Don’t Put Your Eggs All In One Basket

Diversification is all around us–in nature and in business. For a species to survive, it has to diversify and adapt. In nature, species seek different mates to ensure the best survival of their line. Diversifying your stream of revenue is a good way to ensure that your business is successful in any economy.

WAYS TO DIVERSIFY

There are many ways in which you can diversify your business. You can branch into a new market, develop a new product, acquire another company, partner with another company (like an engineer or home builder) to provide a service or sell products, or become a distributor.

If your business is pumping, then there are many services in that same channel that your customers will need. You could expand to inspections, jetting, installations, repair, dewatering, grease trap pumping or even design. You can also get into a whole new area like portable restrooms. There are many different areas from which to choose. You simply need to figure out which is the best for you and your company.

Expand your network

If you perform septic inspections, meeting local real estate agents and home inspectors can help you grow your business through referrals. Likewise, if you are a septic pumper, getting to know septic inspectors as well as real estate agents can help you make those connections that send business your way without additional expenses or work.

Plan your way

Before you diversify, plan. Mark Lowenstein, a small business advisor with SCORE, suggests that you write a business plan each year. “I know it’s a pain,” admits Lowenstein, “but it’s worth it to see how your business is doing and how you can make it better.” Sometimes, you may identify areas where you can increase efficiency just through some minor tweaks.

Conduct market research to determine if there is a need for another competitor in a service or product area. If there are several competitors in the market, but they aren’t doing a very good job, there still may be a space for you.

If you decide to expand into another service area, then make sure that you have a business plan and marketing plan to accompany that expansion. Marketing that new service to your existing customers will be your first step if that service applies to them.

Figure out what success looks like for you. What are your goals both short-term and long-term? Write them down. Writing down your goals and breaking them down into manageable chunks will help you to develop your plan to success.

There are several things a small business owner wants to ask before diversifying. What are the needs of my current customers? How can I help meet those needs? Do I have the knowledge and experience in that area? Do I know someone who does? Is it the right time to expand? Do I have the funds to expand or will I need to borrow?

“Expanding is like a bull’s-eye,” says Lowenstein. “If you are the circle in the middle, you don’t want to expand more than a couple of rings out. You don’t want to overreach and get yourself into trouble. You don’t want to cannibalize your current business.”

Minimize risk

Diversifying into a new market contains a high level of risk. You need to ensure that you or your employees are skilled in the new market. The worst thing you can do is harm your good reputation with your customers by getting into a new area and providing a subpar product or service.

If you decide to buy another business, there are many things to consider. Lowenstein advises keeping the previous owner on the payroll for at least six months to complete all knowledge transfer and make sure that the customers know that he or she supports you. If you are forming a partnership, then you want to state the terms and agreements up front.

He also advises finding a good CPA and attorney. “A good CPA will help you with your taxes and bookkeeping as well as give you advice,” says Lowenstein. “An attorney will help you write up a good contract or business agreement.”

By diversifying and seeking out strong partners, you can ensure the future and strength of your business.

No comments yet... Be the first to leave a reply!