A business that isn’t moving, changing and improving is in danger of becoming complacent, unable to adapt and, eventually, incapable of operating.

Diversification is an important avenue for growth in all businesses, from the tiniest one-person, home-based operation upwards. It can help you weather general economic or industry-specific slowdowns: relying on a single revenue stream makes you extremely vulnerable during tough times. And the new challenges that arise with diversification can reignite the business owner’s enthusiasm, which may be burning low after a series of major business goals has been achieved.
There are three avenues you can take to diversify your business:
1. Leverage your expertise through the following activities:
Offering consultant or advisory services.
Holding seminars.
Teaching classes.
Obtaining accreditation with a speaker’s bureau and joining the public-speaking circuit.
Writing and publishing a book. Digital publishing makes this a financially viable proposition today, and also makes it easy to keep information current. (For more information, check out the Website of this reputable and ethical publisher: http://www.booklocker.com/getpublished/published.html.)
2. Expand, value add, or find new uses for your range of products and/or services.
3. Seek new client bases by forming strategic partnerships, selling on the Internet, opening a new location, or acquiring another business.
Options one and two are the logical first steps to take in diversifying as you are starting from where you are most successful. The self-explanatory first option carries least risk. While there is more risk attached to the second option, you can minimise this risk by ensuring you maximise usage of your existing assets. So look for products and services that are related to those you already sell, that will interest your current customer base, and that can be distributed through channels already in place. Following these criteria means that (a) you won’t have to devote significant amounts of time getting things operational, and (b) there’s less chance that you’ll run out of both the finance and the energy to see your new project through.
Seek to conquer your niche first. So if you own a sporting-goods and fitness-equipment store, look at expanding the range to include fitness books, videos and magazines, cosmetics designed for active people, sunscreen, sunglasses, hats, and after-sports casual wear. You may also put out a fitness newsletter, establish a database of fitness trainers who can be contracted by individuals or small groups, and provide a consultancy service to people wanting to set up home gymnasiums. However, leave the fully-fledged commercial gym to someone else: it’s a crowded field, it’s expensive and highly specialised in terms of equipment and compliance, and will devour much of your attention because you’ll need to build a new client base.
Similarly, if you manufacture herbal cosmetics, look at adding specialist ranges for men, gardeners, babies and pregnant women rather than opening up a luxurious day spa equipped with beauticians, massage therapists and herbalists.
Sit down with your staff, your business partners and your advisory board (or just your notebook if you are a sole trader!) and hold a brainstorming session for ideas on complementary products or services you can offer your customers. Consider these questions:
• Are you extracting maximum value from your current range of products? (A Tasmanian goat dairy makes the most wonderful chevres and yoghurts, which are distributed throughout the country.  Seconds are sold at a factory outlet - along with a beautiful goats-milk soap made by a local woman who specialises in hand made ‘gourmet’ soaps.)
• How can you add value? (Online share-broking firms offer investment newsletters and a range of courses covering all aspects of investing.)
• Is there some way you could utilise leftover or waste products? (In northern New South Wales, the scores of tonnes of tea tree waste remaining after the oil is extracted are sold as garden mulch.)
• What additional services can you provide? (A CBD art gallery and framing shop periodically holds framing classes for those who want to learn the art themselves – and of course sells all the accoutrements including frames, matte boards and matte cutters.)
Your brainstorming session may generate some fantastic ideas for complementary services that you can’t implement because you lack the resources, the expertise, or the mandatory qualifications to provide them. This is where you should start thinking about potential strategic partnerships.
The two most common forms of strategic partnering are:
• Marketing alliances. A basic marketing alliance sees two businesses that sell complementary products or services joining forces to share their customer databases, which gives each business another list of customers to whom they can market their products and/or services. More sophisticated versions may permit each business to earn royalties, or share revenue from one partner’s sales to the other partner’s customers.
• Product alliances. Two businesses team up to offer their respective customer bases a whole new set of products or services, without the additional overheads usually associated with expanding a product range: sourcing new suppliers, testing products, organising distribution networks, securing extra storage and funding additional inventory investment.
Recent years have seen a proliferation of alliances in North America between one-person public-relations businesses, for they allow access to the types of projects generally available only to large agencies. Members form a team, or ‘virtual agency’, to bid for, or work on, major projects. To ensure these alliances work, certain ground rules apply, including compulsory membership of the national and state professional organisations. As alliance members are expected to adhere to a professional code of ethics, this guarantees consistency of ethics within the alliance.
