Big or Small, Diversification Protects All Business
For diversification to really work, you need to have a big corporation, right? Wrong! Even if you're a sole proprietor working without employees from a home office, diversification is one of the best strategies for protecting your income in good times and in bad. The philosophy is simple. Invest your time and money into more than one project. The more difference between them, the better. Find income opportunities in different fields, with different sources and different customers. The more differences between you projects, the more protected you are against a lot of disasters. Should a source for one of your projects dry up, for example, you're income from the other projects will continue on. You'll suffer a small, but not complete, setback.
This is a wise business strategy, and as companies grow they generally take this direction. But how can the small businessman or sole proprietor take advantage of this recommended method of doing business? Is it even possible?
The answer is yes, but you have to be inventive. What is your business? How narrowly do you define it? What is your prognosis of future demand for your product? Can you get involved in another related business or product for which you already possess the necessary knowledge or have ready access to it?
An example that is easy to see is that of an MLM marketer. Suppose you've been successful at selling Avon for years. Now, Avon is a fine company of the highest reputation, and there is no reason to think it would go out of business in the near future. But suppose it does? Or B11suppose you have friends and neighbors who just don't care for Avon products, but like Mary Kay better? Selling Mary Kay in addition to Avon may be a step in the right direction, but it still wouldn't help you if the demand for all cosmetics products decreased. You might be better off to diversify in a completely new direction. You can use the expertise you've gained selling MLM products and opportunities by choosing another MLM company who sells children's toys or candles or kitchen gadgets.
Suppose, on the other hand, your business is a service. Suppose you spent a lot of time and money obtaining a college degree in accounting and obtaining your CPA designation. Now you work in a small office providing tax, accounting and bookkeeping services to individuals and small businesses. Youre already seeing some decrease in the tax preparation portion of your business because of the rising popularity of tax preparation software. You need another income stream. Here, it might take a little more inventiveness. Perhaps you could get involved in selling tax preparation software and adding your own consulting services as a bonus to the product. Perhaps you could get into a related field in which you have an interest. A little education or self-study could qualify you as a financial advisor, for example.
If you're just getting started, you're in the perfect place to plan to diversify. You can build it right into your business plan. You needn't start them all at once, but plan early and you won't be caught off guard by sudden business downturns. If you're already established but not diverse enough, start looking around and seeing what else you could add at minimal cost that would gain you a different income stream from a different source. This is one of the best ways to protect your overall income and ensure on-going profitability.
Kim Brockman writes on a variety of subject pertinent to the small business owner. http://www.tiiezine.com/Top_Picks/5-Bucks-a-Day.php