I’m sure you’ve heard the old adage, “Don’t put all your eggs in one basket.” For many small businesses, it’s advice that should be taken quite seriously--especially in this digital age when product life cycles and customer sensibilities change more quickly than the leaves in Vermont come October.
Hollywood Video and Blockbuster put all their eggs in the local video rental business. The first is completely gone and the second, well, it’s pretty much gone too. Recently, Crumbs Bake Shop closed its doors because it put all its eggs into cupcakes, so to speak.
You don’t want that to happen to your small business. The answer is diversification, but it’s an answer that is much more easily offered than implemented. You need to strap the thinking cap on tightly for this one, and tap the most creative minds in your small business. Here are some seeds for your brain storms.
Diversify your product lineup
- Adapt. Tweak your product or service so it appeals to a new group of consumers or users. If you have a “high end” product or service, consider a less-expensive version. You need to be careful that you don’t undercut yourself. In some cases a “professional” and “hobbyist” version of the same product work well.
Add features that will make your product or service appealing to a different group of consumers. Springer Equipment sells forklifts. They recognized a market for salvaged forklift parts so they started to disassemble gear in their bone yard and add the spare parts to their parts department inventory.
- Find related products. Are there products that go along with what you sell or do that your customers or clients purchase from a different vendor? Perhaps there are training materials that you can offer as well. A medical equipment company, for example, found a new niche in providing ongoing training and support for its equipment.
The most aggressive version of this strategy is to buy a company that makes products related to yours. If you can swing it, this can be a very smart move. You diversify your lineup and remove a potential competitor from the playing field. We’ve seen that a lot lately with companies such as Facebook and Amazon.
- Offer an integrated solution. This flows from the previous idea, and the basic question you need to ask yourself and your team is, “Can we do more?” This might be anything: training, cloud services, apps, additional gear, monitoring, servicing-;the possibilities are endless.
- Find out what’s next. Are technological changes beginning to erode your base? Don’t be the last in your industry to sense where things are going. Devote part of your business to meeting the needs of the “early adopters,” and then you’ll be ready if a major shift occurs.
- Sell online. If you don’t offer your products over the Internet, add an e-commerce element to your website. If you already sell online, sell online more. Look at the various “marketplace” programs major e-tailers like Amazon have. Consider opening an eBay store, especially if you have miscellaneous overstock items in your warehouse. Rather than marking them down to next to nothing and undercutting new products, sell them on eBay.
- Open another location. If you’re exclusively online, consider a physical location. If you have one physical location, consider opening a second.
- Go overseas. Not every small business has the wherewithal to launch an overseas operation. Right now the big players are eyeing Africa the way they eyed Asia 10 years ago. Network in your community, and see if any businesses are exploring overseas ventures. You might find a project where your company fits in.
- Follow the growth. If you’re in an area with disheartening demographics or punishing tax rates, see if you should expand to a lower tax growth area. Look at the South, Texas, and North Dakota. Would one of these areas be a good candidate for a branch office?
Smart business owners, like the smart investors, place a high value on diversification. Take time to draw up a good game plan for your company.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com or Visa.