Category: planning

There Are Huge Benefits to Diversifying Your Business—Here’s How to Achieve Them

By Alexander Bachmann

As both an entrepreneur and an investor, one of the most common questions I get is, “Why put the effort into looking for new lines of business when you have something that’s already working and has the potential to be developed further?” To this, I bring up a metaphor, “Can you sit in an ordinary chair with just one leg?”

The answer is that you could if you were great at balancing, and some people might enjoy that challenge. However, what happens if that leg breaks? Now imagine that each leg on the chair is a business unit you’re pursuing—even if one or two legs break, you can still stay seated, even though it’s a bit of a balancing act.

The simple truth is that business ventures often die for one reason or another. There are some foreseeable, avoidable reasons, like poor market fit or lack of capital. But other things, such as currency devaluations or a global pandemic, can’t be anticipated.

Diversification is a way to mitigate these potential risks and losses, but you must do it carefully. Otherwise, you’ll run the risk of failing because your focus is too divided.

There are many other potential benefits of diversification, and here are a few tips for making the most of it.

Leverage new markets to stimulate growth

Every entrepreneur is chasing growth, but they don’t always have a concrete idea of what that means. It’s important to remember that a business can only achieve so much vertical growth before it either plateaus, combusts, or becomes a monopoly. In all three cases, this type of growth ultimately will lead nowhere.

For example, if a company is incredibly successful, it can become a monopoly in its space, like Google, Amazon, and Meta. These mega companies can no longer utilize their tried-and-true strategies for growth. They start losing traction over time, as we saw with Facebook. To remedy this, Meta acquired Instagram in a “horizontal growth” move that allowed the company to capture a new audience and bring back some users that had abandoned the platform.

Too many founders are focused on providing investors with 30 to 40% year-over-year vertical growth numbers—and this is not sustainable. Instead, once a business has a well-established management team and things are running smoothly, owners should start looking for new markets to achieve cross-vertical growth.

Treat new lines of business like investment projects

Another familiar problem companies can run into when trying to diversify is not knowing when to give up on a project that isn’t yielding results. Devoting resources to R&D and expansion is important, but knowing when to stop pursuing an idea is equally important. For my businesses, I treat every new idea like an investment project. It needs to have actionable hypotheses, a dedicated amount of investor capital (i.e., budget allocation), and a defined runway.

As an example, since September 2021, I have had a team working on trying to turn an existing business feature into its own line of business. Unfortunately, I recently had to close the project because it was not feasible to bring the product to market, despite the year and a half spent looking for ways to make it work. The risk was no longer worth the investment, so it was time to move on.

There is no precise formula for a business to follow when it comes to determining how long to infuse cash into a diversification project, but founders must set a timetable and budget and stick to it, even in the face of losses.

Look for synergistic business opportunities

There are two basic types of diversification: synergistic and experimental. With the first, your company looks to related verticals for expansion and security. The Facebook to Instagram pipeline is one such example, and Disney’s National Geographic and Marvel acquisitions are another. However, there are also experimental lines of business, such as Google’s attempt to branch into the social messaging space with Google Hangouts.

Both modes of diversification have merit, but new businesses should focus more on horizontal integrations than large jumps to a new space. Finding niches within your current company’s industry is a great way to make the most out of R&D investments while also pursuing horizontal growth for additional security.

The automobile industry is well-known for this. Many manufacturers will start with a core set of car models and eventually expand into related markets, like trucks or SUVs, or even make the leap into aircraft manufacturing, as we’ve seen with Honda.

Remember that focus trumps diversification

Founders are notorious for spreading themselves too thin. They are visionaries and creatives, so they always have new ideas they’re excited to test. However, the mark of a truly great entrepreneur is someone who can direct their focus on the venture in front of them without becoming distracted by other projects.

Business owners must realize there is a difference between intentional diversification and experimenting simply because they have a promising new idea. One of the best strategies for developing new lines of business is to surround yourself with intelligent, competent people who can help you determine whether an idea is worth investing resources into or not, and then delegating to them when it’s time to pursue the new project.

Diversifying is the key to mitigating the risks of keeping a company running, and it’s also an excellent way to expand your organization’s reach through related projects, making it more sustainable in the long term.

FAQs on diversification and growing a business

What are 3 reasons why businesses adopt a diversification strategy?

Diversification can help with long-term growth, risk mitigation, and the overall sustainability of your business model.

What is an example of a diversified business?

Popular examples are Apple and Disney. Both expanded their original offerings into related and unrelated verticals to become the industry giants they are today. Apple grew from PCs to music to mobile devices and beyond, and Disney grew from an animation studio into real estate, merchandise, and global entertainment.

