It’s long been said that putting all your eggs in one basket is risky. Many small business owners may fear that risk of becoming a reality.
Take the UK’s farming sector as an example. Faced with extreme weather, policy shifts and volatile prices, farmers have increasingly turned to other sources of income to keep their businesses viable. According to a recent BBC news article, nearly three-quarters now run at least one non-farming enterprise - anything from glamping to beauty salons to wedding venues.
It's not just farming where this lesson applies: when your main income stream becomes unpredictable or limited, diversification can help stabilise your business.
What does diversification look like?
In business terms, diversification means creating additional income streams that don’t rely on your core product or service. That could include:
· Renting out underused space or equipment
· Offering a new service that fits your customer base
· Using your skills in a new market
· Turning a hobby or interest into a side income
· Creating online or subscription-based offerings
At its best, diversification adds resilience. It spreads your risk and gives you more ways to grow. But it’s not just a fallback - it can also uncover new markets and help your business grow in a way that may not have been possible otherwise.
When is the right time to diversify?
Here are a few signs that it might be worth considering:
· Income is unpredictable or seasonal: If your sales swing wildly month to month, a secondary income stream can even things out.
· You have unused assets: This might be space, equipment or even skills going to waste. For example, as some farmers have found, letting out buildings or land can be a smart use of what’s already there.
· Customer habits are shifting: If demand for your core product or service is declining, diversification can help you adapt before things dip further.
· You’re seeing unmet demand in your area or industry: If customers keep asking for something you don’t currently offer, that could be a sign there’s an idea worth exploring.
· You’re relying too heavily on one client or sector: Many businesses felt this during the pandemic; when one client or industry struggles, it can take you with it.
A few things to keep in mind
It’s usually best to start small. You don’t need to go all in. You could try testing a new idea alongside your main business to see what works.
Try to build on what you already do or have. It’s usually easier, more cost-effective, and more likely to succeed than starting something completely new from scratch.
It’s important to be realistic about the time and costs that will be involved. Any new venture will need your attention. Make sure it’s worth the effort and doesn't distract from what’s already working for you.
Final thought
Diversification isn’t just about chasing trends. It’s about making your business more adaptable and more resilient. For some businesses, diversifying is not just a bolt-on. In a changing economy, it can be what keeps the whole business afloat.
If you're considering your business strategy, why not give us a call? We would be happy to help you review and appraise the options available to your business.
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