By Tyler Bray, owner, The Trailer Parts Outlet.
Every business, no matter how big, reaches a point where it can’t quite tell how to scale up from its current status. Sometimes, it’s easier to grow outward than upward.
By that, I mean that the biggest driver of growth is often not expansion, but diversification. When you diversify, you also make your organization more adaptable and ready to meet the future.
As I branch out into new business ventures, I want to explain why to diversify, how to do it and what it can do for your business in terms of expansion and adaptability.
Why Should You Diversify?
Diversification can be visualized as a table. One-legged tables do exist, but they are not as stable as three-legged tables. Three-legged tables are great, but often a four-legged table can stand even if you remove one of the legs. Basically, diversification is adaptability. Every entrepreneur knows that the market is shifting under everyone’s feet at all times. However, if there are more facets to your business, you can develop the one that is best suited to new evolutions in the business landscape.
For example, let’s say you owned a food truck, but you started really diversifying into delivery services. You built up your roster of drivers, bikers and runners. You got insulated delivery bags, uniforms, everything they need. You fine-tuned your online menu and built a great presence on popular food delivery apps. Then lockdown hit, and the bulk of your sales (walk-ups to the food truck) vanished.
If you already have a delivery service that your customers have been trained to use, you can adapt to losing walk-up sales rapidly. However, if you launch your delivery service the day you learn you can’t do walk-ups anymore, you’re behind the eight ball.
To summarize the answer to this question, diversify because it expands your options and revenue streams and it makes you more adaptable.
How Should You Diversify?
Your first act of diversification should not be too unrelated to your core activities. If it’s too unrelated, you are unlikely to have the knowledge or the experience to truly build up that pursuit. Plus, your ventures are more powerful if they can synergize together. If you’re too diversified, your channels won’t be able to support each other.
For example, our previous example of in-person food sales branching out into food delivery is logical, and the relationship is too clear to need explaining. But if you start with a food truck, it would be a stretch to unite that with a passion for figure skating.
Diversify With An Eye To The Future
The pandemic expanded our sense of what could be taken away and how quickly it could vanish. I think one of the best ways to prepare for the future is to ask yourself, “What would I do if this part of my business vanished? How would I solve it if this option disappeared?” Diversify toward solutions to those worst-case scenarios, and in the future, you will be prepared to handle anything.