We use cookies on our website to make your browsing experience better and to continually improve our website. To find out what cookies are, which ones we use and why, please see our cookie policy statement. You can manage your cookie preferences at any time through your chosen browser settings.

The art of good business diversification

The art of good business diversification

More and more firms are choosing business diversification as a way of maintaining financial stability and growth. For many it is a key tactic of surviving during a recession, perhaps due to reduced consumer demand for existing products or services, or because there are too many competitors in the market. However, there are a number of other reasons why adding more products or services to your range might be good for your business.

Diversification is a good way of growing your business, particularly if your existing market is becoming saturated. Done well, it is a way of exploiting what you already have, whether it is your business assets such as stores, your brand name, or your customer base. If you have a seasonal business, you might want to think about how to use your staff (and your expertise) profitably at other times of the year when demand is low.

Offer complimentary services

In most cases, it will make sense to introduce new activities that relate in some way to what you already do. For instance, if you own a bakery, you could introduce a café, or set up an outside catering business. This approach has a number of advantages. Firstly, you already have a customer base and an established brand, so your marketing is much easier than it would be for a completely new enterprise. Secondly, you and your staff already have a considerable amount of expertise and skill sets that can be transferred directly to the new part of the diversified business.

Offer new related products

An alternative approach would be to expand the range of products sold. In the above example, the bakery could offer hot takeaway snacks, or sell a range of pre-packaged groceries. In either case, you would be able to carry on the diversified activity with your existing premises and customers. Again this takes advantage of existing skill sets in the company and can be done with little or no capital outlay.

Don’t stray too far

Remember that successful business diversification depends upon building upon what you already have. Moving into a completely new area of activity means a considerable investment of time and money, and does not offer the same advantages of expanding into complimentary offerings. Adding completely different services or products to your range can carry very high risks as you will have to build the new consumers trust in your brand and it may take a great deal of time before you see a return on your investment. 

Be prepared

There are two other things to remember: make sure that your existing business is stable before you start to diversify, and do not forget to do the same amount of market research and business planning that you did when you first set up in business. If you do this, there is no reason why your diversification should not be a great success.

Call 020 3005 4200
Monday - Friday between 9:00am - 5:30pm
Get a quote or contact us online

Industry Finance
We've worked with businesses in a wide range of industries including:

We have access to finance from over 25 of the leading UK lenders

Aldermore Shawbrook RBS Invoice FinanceHitachi CapitalFactor 21GE Capital
Members of
ABFA logo

First Financial 110 Cannon Street, London EC4N 6EU - Tel: 020 3005 4200 - Fax: 020 3005 4400

First Financial is a trading division of FRP Advisory Trading Limited incorporated in England and Wales with company number 12315855. Registered office: 110 Cannon Street, London EC4N 6EU.

© firstfinancialuk.com