Often, people who want to start a business will ask my advice. For instance, if they are thinking about starting an online business, they will ask if they should have a blog. Sell advertising on their site? Create an ebook? Sell physical products? Offer services? Promote affiliate programs? My answer: Yes. Do all of those things, or as many as you can manage.
While they are often looking for one thing they should do, I believe that you should have many ways of generating income. The same is true for offline business. If all of your revenues come from one source, what happens if that revenue stream dries up? That can happen if you do not diversify your business.
Diversification can come in many forms. For example, you might do business both online and offline. Many small retailers have found that having an online business allowed them to keep their businesses afloat, and even expand, when their brick and mortar stores went through tough times. And for some, having the online business meant they still had income, even if the store did not survive.
Some online businesses have gone the opposite direction, from being Internet-only to opening physical locations to serve customers locally.
Some other ways of diversifying include:
Have a mix of customers. If most of your business comes from one large client, you would be in big trouble if that client went away. Even having most of your clients in one industry can spell trouble if that industry suffers a downturn. Having lived through the 80’s oil bust here in Houston, I remember well how many businesses outside the oil industry were hurt when their customers’ businesses were down.
Create multiple revenue streams. Offer a variety of products at multiple price points so that customers can get the solution they need at a price they can afford. Sell products through multiple channels.
Be prepared for change. Will technology or changes in the law make what you are doing today obsolete? Start diversifying now to move your business to the next phase.
Attract customers in many different ways. If you only get customers from one source (e.g., advertising in the newspaper), what happens if that method becomes less successful? Or goes away completely? (How many people do you know who get a newspaper?) Online, do most of your customers come from a particular search engine or site? Or from pay-per-click advertising? Keep using something as long as it works for you, but never stop looking for new ways to find customers. I have seen a lot of online businesses collapse virtually overnight when a search engine penalty or algorithm change took away all of their traffic. Get web visitors from multiple sources (both free and paid) to protect yourself.
Did your mother tell you you shouldn’t “put all your eggs in one basket”? Mom knew what she was talking about. Diversification not only makes your business more successful, it can mean the difference between survival and failure.