Reducing the uncertainty: how to diversify your business

It’s been a major challenge to trade during the past few years of economic uncertainty. Markets are changing, customer spending behaviour is up and down, and the rising costs of raw materials and labour have put real pressure on your margins and overall gross profit.

In this atmosphere of uncertainty, it’s sensible to diversify your business and explore new ways to locate new customers, generate revenues and find some stability for the business.

Let’s look at five key ideas for embracing diversification in your company strategy

1. Horizontal integration: increasing your appeal to existing customers

Think about developing and launching new products or services that appeal specifically to your current customer base. Your existing customers already have real brand loyalty and trust in the company, so this can be a great opportunity to increase the lifetime value of every customer.

2. Market development: exploring new and diverse markets

If you’re focused on one core market, it’s a good idea to expand your current core offerings into entirely new geographical regions or digital marketplaces. This helps you reach a more diverse range of customers without fundamentally changing your existing product line.

3. Vertical integration: taking ownership of key areas of production

How much of your margin is eaten up by supplier costs? Taking direct control of your supply chain or distribution channels can help you reduce your third-party costs and take a greater level of control over the production process. Lower costs also help to boost your profit margins.

4. New audience targeting: focusing on new customer demographics

Bringing new customer segments on board is one way to broaden out your appeal and your revenue potential. Try repackaging or rebranding your existing core products to solve specific, high-value problems for a completely different industry sector or consumer group.

5. Service extension: offering a deeper range of services

Pairing enhanced service features with your existing products is a good way to upsell to customers. Complement your physical products with high-margin, subscription-based maintenance, higher levels of customer support or specialised digital training programs.