Planning For Diversification


Let’s get one thing clear. Growth is not diversification. Growth is developing your current business so that it increases in size. Diversification is doing something new. Lets look at why, when and how you should plan your diversification.


• Because diversification means you will have different business lines and if one suffers for any reason, you have the others to fallback on.

• Because you have gained a degree of business expertise and knowledge that you can profitably use in a new sphere of activity.

• Because your current business is stable and does not need your full time attention.

• Because you like the challenge and want the high of the days when you first started to visit you again.

• Because you can make more money!


• As a business grows, expanding it requires more time and resources. Look at diversification when you are sure that the efforts you need to put into your current business could be more productive in a new line of operation.

• Look at diversification when you have an idea that you know will work and have studied the prospective new business in detail and know you can make a success of it.

• Plan on diversification when you know that the expertise, knowledge and experience you have will bring something new to your projected business. There is no point starting something new to be lost in a herd of others who were there before you.

• If you are planning to diversify into something new or unique, the rewards can be great, as are the risks. Are you sure you are ready?


• Study, study, study. The more you know about your planned new business, the better you can plan.

• Look at the big picture. Even if your specific business prospects are great, starting to diversify in an economy that is heading towards or already in a recession may not be a good idea. Having said that, doing something new when no one else is can bring a reward as big as the risk

• Be sure that your existing business will not be neglected. It’s easy to take a stable line of business for granted and not notice problems until it is too late to do anything about them.

• You will be using resources created from your existing business to start the new one. Be sure that you have not taken too much from the old business and have left it too weak to survive.

Make a business plan that covers everything involved with the startup and well as the first year of operation. Have metrics in place so you can constantly measure your progress and correct any problems.

• Know all the resources you will need, including manpower, or will have to create and be sure everything will be available when you need it. Look at outsourcing options that can help you become more efficient.

• Think everything over 10 times if you need to. Be sure of what you are doing when you start. Beginning a new venture with doubts will undermine everything you do.

• The only thing you can be sure of is that the unexpected will happen. Be prepared for surprises.