What makes a company diversified?

A diversified company operates in several different segments that are often unrelated, usually through the acquisition of an already operational business or through entry into a new market.

About the Author

Post by: Alexander Bachmann

Alexander Bachmann is the founder and CEO of Mitgo, a global tech company focused on delivering innovative solutions and promoting entrepreneurship. Previously, he had founded Admitad as an affiliate network, which is now recognized as one of largest affiliate platforms for advertisers and publishers. Alexander has been in the martech space for over 20 years and has extensive expertise in martech, fintech, smart shopping, and IT-driven startup incubation sectors.

Company: Mitgo

Website: www.mitgo.com

Connect with me on
Linkedin.

How to Listen to Your Intuition in Business—And Why You Should

When you make a business decision, do you rely on your head or your gut? Are you strictly a by-the-numbers business owner, or do you “have a feeling” about something and act on it?

Kim Woods does both. She’s a master astrologer and a business strategist. She has numerous certifications as a master-level intuitive and an MBA. Woods has helped hundreds of entrepreneurs and Fortune 500 executives achieve personal, professional, and financial success.

I talked to Woods about what she foresees for business in 2023 and how you can tap into your intuitive powers to grow your business.

Listening to your intuition in business

Rieva Lesonsky: When did you learn you had this special power?

Kim Woods: I discovered the power of my intuition when my son, Nick, was born with significant health issues. Until then, I’d built a successful career based on someone else’s definition of success and ultimately lost myself. The crisis with my son forced me to find myself again.

Relying on my intuition and marrying ancient wisdom with Western methods, I [refused to] accept the doctor’s plan to work around the issues. I [followed] my strategies for eight years until I saw the complete transformation and realized I’d never turn my back on my intuition again.

Lesonsky: When did you start your own business? Did you always combine being an intuitive with business consulting?

Woods: I got my MBA during my corporate career because I reasoned that I never wanted to have to explain why I didn’t have it. Isn’t that ridiculous? The universe is wily, however. Babson College is ranked #1 in entrepreneurship in the country, so I took as many classes as I could. These classroom conversations prompted me to consider opening my own business, and I’m hooked—entrepreneurship is my jam!

I started this business after I outgrew my traditional business strategy firm. I attempted to incorporate intuition with my business then, but my clients would say, “We like your business expertise, but keep the woo at home.”

Of course, I didn’t because you can’t possibly separate yourself from your natural gifts. However, I did respect their wishes and kept my intuition quiet. But it was my secret weapon for teaching unteachable leaders, gaining consensus for a particular vision, and keeping employees engaged.

This business was born to put my intuition forward. It’s my promise to myself. Prospective clients must say yes to me walking into the stars the minute they’re born and channeling the voice of their soul. It’s non-negotiable. When clients want my 25-plus years of C-suite business strategy expertise, they also get the oracle and healing faculties.

Lesonsky: What’s in store for small business owners this year?

Woods: The theme of the year is POWER.

Globally, social and environmental justice will come to the fore with power structures undergoing scrutiny. Everything has been brought to the surface in the last few years—the rights of minorities and women, massive weather events, and the pandemic introducing a flashpoint for healthcare versus sick care. The stars stir up what’s wrong with the power structures and support innovative solutions [at a] grassroots, organic, and local [level].

This decade represents the turning from traditional, institutional, top-down power structures to consensus, humanitarian, and service-oriented value-based influence. Being equitable, inclusive, and sustainable is essential for every business.

Growth in the medical, scientific, and technological sectors will continue. Media businesses, both digital and traditional, and the arts, will get a boost in the next few years. In addition, non-traditional healing methods and mystical methods will become part of the mainstream.

Personally, the stars will ask you to step into your power and authority. You know you’re in your power when you make sound decisions and stick to them, remain solid no matter what’s happening around you, and have the confidence to ask for and accept support.

You know you’re out of your power when you second-guess yourself, consistently put others’ needs before your own, and find yourself lacking when you compare yourself to others.

I typically choose movies to describe the year’s energy. Last year, the film was Twister, with the goal of staying in the eye of the storm with all the chaos going on around you. This year, it’s Jerry Maguire. Yes, “Show me the money!” Yet it only happens when you stand in your authenticity, live your true purpose, and allow your full potential.

Lesonsky: Any particular bad times or good times you can pinpoint?

Woods: March, May, and July are complicated months that won’t be great for big events, travel, or launching new initiatives. Keep March simple and be flexible about changing your plans. Be wary of overextending yourself in May, and don’t make new offerings in the first few weeks. July reaches a crescendo of explosive energy, so keep [an eye on] your travel plans.

