Is a large percentage of your business tied to one product or service?
Is what you offer niche enough that it would be easy for a new competitor to open up shop and threaten your space in the market?
Does 10 percent or more of your business rely on one important client or account?
If you answered yes to any of these questions, it’s time to think about diversifying your business.
History has not been kind to business leaders that become too comfortable with the status quo the market changes constantly and those who anticipate and prepare always come out on top.
Whether you are looking to expand or simply maintain your current success, there are plenty of ways to diversify your business.
Expand What You Offer
The most obvious way to diversify your business model is to add new products and services. Expanding what you offer opens your business up to an entirely new set of customers, and pads you against being too niche. It also allows you to pitch existing clients on choosing your business to fulfill more of their needs most clients prefer the simplicity of bundling services, especially if you offer a discount.
While expanding product and service offerings can be lucrative, it is also the riskiest diversification strategy. It might be wise to bring in a professional consultant to assist you, especially if your brand is well-established in your area and known for a specific product type. Household names like Ford, Pepsi, and McDonald’s have released seemingly amazing new products that were complete flops don’t make the mistake of thinking it can’t happen to your business too.
Explore New Clients or Markets
It may not be possible for you to expand product offerings at this time, but you can certainly change how you interact with current clients and prospect for new customers. Are you hyper-focused on your largest client, customizing your product to their needs and neglecting smaller accounts? It may be time to set some aggressive goals for new customer acquisition.
While you want to offer the best customer service possible, it could be in the business’s best interest to have several smaller clients in lieu of one large account that may remove their business and leave a large hole in your revenue stream. Take a hard look at your business’s customer concentration how your total revenue is distributed among your customer base and make sure you aren’t leaving yourself in a vulnerable position.
Even changes in the location and operations of your business can open up new markets. For instance, many businesses have gained clients and cut operations costs by becoming more sustainable. Consider relocating to a LEED Certified building, choosing more eco-friendly suppliers, going paperless, or investing in greener shipping methods.
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Diversify Marketing and Sales Tactics
While it may be comfortable to rely on the same tried-and-true marketing and sales tactics that have always brought your business success, if you want to expand and diversify, it’s imperative to explore new ways to reach customers and negotiate new accounts.
Try segmenting your customer base and crafting customized marketing and sales campaigns that address their unique needs and demographics. What motivates each customer segment to buy? What types of new products might they be interested in, and how can you change your messaging to appeal to them? Are there opportunities to upsell or ways you could change your pricing to convert at a higher percentage?
Test, Test, and Test Again
Knowing that you need to diversify is only the beginning. Diversification can be risky, and testing your strategy before you deploy it on a large scale is extremely important. It can be tempting to jump in head-first when you have a product concept that could blow open a new market or a unique sales tactic that’s never been tried before but even the best ideas sometimes flop.
Set up some key performance indicators and test several ideas before investing in one or two that have the best returns. Be prepared to fail, and try not to get too attached to a concept keeping an open mind is always best.
While diversifying can seem scary, it’s absolutely necessary for the longevity and health of your business. If you plan intelligently, hire experienced consultants to steer you in the right direction, and test your strategy before deploying it full-scale, the risk can prove to be completely worth the reward.
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