Trying to grow your company in today’s cut-throat business environment is far from easy. You need to constantly be on the lookout for new market opportunities and new ways you can optimize your workflow.
One of the best things you can do to ensure your business’s survival is to diversify your revenue streams and ensure you’re not overly reliant on a single product/sector.
Why is Diversification so Important?
The benefits you get from diversifying your revenue streams are genuinely immeasurable. There are a lot of benefits both big and small:
- Mitigating the risks inherent in running a business: when you’re running a business, you’re constantly facing various risks and challenges. Maybe your imports will get taxed more? Maybe the sector you’re working in faces a slowdown? Maybe one of your products becomes subject to more regulations by the government? If you have a large company, you’ve probably faced all three of these. Diversifying your sources of revenue can help you deal much better with these situations. Imagine the government raises tariffs on one of your imports tomorrow, what will happen next? Well, if that’s the primary and main import that you use in all your products, your company will incur a lot of damages if not outright bankruptcy. On the other hand, if you’ve sufficiently diversified your products, the materials you use, and your sources of revenue, you’ll incur way less damage. Over-reliance on a single product, service, market, etc. is so bad, whole countries’ economy fails due to not diversifying.
- More opportunities and more money: diversification will allow you to capitalize on more opportunities and respond much more quickly to market forces. When you are a business with one revenue stream, you’re practically tied down to whatever you’re doing. If the sector you’re working in did well, you’ll also do well. If they do badly, you’ll most likely do badly as well. On the other hand, if you have multiple revenue streams from multiple sectors, you’ll be able to ride the wave of success of each specific sector. If you see one of your sources of revenue is doing badly, you can just move the capital to your other products/services that are doing well. You’ll be much more versatile.
How Can I Diversify?
The benefits of diversifying are rather clear – anyone taking an econ101 or a business101 class in college should be able to tell you most of the benefits that come from diversification. What’s much harder to do is devising a concrete plan that will allow you to diversify successfully. This requires ingenuity and research. There’s no gameplan set in stone you can follow, the realities of each business and their MO will be different. Nevertheless, there are some general tips you should be following:
- Make use of the internet: try to make sure all your business processes have online representation, and you utilize the internet fully for importing, manufacturing, and distributing products. Having a large internet presence will not only help you become much more adapt to a changing environment but makes it quicker to enact changes and keep your business innovative. The internet is the best way to diversify your consumer base because it is large, it is quantifiable with data, and it is rather inexpensive. There are a lot of novel methods you can use to entice more consumers as well. For example, a recent start-up, Fourthwall, helps you increase your merch sales by allowing you to send a custom thank you message to each buyer. This has hugely benefitted online influencers. There are numerous other programs out there that will be more compatible with your business.
- Constantly keep up to date with national and international markets: make sure you read trustworthy sources like the Economist, Financial Times, The Wall Street Journal, etc. that will help you get a better and more accurate understanding of the state of the economy both locally and worldwide. This will help you be up-to-date and react quickly to opportunities that you might be able to capitalize on.