how to diversify a small business – GoForth Institute Blog

Why diversify your business offerings

Why should you diversify what your small business offers? Here are some reasons why you might consider it.

Diversification is a buffer against slowdowns

You may have perfected a certain product or service that your customers love, but what happens when demand drops? As a rule, customers love variety and innovation. If your coffee shop has offered the same four styles of coffee and same four pastries for years, of course the new place down the street will attract some of your customers.

Resting too heavily on your laurels can leave you unprepared in a changing market. Diversify your products or services and you’ll stay competitive in times of reduced customer demand or economic slowdowns.

Planning your small business diversification

When planning ways to diversify your small business, ask yourself two things: 1) Does it make sense for my business? and; 2) Will it be profitable? Offering small, easy breakfasts at your coffee shop might make sense, but opening a dog grooming centre won’t (that’s not to say, however, that opening a second separate dog grooming business is a bad idea).

As we always like to say at GoForth Institute – do your research! What are your customers asking for, either directly or indirectly? What are your competitors doing to stay appealing? What trends is your industry loving – or hating?

Ways to diversify your business

Here are a few ways you can diversify your small business:

Target new markets – Some customers might not care so much about your coffee shop’s amazing lattes, so why not become experts in tea as well? Get creative and look for markets that complement your own.
Consider partnering – What opportunities are out there for partnership with companies related to your business, but not directly competing? Back to the coffee shop example – getting involved as a coffee supplier for local events will expose your killer espresso to people who may not have heard of you before.
Go out of your “comfort zone” altogether – Were you the first to introduce fair-trade coffee beans in your town? Do you know everything about espresso? Why not offer your expertise outside the coffee shop? Consider speaking engagements on the importance of fair trade, consulting services to other cafés looking to make the switch, or offering “espresso-at-home” lessons to private groups.
Go virtual – Can you use technological solutions or the internet to increase your business? Perhaps you can sell your café’s special roast online, or even your favourite coffee-related products.

Diversification in small business is often tricky to figure out, but infinitely rewarding. Not only will you have a bit of protection against reduced demand, but you’ll be learning a thing or two as well. As always, plan everything out on paper first, consult your advisors and – most importantly – have fun!

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How to diversify your rural business – and why you should

Note: This article was originally posted in February 2014. This updated article contains refreshed links and up-to-date information.

diversify-rural-business According to Statistics Canada, 28% of Canada’s small and medium-sized enterprises (SMEs) are rural-based. Running a small business can be challenging at the best of times, but rural entrepreneurs face additional hurdles: Industry changes, technology replacing human labour, and a steady trend of youth migrating away. Rural-based entrepreneurs, especially those in remote areas, can be challenged even more by lack of access to training (ahem – this is why we put our small business program 100% online!), and a greater distance from markets and business services. Compared to your urban counterparts, you may also be be affected more by the level of taxation, insurance rates, low profitability and government regulations.

Reducing your business’ dependence on one industry or income stream can help you mitigate these risks. Here are six ways to help you diversify your rural business.

Engage existing customers. Know what they are buying from you and what they’re not. Keep track of the products and services you sell every day. Find out what customers love about your products and services, and what they wished you would offer. According to MIT professor Eric Von Hippel, 70% of new product ideas come from customers. If you don’t ask, how will you know what your customers want?
Engage new customers. Take a close look at your product or service offerings. Are there customer segments who are not currently buying your products? Could you tempt them over to you with a little product tweaking? Oil Can Charlie’s is a North Battleford SK oil change shop, but owner Jay Bottomley also opened Betty Bubbles next door – a car and RV wash.
Take stock of your company’s strengths. Can those strengths be turned into a new product and new market combination? Caterpillar leveraged their popularity in the heavy equipment industry with the launch of Caterpillar Apparel.
Challenge your competitors. Scope out your competition. Visit them if you can – become a customer. This works best for retail businesses but your goal is to find out what they are offering, how and how well. Can you do better?
Think ahead. Where is your market going? What are they doing? What are their likes and dislikes? Do an environmental analysis of trends that may impact you, your business or your customers in the future – and position your business accordingly. Look for emerging trends in society, technology, the economy, and politics.
Investigate partnerships. Is there a business in your area that isn’t direct competition and could work well with your business? For example, a flower farming business could partner with a local country market to teach a flower arranging workshop, or rent out an unused building as a wedding venue (with the appeal of local flowers!).

Local economic development groups in your area, such as Community Futures, are great for suggesting diversification strategies that suit your business and local market.

Diversification can reduce your business risk and maximize your opportunities to grow business operations while leveraging your company’s resources, materials, talent and success so far. You’ve heard the expression, “Don’t put all your eggs in one basket!” That’s the best reason of all to pursue a diversified strategy.

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From the archives: Six ways to diversify your rural business

rural-small-business It’s a new year, and you’re likely reviewing your small business’ goals for 2014 and the future. If you run a rural business, you might have wondered how you can diversify in order to give yourself extra income streams in case the going gets tough. It can help you grow your business in unique ways while ensuring your risk stays as low as possible.

So, how do you diversify? It’s not as hard as you may be thinking! In 2012, we wrote a blog post about how to diversify your rural business, and gave six tips to get started. Check out our post on diversifying rural small businesses and get a head-start on managing your business’ risk.

Let us know what you think!

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Six ways to diversify your rural business

According to Statistics Canada, 28% of Canada’s 1.4 million small and medium-sized enterprises (SMEs) are rural-based. Running a small business can be challenging at the best of times, but rural entrepreneurs and communities face a number of additional hurdles: Outdated industries, technology replacing human labour, and a steady trend of out-migration by youth. Rural-based entrepreneurs, particularly those in remote areas, can be challenged even more by access to education and training, increased distance to markets and business services. You may also be be affected more by the level of taxation, insurance rates, low profitability and government regulations than urban-based businesses.

Diversifying your rural business can help. Reducing your business’ dependence on one industry or income stream can help you weather the storm if things get rough. Here are six ways to help you diversify your rural business.

Engage existing customers. Know what they are buying from you and what they’re not. Keep track of the products and services you sell every day. Find out what customers love about your products and services, and what they wished you would offer. According to MIT professor Eric Von Hippel, seventy percent of new product ideas come from customers. If you don’t ask, how will you know what your customers want?
Engage new customers. Take a close look at your product or service offerings. Are there customer segments who are not currently buying your products that could with a little product tweaking? EZGO did just that. They modified their successful golf cart product line and started selling them to shopping malls and airports and have recently launched their first street legal vehicle.
Take stock of your company’s strengths or core competencies. Can those strengths be leveraged into a new product and new market combination? Caterpillar leveraged their brand awareness as a global leader in the heavy equipment industry with the launch of Caterpillar Apparel.
Challenge your competitors. Conduct a competitive benchmark – that’s a fancy term for snooping your competition. Visit your competitors if you can – become a customer. This works best for retailers businesses obviously but your goal is to find out what they are offering, how and how well. Can you do better?
Think ahead. Where is your market going? What are they doing? What are their likes and dislikes? Conduct an environmental analysis of trends that may impact you, your business or your customers in the future and position your business accordingly. Look for emerging trends in society, technology, the economy and in politics.
Investigate partnerships. Is there a business in your area that isn’t direct competition and could work well with your business? For example, a carpenter could partner with a local craftmaker and double their selling power at markets. A group of such businesses working together could mean a boost in local tourism, as well.

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