January, February, and June will be excellent for launching, connecting, and selling. The forward momentum increases each week through January and February. Things seem to come together easily.

Remember that the energy is massive this year, pushing toward growth, which can be exhausting for people who need lots of downtime. So healthy habits and sound business practices are a must.

Lesonsky: What advice do you have for small business owners about listening to their gut?

Woods: Your instinct is your doorway into intuition. It’s the initial knock that gives you your initial yes or no reaction. The key is determining how your body communicates instinctively with you.

For many, their instinctive feelings arise in the belly or neck, but for others, their bodies respond differently. The key is to figure out how your instinct responds to a yes or no question. For example, your body may change temperature, make you shudder, give you goosebumps, or even cause a soft flutter on your arms or legs.

Once you determine how your body instinctively gives you nudges, you’ll be able to rely on your instincts as a first response to fully communicate with your intuition.

Lesonsky: Are people afraid to listen to their inner voices? If so, how do you get over that?

Woods: People hesitate to listen to their inner voices because it takes a leap of faith to believe. And you’ve probably systematically shut your intuition down so often that it’s gone quiet.

Your intuition begins as a whisper, inkling, or nudge and often doesn’t make sense, while your mind talks to you in complete sentences and rationalizes itself at every turn. It’s easier to believe your thoughts than the nudges that may or may not make sense.

Lesonsky: How should small business owners get started following their intuition?

Woods: You can get over being afraid by practicing following your instincts. Once you get that initial reaction, listen to it. Then, take the opportunity to rely on your intuition for small things, like taking an umbrella, following certain traffic routes, and finding a parking space. Then you can use your intuition for bigger decisions, like hiring a particular person or making an offer to a specific client.

Small Business Trends in 2023: What Entrepreneurs Can Expect in the New Year

Many small business owners expected 2022 to be a year of recovery after two years of struggling to survive a global pandemic. But inflation, fears of a recession, a still unreliable supply chain, and a nation at nearly full employment resulting in a tight job market all loomed large, dampening many of our goals.

As we enter 2023, the outlook seems somewhat brighter for small business owners. I talked to several small business experts to get their advice, insights, and predictions for small businesses in the new year.

Small business outlook for 2023

Impact of a recession on SMBs

“Nobody knows whether a recession will occur, but it’s certainly fair to say that small businesses are dealing with several economic obstacles right now. Fortunately, small businesses are resilient. Even if a recession does develop, our 2022 Small Business Now report shows that 90% are confident that they will still be in business a year from now. We also often see lots of small businesses get started during recessions.

“However, some sectors would likely be impacted more than others. The consumers we polled said that, during a recession, they would cut back on spending at “convenience,” “lifestyle,” and “entertainment” businesses first. I strongly encourage those business leaders to begin their recession planning now to be safe.”

—Dave Charest, Director of Small Business Success, Constant Contact

What the small business environment will look like in 2023

“2023 will be a year of small business owners betting on themselves and focusing on the elements of business ownership within their control. Between the pandemic, inflation, supply chain issues, and labor shortages, running a business over the past few years has been incredibly challenging.

“Still, through research and conversations with our clients, it’s clear that most business owners are resolute and optimistic heading into 2023. While business owners anticipate a recession may force them to raise prices and reduce spending, entrepreneurs are focusing their efforts on marketing and promoting their businesses, investing in new technology, and boosting head count.”

—Sharon Miller, President of Small Business/Head of Specialty Banking and Lending, Bank of America

“Of course, inflation is the biggest [concern] I’ve heard from small business owners. They are concerned that higher prices will drive away customers. But consumers are very willing to support the businesses in their communities as long as the value is clear and the company cultivates a relationship with them.

“The bigger challenge I see extending into 2023 is staffing. According to our research, about 40% of small businesses are struggling to attract new employees, and another 21% are concerned about retaining current staff. I expect small businesses to get creative about what incentives they offer employees to keep them engaged and invested in the business.”

—Dave Charest, Director of Small Business Success, Constant Contact

Outlook for startups

“Whether or not there’s a recession, startups will continue to flourish. More and more individuals will take control of their own destinies rather than be at the mercy of large corporations.”

—Nellie Akalp, CEO, CorpNet

Overall outlook for small businesses

“Though a recession is uncertain, the warning signs are there, and small businesses should begin preparing for whatever new economic challenges may come. There are a few ways they can do this. One is to improve the way they communicate with customers. It’s never been more critical to build an email or text list, which are still cost-effective ways to deliver helpful information to customers.

