How to Diversify Your Business for Growth and Survival (Issue #6)
Don't let your business become fragile and vulnerable
You wouldn’t think that a late frost could kill your business. But, if you’re a small farmer, that’s precisely what can happen. I grew up in the Midwest, so I know how much the weather can make or break a harvest, and farmers often walk a thin line of profitability.
After 30 years of living in cities, my wife and I finally made our way back to a rural lifestyle. We now live in an area that is known for its fruit orchards. Unfortunately, we had a late cold snap in the Spring, and snow eliminated most of the apple crop.
Some orchards closed their doors for the season, which is when most make all of their income for the year. I don’t know what will happen to them. But others diversified and are doing what’s necessary to survive.
One is selling spooky Halloween walks through their forests and orchards.
Another transformed its facilities into a small events center, and they just hosted a wedding last weekend.
Another farm has hard ciders, wine tasting, and family activities to fall back on since they can’t sell fresh fruit.
Now, dear reader, I know it is highly unlikely that you are planning to start a farm for your solopreneurial business. But there is still a lesson here for all of us.
Don’t put all of your eggs in one basket, and find relevant ways to expand and diversify your business income.
You should definitely diversify your business portfolio and income sources. But you need to do this the right way, so you don't become fragmented. A bewildering business expansion muddles your brand, confuses customers, and distracts you from your primary focus.
If the work you do for your business requires your active involvement, bias for alignment amongst your lines of business as you diversify and expand. This will reduce the cognitive load of switching gears.
For example, I've worked hard to align my coaching practice around common themes that can apply to work, business, and life (e.g., freedom, flexibility, confidence, empowerment). I've also diversified my different practices under the same business umbrella, with scalable and non-scalable business offerings.
Courses, workshops, digital downloads
My other businesses and income sources can be more distant from my core business since they don't require a lot of my active involvement every day or week. For example:
Residual income from courses
Passive income from articles
Ok, let’s dive into the details of how, when, and why you should diversify your business. But before you can expand, you must build a foundation and reinforce your brand.
Establish a foundation
Build and expand your brand
Diversify for growth
Diversify for survival
Maximize flexibility and freedom
Subscribe for free to receive new posts and support my writing.
1. Establish a foundation
Don't fragment your attention and your business focus before you establish a solid foundation. Occasionally, I’ll talk with someone about their business plans, and they describe a full portfolio of goods and services they want to sell to customers. They have plans for expansion before they’ve sold a single product to a customer or provided services to their first client.
Now, it’s ok to have a grand vision for your business and picture what success looks like 10 years from now. That can be inspiring! But you need to create a clear short-term strategy and roadmap to “ship” your first product or provide your first service.
There’s also nothing wrong with imagining a full suite of products and services that your mature business will eventually provide. I do this all the time. I can’t help myself!
However, before you actually begin diversifying your business, establish a solid foundation first. Build your loyal customer base. Consistently sell your first product or service to create a profitable and recurring flow of revenue.
Make sure you have happy customers and a proven, repeatable business model that works well. Once everything is up and running and humming, reach that point of comfort when you feel you have things well under control. Then, start thinking about how you can leverage your strengths, brand, and competitive advantage to explore adjacencies.
Diversification and expansion always come with risks. The closer you can stay to your core foundation and competitive advantages, the greater your chance of success is.
“Before diversifying, managers must think not about what their company does but about what it does better than its competitors.”
— Harvard Business Review
For example, I’ve watched a local multigenerational family orchard use this strategy. They spent decades running a farm, selling fruit, and offering various goods based on their harvests (e.g., juices, pies).
Then they expanded into hard cider.
Slowly but surely, they remodeled their buildings and increased their income from tourist activities.
A few years ago, they added a vineyard.
Last year, they built a nice tasting room with a view of the orchards and vineyards to provide a beautiful tasting and drinking experience for their wines and ciders.
Now, I can see how they are going to expand this venue to support more events.
This process has been going on for several decades. They didn’t immediately leap into providing dozens of products, expanding the farm, and going into debt. They leveraged their well-loved family brand and success to build on their solid foundation.
I did this with my coaching, too. I took it slow to test the model, establish my foundation and reputation, and then slowly started adding more services.
First, I only provided 1-on-1 career coaching, which was my foundation.
Then, I started offering job search and interview support.
