Just like in your investment portfolio, diversification is important for your business too. Before we dive right into the ways you can diversify your business, let’s define what diversification really is. In terms of investing, diversification means ensuring that you spread your capital amongst different investments. The reason to do this is so that your success is not contingent on one revenue stream. The same is true for diversification with your business. Being dependent on only one revenue source can put your business at risk. There are many concrete reasons that speak to the benefits of diversification, such as:
- Reducing the impact of market volatility – A diversified business minimizes the overall risk associated with market fluctuations. With diversity, your business becomes stronger in the face of external factors.
- Offering peace of mind knowing that you have more than just one revenue stream – As you know, the business owner has much to worry about. With multiple diverse revenue streams flowing into the company, this worry lessens. Peace of mind is more than just a good night’s sleep, it can also impact growth projections, hiring decisions, and capital investments.
- Allowing the business to pivot when needed toward another source of income – As we’ve all experienced in the past, anything can happen. And, sometimes, that anything can impact a business’s source of income. With diversification already in place, should something happen to one revenue stream, you are able to pivot to another area of the business to shore up your sources of income.
- Creates cross-pollination opportunities for new customer segments to interact with your business – Your diversified product or service can tap into new markets and new customer targets that may align with your core offerings. In other words, your diversification can turn into a prospect pipeline from one area of your business to another.
Let us explore some tips on how to get started.
4 Easy Ways to Diversify Your Business
- Broaden services – What ancillary services or products could you be offering right now that you don’t? What are your customers asking you to offer all the time? What new demand do you see in your market that is untapped? What are you giving away for free that you could package and sell? Your first step in adding a new product or service usually can be found in the answer to these questions. Rather than trying to recreate the proverbial wheel, start with what you know. Starting small and simple is okay too.
- Increase customer base – Diversification for your business could come in the form of reaching into new markets or attracting new customers for your same product or service. This option might require a new marketing approach but can be one of the most seamless ways to get diversified quickly.
- Recurring revenue stream – A subscription model or any kind of recurring revenue stream is a perfect way to diversify your business. Packaging up your existing services and presenting them as a subscription, monthly box or any variation of a monthly/yearly service can add a new segment to your business. This “stickiness” creates stronger bonds with your customers and helps you plan for growth over time.
- Increase customer value – By adding more services (aka diversifying), you are also adding value for your customers – future and present. This customer experience leads to brand loyalty, long-term relationships and word-of-mouth marketing…it is the ultimate win-win!
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