Diversification can be a great way to grow your business. It allows you to access brand new markets or a larger market share, and grow not just in value but in scope as well.
If you want to achieve your business’s growth objectives, diversification could be an option to consider. Mergers or buyouts are ways to diversify your business by gaining a fully established new market, but here we’ll focus on how you can do it by changing just yourself.
This article explains 3 simple steps you can use to prepare your business to diversify.
What does diversification mean?
Diversifying a business means expanding its operations into something new. This could be taking the same products into a new market, adding new products to your existing market, or trying something completely new. Each comes with its own inherent risks, and it’s important to plan thoroughly using tools such as Ansoff’s Box.
It opens up access to a larger audience and therefore a larger number of potential sales. If you want to grow your business, you need to be making more sales, so you can see the value.
3 steps to prepare
If you decide you want to diversify, it’s best to figure out what route is best for your business. When preparing for diversification, there are some important questions to ask yourself. By understanding these things, your expansion will be able to start from a strong position.
1. Evaluate your growth strategy
Before changing anything, you need to truly understand what you’re already doing. Evaluating your existing growth strategy should help you dig deep into your business.
The steps involved in reviewing strategy will help you pin down what your business already does well and which changes would most easily fit it. Knowing your existing operations like the back of your hand can reveal new diversification options. Meanwhile, reminding yourself of your current strategies prevents you from getting in your own way with any proposed changes.
2. Involve your customers
Did you know that it is much cheaper to market to an existing customer than to a new one? It can be as much as 25x more expensive to create a customer, so your customer base is a resource you don’t want to forget. Survey your market and learn what other pain points you can provide a solution for.
Finding out why your customers chose you can help give a picture of where to go next. Are the products that many of them wish you also supplied? Are there markets that a lot of them also belong to?
Your loyal customers will always be happy to help a business they like. They trust you, so getting more from you is great for them, and they’ll be happy to advocate for you in whole new markets.
3. Research, research, research
You can’t diversify without there being some risk to it. You’re trying something new and stepping into something untested. Research is your friend in such situations.
Try to understand as much as possible as you design your expansion. Explore as many options as you can so that you can weigh up what’s best for you.
If you manufacture a product, find out what else you could produce with the tools you already own. If you provide a service, what other sectors could benefit from your service?
Do your market research on a number of adjacent or even completely separate markets or industries. You may be surprised by the level of crossover that exists for you to expand across.
Diversification for your business growth
Preparations for diversification are all about knowing yourself and your place in the business world. Knowing what your business is great at and where those strengths can be put to good use is crucial to diversifying.
If your business excels in a certain skill, explore and explore until you find out everywhere you’re in demand. These are your easy diversification options. You don’t need to tear up everything you know to grow your business outwards.
Understanding your current growth is an important first step, and there are tools out there to help you with this. Get started with your free, personalised growth report, breaking down your business into its main sections and providing a prioritised action summary. You can get your own report with the Scale-up Growth Diagnostic.