Then, I built a community and started inviting people into it.
Then, I created a group coaching program.
Then, I offered leadership coaching to individuals and corporations.
Then, I created several DIY courses.
Now, I’m expanding into more coaching and communities for solopreneurship and life coaching.
This didn’t happen overnight. I’ve been building and expanding my business slowly for the past six years.
2. Build and expand your brand
Diversifying too early is a risk before you've built a brand and become known for something. It’s good to place small bets, test ideas, and explore multiple revenue streams. But, you want to envision these explorations as smaller branches feeding off your core business and brand.
Once you've built a core brand, you can carefully and strategically expand. But you still don't want to fragment your brand. Expand in ways that enhance and strengthen your core brand.
Businesses that got it right:
A tax preparer that expanded his brand into more general accounting services for small businesses.
Apple created an ecosystem of well-designed hardware devices, software, and a unified app platform.
A fitness trainer who expanded her business to provide nutrition plans.
LinkedIn acquired Lynda.com to create LinkedIn Learning for ongoing professional development.
A musician who expanded beyond selling his music to provide guitar lessons.
A photographer who sold her photos and provided event photography but expanded her business to teach other photographers how to start their own wedding photography businesses.
Businesses that damaged their brands with confusing fragmentation:
Amazon baffled customers (and the industry) with a poorly-designed smartphone that didn’t solve a problem or meet anyone’s needs in a useful way.
Similarly, Facebook confused their user base with a bizarre smartphone offering.
Google damaged its brand with the massively costly mistake that was Google+ (trying to compete with Facebook).
Make sure your brand makes sense at the core and your new lines of business seem rational. Talk with your current customers to see what they think of your plans. Ask your circle of advisors for input, too.
3. Diversify for growth
When is it time to diversify your business for greater growth? Well, it depends.
Do you actually want to grow your business? Maybe you're happy with how things are right now.
Do you need more income from your business? Is there no way to increase your revenue without offering new products or services?
Is your business growth limited by your available time every day? Sorry, but you do need to sleep, eat, and have a personal life too.
Is your growth limited by how quickly you can create what you sell? Have you hit a ceiling in your production efficiency?
Could you scale if you automated more tasks? You could probably automate more than you think.
Could you scale if you brought on a partner, hired employees, or outsourced some things? Do you want to do that?
It is possible to grow a business with one product line or one service offering. But, you may eventually hit a ceiling.
Diversification allows you to grow your business and offer more products and services. But, as a solopreneur, you have to be careful that you don't spread yourself too thin.
As a coach, I frequently run into this issue. If I want to grow my business and increase my income, the obvious answer is to take on more clients. But, I quickly hit max capacity.
I find it becomes challenging to spread my attention beyond ten or so 1-on-1 clients. I can scale myself a bit with my group coaching. But even that has its limits. A group session with over 30 people drifts quickly from discussions to lecture mode.
So, since I wanted to diversify my business to enable greater growth, I had to embrace asynchronous service models (e.g., office hours in my communities) and more scalable products (e.g., DIY courses, digital downloads, books).
Over the years, I’ve watched other business owners successfully scale through similar models. Some examples include:
An artist who sells paintings and handcrafted jewelry but expanded her business by offering one-to-many live watercolor courses, DIY online courses, and a guide to finding your style as an artist.
A musician who performs at venues, sells music online, and provides online guitar lessons.
A fitness coach who provides 1-on-1 training but also sells nutrition plans and online lifting programs.
An engineer who provides development services but also began providing interview coaching to help engineers land jobs at top tech companies.
As I always do, I recommend you take a lean approach to diversifying your business and adding new products or services. You want to make sure there is a “there there” before you invest a lot of time or money in a concept that might not pan out.
There are a few ways to test your new business concept.
Talk with your inner circle of trusted business peers and advisors.
Ask your current clients and customers what they think of the idea.
Test the idea with some potential clients during sales calls.
Create a sign-up form for early access and beta testing a new product or service.
If you feel confident that you can deliver later, pre-sell the new offering at a discount.
You could even try a Kickstarter campaign.
Long story short, validate your new concept before you commit too much money or time to it. Make sure it's on brand. Make sure it makes sense. Test the features and pricing.
Even if your business is growing with one revenue stream, you are more vulnerable than a diversified business. A disruption of that primary income source can kill your income quickly.