“They should also lean into their strengths—their connection to their communities and the great experiences they can provide customers. Bigger brands may have bigger budgets and more exposure, but they can’t offer the same inventory, customer service, or experience that a small business can. Despite what you might read in the headlines, small businesses are tough and will get through whatever 2023 has to throw at them.”

—Dave Charest, Director of Small Business Success, Constant Contact

“Small business owners have proved that they’re resilient and nimble enough to handle any challenge the economy throws at them. A recent Hello Alice survey found that 73% of owners predict their businesses will grow in 2023. [They] are buckled in to continue their fight against inflation—their top challenge predicted for 2023. Surveyed owners identified price hikes and adjustments to product offerings as two effective strategies that helped them combat inflation in 2022.

“However, these tactics contribute to two of the owners’ biggest fears for 2023: losing customers due to price increases and the inability to acquire customers. In response, small business owners must learn best practices and explore software solutions to optimize their marketing efforts for the coming year.”

—Elizabeth Gore, Cofounder/CEO, Hello Alice

Small business finances in 2023

“In 2023, small businesses will be even more focused on managing costs to manage an increasingly challenging economic environment. Small businesses already leveraging fintech offerings will be prone to scrutinizing whether those they have are exactly what they need to run their business. We expect many to look at consolidating services, which will increase demand for cohesive financial platforms that help small businesses manage their money end to end.

“When financial services like payments, business banking, and lending are integrated and embedded intelligently to meet the money needs of a small business owner, it can unlock unparalleled cost and efficiency benefits. Faster access to money provides more opportunities to invest in growth; real-time insights aid with more informed strategic planning; and seamless integration across money-management tools removes complexity to enable streamlined business operations. Arming small businesses with the technology that fuels these capabilities will be especially critical in the new year as small businesses navigate an uncertain macroeconomic environment.”

—Rob Daniel, Director of Product Management, Intuit QuickBooks

Buying and selling businesses in 2023

“Based on how we’ve seen the small business market react to rising interest rates, I expect the theme of 2023 will be seller financing. The Federal Reserve is staying firm on its mission to fight inflation and has indicated that multiple rate hikes may be in store this year.

“Time will tell if that truly is the case. However, I expect these conditions to motivate more buyers to ask for, and sellers to accommodate, at least some percentage of seller financing in order to close deals. In terms of transactions, with so many buyers in the market and baby boomers on the brink of retirement, I expect transactions to continue at the same accelerated pace we’ve seen over the past two years, with financing being the core hurdle for entrepreneurs to overcome.”

—Bob House, President, CoStar Group (BizBuySell)

Trends and challenges that will impact women entrepreneurs

“Women’s business ownership has rapidly grown over the past decade, and I expect that trend to continue in 2023. Equal access to capital will always be essential in accelerating growth—and there’s still much work to be done, but access to education is similarly critical. The
2022 Women & Minority Business Owner Spotlight found that 75% of women business owners wish they were more knowledgeable about small business finances. I believe the number of educational resources available to women entrepreneurs will continue to grow in 2023 and beyond.”

—Sharon Miller, President of Small Business/Head of Specialty Banking and Lending, Bank of America

“2023 will be pivotal for women and access to capital. Nearly 70% of small business owners told us they plan to apply for funding to combat inflation this year. Yet, we know that women face barriers that limit their access to loans, credit, and other vital business capital. We should focus on ways to ensure every woman has the financial tools to respond to unexpected challenges and grow their business.”

—Elizabeth Gore, Cofounder/CEO, Hello Alice

Trends in cybersecurity

“Attacks on small businesses will increase in 2023. SMBs already make up over 41% of data breaches, but as large enterprises spend more on cybersecurity and adopt more robust frameworks, attackers will increasingly turn their attention to small businesses. Cybersecurity will also be a major differentiating factor in sales and partnerships for SMBs. Organizations increasingly want to work with vendors that have mature security and compliance programs.”

Why businesses should implement a BYOD (Bring Your Own Device) policy

“Even if you prohibit your employees from using their own devices, some employees will choose to use them anyway. The key advantage of establishing a BYOD policy is ensuring that any device that could potentially be connected to your company is properly secured.

“The top place where BYOD policies fail is an ineffective onboarding stage. Sending employees a list of instructions may be challenging to follow but can be remedied with a live onboarding plan for every device. At a minimum, your BOYD policy should include mobile device management and remote monitoring, endpoint and network security, and personal data breach monitoring.”

—Amir Tarighat, Cofounder/CEO,
Agency

The coach’s love-hate guide to profitability in 2023

To maximize your profitability in 2023, you must also address how your beliefs, attitudes and feelings either support or undermine your ability to take the actions that result in success. Trainer Bernice Ross walks you through an actionable, step-by-step planning process to help you soar like never before.