I’ve noticed that in a lot of respects, people are like ants. They go about their lives serving the purpose they know best. Some are workers, some are queens, some are gatherers, some are builders. There’s nothing wrong with this mentality as long as it’s not the tunnel vision by which you measure the whole of your life.
The same can be said for business. Having a company march along carrying the fruit of it’s successes is all well and good. But what happens when the seasons change? If a business only has one core competency and it puts it’s eggs in that basket, what happens when the tides of the market change and that primary product or service is obsolete? What if suddenly produced cheaper or higher quality elsewhere? What if your product suddenly is replaced in the market place by a competing product? What happens to a business that counted on that one product for the bulk of it’s sales? It sinks, and quickly.
Here’s a few ways to diversify your business in a controllable (And most likely profitable) way:
- Go with what you know. While this statement might seem counterproductive to this post as a whole, consider it from another angle. You were profitable with your niche to this point. Are there similar products or services you could be offering to compliment your existing product or give it more value?
- Test the waters with other products made from the same materials or similar processes. Perhaps the same plastics you use or the same molds you use or the same accessories you purchase can be reconfigured into a whole new product. The idea of offering many products from the same base materials gives you diversity without changing inventory.
- Look at what doesn’t work about your product and make something new from those flaws. If you look at any software company, auto maker or, well, pretty much any company that has been around a while, you will see this trend. By using consumer test groups, customer feedback and good old product testing, you’ll see what does and doesn’t work about
- Knock out the competition with special features. Find something about your product line that the competition doesn’t have and make a push to market this feature. Play it up as if this feature is the greatest thing since sliced bread and your customers get the first chance at it.
- Consider buying up a failing business. It can be said with confidence that many failing businesses are not the fault of a bad idea or an unnecessary product, but rather of poor management or bad allocation of resources. Just as large companies often swallow up competitors and companion companies to bolster their product offerings, even a small company can do so on a micro level. If you see a business that somehow compliments yours that is in dire straights, consider the benefits of adding their services, products and possibly staff to your organization. If the chips or down, you may be able to scoop up these troubled companies at a bargain price.
- If you can’t buy it, better it. If you like what another company is doing and they won’t sell the product or the company to you, find ways to improve on their idea. Be respectful of patents and copyrights, but move swiftly in finding ways to better something they have done. Many copyrights are written about specific parts or specific functions, not a general idea. Perhaps you can improve on something they were doing or take their idea a different direction.
If you feel like you can’t diversify your product line, consider what you can do to diversify your risk. I’ll be making a post in the coming days about strategies to diversify your risk as a business owner and having an exit strategy in case you find yourself in a situation without an upside.
