your customer benefits only dealing with one – you become the photography supermarket. Unfortunately, those who previously designed, styled, videoed or planned may choose not to deal with you any longer. Worth it? Maybe, maybe not. A non-partnership, more product-focused diversification could be a florist who starts selling gift cards, chocolates, confectionary, vases, balloons, ribbons, and delivering thus becoming the special occasion supermarket. In neither scenario is it guaranteed customers will take advantage of your extra services. The questions is, how easy, or difficult, or risky, is it to test the market and ss the upside worth the risk?
So what is diversification’s golden rule? Add one extra string to your bow at a time. Don’t spread yourself too thin. Concentrate on your core business, your trunk, before growing branches. Second rule? Work on one branch at a time until it is complete – implemented or culled. Discipline will prevent having too many irons in the fire and the subsequent stress and distraction – stay focused! And stay close to your core product. It’s likely where your passion and purpose lie plus your expertise and experience. Risk is reduced when you grown from what you know.
Lastly, diversification can be made in regards to your suppliers and customers too! Do you need to rely on who currently buys from you or who you buy from? Suppliers run into problems delivering or sourcing just as often as we do. What other options are there? Are they more negotiable? Are there fringe benefits? And customers, relying on large or few customers is risky. Extending our customer base is protection and prudent and could mean surprising growth. Are you complacent? Have you tried recently to source stock or attract customers through different avenues; online, offline, locally, overseas, or with an environmental, ethical, or social advantage?
If your business is going gang-busters, make hay while the sunshines. If not, look around for opportunities to branch out into new fields, without getting too far away from your expertise. You can do anything but we cannot do everything. If you can’t grow up – grow out!