Ideas for complementary partnerships include a typing/secretarial service and a bookkeeping service; a house/office cleaning contractor and a car detailer; a pet supplies store or veterinary practice and a home pet-care service; a garden centre and an online garden magazine; a nutritional supplements company and a naturopath; small firms of accountants and solicitors with similar specialties, such as small business.
To determine whether, and how, a strategic partner could be beneficial, conduct a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) of your business, something you should be doing annually anyway. Analyse the results against your business’s mission statement to help you identify weaknesses that prevent you from achieving your mission. As an example: an ineffective distribution system may be the weakness that’s hindering you in achieving your mission of becoming a trans-Tasman enterprise. Investigate whether a business partnership could help you extend your reach.
The key to successful partnerships is selecting a business with compatible missions, visions and ethics; reputation; trustworthiness; customer-service orientation; quality focus; capabilities and staff culture.
True, it’s quite a lengthy list of attributes to check, but it’s important to do your due diligence before formalising an agreement: in one USA survey that investigated failed alliances, CEOs agreed that their biggest mistake was choosing the first partner that appeared. Remember, your customers will expect your partners to operate with similar business ethics and philosophies: they trust you and will assume you did your homework. Don’t let them down.
Today, the Internet provides the perfect vehicle for both marketing and product alliances. Marketing alliances are facilitated through a direct link between Websites, while product alliances are activated when a customer clicks onto a product that belongs to the partner’s business and is transported immediately to the other Website. One ubiquitous example is books: click onto a recommended reading list on any Internet article, and chances are you’ll be transported to the Website of Amazon or Barnes and Noble.
So if you don’t currently have a Website, the potential for strategic partnerships is just one reason to consider a setting one up. However, the main reason to have a Web presence is the vast audience of potential customers you can reach. When you consider the number of people who now use the Internet to research their purchases even if they don’t but online, that presence becomes critical.
Aim for a clean, professional, Website that is easy to navigate, quick to load, rich with information. Ideally, it should incorporate a secure e-commerce facility, but if you don’t want to take this step initially, it should at lease provide sufficient details – and photographs, if applicable - of all your products and services to help researchers make an informed decision. Think of how frustrating it is to encounter an intriguingly titled CD or book on an e-commerce site, only to find that there’s not one useful piece of information such as a track listing for the CD, or a summary of what the book is about. How many sales do companies lose because of this dearth of information? Don’t make these mistakes on your site!
Additionally, list all your contact details, the stockists of your products, and a capability statement so that customers won’t experience the frustration of filling a basket only to find when they go to check out that don’t ship overseas. And if you don’t, perhaps it’s time to reconsider. The Internet gives you access to the largest target market anywhere, it’s the most inexpensive way of going global, so if it’s possible to deliver your products and services throughout the world, do so!
Submit your site to all the search engines you can locate, but especially Google, Ask Jeeves and Yahoo for maximum exposure. However, as important as this aspect is, you can’t rely on Internet customers to find your Website through search engines alone. Here’s where we circle right back to partnerships: by aligning your business with successful existing Internet businesses, you can arrange for your business’s Internet address to be displayed on a click-through basis on these Websites.
If your business is powering along and you’ve exploited every opportunity for growth in your geographical location, you may decide to open a bricks-and-mortar branch in another location: in the same city, another city or a regional centre. There are two primary keys to success here:
• Do your market research to determine that a strong demand exists for your product or service in this additional location, for it can take a long time to create demand where little or none currently exists.
• Establish that your potential customers in this new location aren’t current customers of your present location.
Purchasing an existing, complementary business – one whose elements combine well with yours - is another option that can provide increased market share, an untapped customer base, new distribution channels, or give you access to undervalued assets.
Opening a branch or buying another business will devour huge amounts of your time, energy and focus. So before taking either step, ensure that your existing business is operating as efficiently as possible, that you have effective systems in place, and empowered staff you are confident can handle the day-to-day functions and keep the business on track.
However, even if you have great systems and people, don’t become so tied up with your new projects that you lose touch with the old business: it’s all too easy to run it into the ground when your attention is focussed elsewhere, or you’ve spread yourself too thin.
Originally published in Her Business magazine