Consider this before diversifying

score Question:
I want to diversify. How should I tackle this?

Diversification is a growth strategy that can be approached in two ways. You can either provide a new product or service to the market utilizing your sales force, or sell your products or services to a new market.

The first method is much easier than the second because it's less risky and won't compromise your core beliefs and principles. Most business owners understand their clients' wants and needs, and are exposed to the additional products and services they might be interesteed in daily.

Let's see if you have the right mind-set for diversifying by asking yourself a couple of questions: Can you run multiple businesses with different processes, staffs and procedures? Do you have capital to invest in a startup business?

If you answered yes, the following steps should help you branch out:

  • Use your core competency to gauge how well you'd perform in the new business.
  • Ask you clients if the new product or service is important to them. Don't assume it is. If it's important to them, what volume can they use?
  • Thoroughly research the new market for this product/service, real need, proposed client base, estimate of what they'd pay for it, size of market, development and testing costs, time required to obtain break even, long-term need, financing required, etc.
  • If the research responses are positive, develop a complete business plan to accomplish the task.
  • Develop specific processes and infrastructure before you start selling or producing the new product. Separate it from your core business. If it is to be a large venture, consider organizing as a subsidiary.
  • Find someone who can think about the new venture from sales, production and marketing viewpoints. Tailor the search to the type of business you want to start. The key is finding and having the right person on the staff who knows a bit about the new venture but won't need to be involved on a macro perspective.

By having someone responsible for the day-to-day operation of the new venture leaves you free to continue to grow the base business and provide direction and advice to the new baby.

Bill Bryan is a counselor with the Service Corps of Retired Executives. SCORE offers counseling, workshops and seminars on small business operations. You can reach Bryan through SCORE, 515 N Court St. 815-962-0122, for information and appointments.

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