Diversify your business

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Celesta Lee | 21 Sep, 2010
In business, diversification is the equivalent to not put all your eggs in one basket. This is sound advice to many aspects of our lives but more so in business. There are so many uncertainties in the business world, such as the ups and downs of the stock market, a new technology that now makes the previous version obsolete,or a new product or service that outperforms others that are similar to it.

Focusing all your business attention on a hot money-maker today can potentially make you a lot of money up front, but what happens to your income when the product cools or is replaced and you have no other income stream available?

Three ways to diversify your business:
Introduce new but related products or services to the existing market. This gives more choices to the existing customers, like new flavors, new styles and colors, or new versions of the products. This will also draw new customers who may not have cared for your original products but prefer your new offers.

Expand the market reach of the present line of products or services. This is the expected move if the present market is already near its saturation point. Reaching out for a wider market is bound to increase sales volume.

Introduce new products for a new market. This is the combination of the first two ways of diversification. The recommended move is if it research determines that new products are needed in a new market.

When to diversify your business:
Do a thorough and reliable research on the potential market and potential customers of the products to be offered. The result could help guide any possible modifications to make the product or service more matched with the customer.

Find the availability of resources to carry out the necessary research, product development and product/market testing. Lack of resources could delay the completion of the product or service to market.

Determine the availability of resources to cope with the results of diversification. Hopefully, the resources needed are for the increase of demands for the products or services as a consequence of the diversification.

Diversifying your business can carry a lot of risks and a thorough study should proceed any move. There is no single rule and it depends on a lot of factors that are determined through research and data analysis. But keeping up with your market trends and diversifying into several areas related to your product or service will create more avenues of profits, should the times change and you are left holding a basket of broken eggs.

(Source: Articlesbase)
* Celesta Lee is a freelance writer
* The views expressed by the author in this feature are entirely his/her own and do not necessarily reflect the views of SME Times.