It’s those companies that have diversified business holdings, and service multiple markets and industries, that are better positioned to weather the storm of this economy, and in some cases, even grow. As a business owner, you’ve probably learned first hand how catastrophic it can be when your business is tied into one market, or one industry.
Diversifying your business is essential, as it allows your company to spread your risk across multiple markets. There are all kinds of companies that grow when their industry grows, but very few that grow regardless. Diversification isn’t just for personal investments, but an integral part of your company’s future. So, what is needed when it comes to diversifying your business, and selling your products & services into other industries?
First and foremost, your company must review its core competencies. This amounts to an honest assessment of your company’s strengths and weaknesses. Don’t ignore your weaknesses, and don’t downplay your strengths. Next, you must review which of your core competencies could be easily transferable to another market. Does your company, manufacture, support, service, or sell products and services that might be useful for another industry? Does your company purchase a large volume of parts and raw materials that another industry might need?
For example, companies that often purchase large volumes of nickel, silver, bronze for plating of statues, might have more purchasing power and better prices than companies in other industries that need smaller volumes of these raw materials. Think outside the box, and get those ideas on paper!
2. Perform a New Market Feasibility Study
If your company needs help with this step, there are plenty of outsourced marketing firms that can help in assessing a market’s potential. Performing a market analysis amounts to asking the kinds of questions your business needs to make your entrance into this new market a successful one. You need to know the growth rate of the market, the type of technology used and how long it might last, and who the major competitors are.
This is what one might expect to see in a market feasibility study. Where is the market going? What must your company do to be a part of this new market? These questions need to be answered. Your company will be devoting time, employees and most likely some capital investment into making this work, so be sure to perform a thorough market study. To read more please see: Is a Market Feasibility Study More Important than a Business Plan?
3. Become Product & Service Specialists, not Market Specialists
Up to this point, you may have tried to portray your company as market specialists in order to convey an image for your customers of being experts in your field. While this worked for a time, now that the demand has fallen, your company is now left with reduced revenues. What’s needed is a change in philosophy. You must move your business from being market specific, to being products and service specific. This means selling your products & services to multiple industries.
For example, let’s assume a company makes brake pads only for cars, and prides itself on being market specific. However, with a sudden downturn in their one market, they decide to use their brake pads in other applications, such as pickup trucks, 18 wheelers, trains, bicycles, motorcycles etc. Move your approach from being specific to one market or industry, to being product and service specialists that service multiple industries.
Remember, diversification is essential, and requires a company to asses their core competencies, perform a thorough market analysis, and move from being market specialists, to product specialists. It can be done, is done all the time, every day. Your company will succeed and will become better off when it does.
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