The pandemic taught a valuable lesson—the need to adapt and diversify. Those that did—restaurants that launched take-out orders and outdoor dining, bricks-and-mortar stores that began online selling—were the ones that survived that crisis. If and when a recession hits, diversifying your business now can cushion you and help you survive. Even if there’s no recession, diversifying can certainly increase your revenue. Here are some ways to diversify. They’re not new ideas, but may be new to your business plan.
5 Ways to Diversify Your Business
1. Expand your product line
Whether you provide goods or services, you can add to your offering and create another revenue stream. For retailers, it can simply be adding new inventory items. For a landscaping business that normally provides lawn maintenance services, it may be adding paving services. Adding new products or services that are complimentary to your existing line is called horizontal diversification. Expanding along your same line is called vertical diversification.
Consider what our existing customers and clients want that you don’t currently offer, but could offer to them. Expansion may entail initial cost and perhaps even training for you and your staff. The investment in expansion can pay off…to help you weather a recession or, if there’s no recession, grow your profits.
2. Add products to a service business
Service businesses typically are compensated in fees for work performed. But many service businesses can add a product line and create another source of revenue. Many a hair salon also sells hair products. Adding products that have marketing synergies with your existing line is called concentric diversification. If you add new products that are entirely different from your existing business, it is called conglomerate diversification.
Some service businesses will need to get creative to package a product for sale. Someone in marketing could create and sell templates for marketing purposes. Professionals may create and sell books. Typically, books are not big revenue generators, but can be important in attracting new clients.
3. Cover more geography
If you are within a fixed location, expand it. This can mean moving into new markets—perhaps abroad. The SBA offers help for going global.
Covering more geography can mean adding online sales opportunities. An existing website designed for a local business probably would need to be changed to accommodate online selling. Shopify, an ecommerce platform to sell online, offers a free 3-month trial.
4. Diversify your workforce
You always want the best employees, but consider diversifying your staff as a defensive and offensive measure. Why? It’s been said that “diversity of thought, background, and opinions helps drive change within your organization.” It can result in a significant increase in your bottom line (depending on what report you read, this could be 20%, 30%, or even more). A diverse workforce can make your company stronger and better able to withstand economic challenges.
5. Add technologies
Maybe you don’t think of this action as diversification, but introducing new technologies adds additional ways to get things done and usually at a lower cost than with traditional ways. The pandemic taught us how to meet virtually through Zoom and other platforms. Even though travel is now an option, zooming saves money and time.
Today, there’s an ever-growing list of technology options suitable for small businesses…chatbots, cloud solutions for collaborative work, and apps for just about everything. If you’re unfamiliar or uncomfortable with new technologies, talk to an expert in the area.
In April 2023, the Conference Board put the probability of a recession within the next 12 months at 99%, likely starting in mid-2023. Last month, it was reported that the prospects of a recession looked less certain.
My take: listen to Socrates: “the secret of change is to focus all of your energy not on fighting the old, but on building the new.”
By building your business, you can defend against an economic downturn and, whether or not there is one, you’ll be positioned to grow.
Read more about recession-proofing your business in these blog posts.