4. Diversify for survival
Over the past few years, I've lost power and internet access at my home. Sometimes the outage lasts a few hours, but occasionally it goes on for days. We lost everything for over a week a few years ago.
Did my business crumble? Did I have to close my doors and shut it all down?
No. No, I did not.
Living in a remote rural area near or in the forests and mountains has always been our dream. We knew that there's a price to pay for this lifestyle. You need to be independent and self-sufficient. You need to think ahead, have backup plans, and be ready for the worst-case scenarios (e.g., no power during the coldest winter weather).
I intentionally designed my business for maximum freedom, flexibility, and resilience. I wanted a business that leveraged the internet, so I could work anywhere in the world (e.g., moving out of the city and into the mountains). I also wanted a business that I could run from my phone when I travel and go on vacations.
I'm going to encourage you to follow a similar model for your business.
If the pandemic taught us anything, it showed us that activities and businesses are fragile and vulnerable when they require physical locations and face-to-face interactions with colleagues and customers.
Many brick-and-mortar businesses failed during the past 2-3 years. They had to shut their doors during the height of the quarantines. Many never recovered. The businesses that survived had an element of their products or services that could be delivered remotely without a storefront.
I'm not saying that 100% of your business should be conducted solely over the phone (although it can be). But you should be able to fall back to remote interactions and survive when necessary.
Don't get me wrong. I enjoy in-person meetings, workshops, and talks. But, I don't depend on them.
I've also watched business fail during an economic downturn. Smart diversification can help your business survive. In good times, it helps you thrive.
The pandemic was a test of resilience. Some businesses couldn't survive without walk-in customers. Others quickly diversified to survive.
Spinning up an online retail shop. It now sells even more than their physical storefront.
Offering takeaway foods with curbside pickup. Our local brewery sold pizzas and growlers to go.
Providing a new home delivery service for customers who could no longer drop by.
Offering online fitness programs and a community. They went from $0 to millions in revenue in just a few months, while other gyms struggled and closed their doors.
It’s impossible to predict the future. Who knows what the next business challenge will be? But, if you diversify your products and services, you are more likely to successfully weather any new storm.
5. Maximize flexibility and freedom
If you're anything like me, you don't want to build a business that becomes more of a grind than your 9-5 job.
As you're expanding and diversifying, bias for giving yourself more flexibility and freedom. Focus on creating new lines of business that are scalable instead of being limited to your available time.
I considered several options for my business that would have required leasing a physical space and providing services in the physical world. But I realized how much that would tie me down to a physical location and synchronous experiences happening real time.
I want the freedom to live anywhere in the world.
I want the flexibility to work when I want and take time off for vacations with my family when I want.
I want offerings that scale infinitely, since I’m already limited by my time and availability for coaching.
So, if you can, expand your business in ways that increase and maximize your freedom and flexibility.
Working remotely (over Zoom and phone)
Before you think of me as a “shut in” who never leaves his remote cabin, I should explain that I do love real-time experiences in the physical world. I love public speaking in front of a live audience. I enjoy hosting workshops. I love meeting my clients face to face. I'd probably love owning a small coffee shop and bookstore.
However, I've learned that these types of products and services should be only one part of my portfolio. I'll never make my business fragile and vulnerable by relying on a single source of revenue, customers in the physical world, or a storefront in the physical world.
Diversify or die
My business will always be diversified. I'll always have virtual services and digital goods. I'll always be able to work with clients and have customers anywhere in the world.
So should you.
Are there examples of successful businesses that have survived by only providing one product or service? Sure, there are a few that seem to have nailed down their value, secured a loyal customer base, and weathered every storm.
But why risk it? Why hope that you’ll be one of the few magical businesses that can survive without a robust diversification strategy?
It’s simply too dangerous to put all of your business eggs in one basket. For every business that pulled that off, there are hundreds more that failed when the bottom fell out of their baskets.
Diversify, survive, and thrive! But do it the smart way.
Larry Cornett is a leadership coach and business advisor. If you’re interested in starting your own business or side hustle someday (or accelerating an existing one), check out his “Employee to Solopreneur” course (launching later this year).
Larry lives in Northern California near Lake Tahoe with his wife and children, and a gigantic Great Dane. He does his best to share advice to help others take complete control of their work and life. He’s also on Twitter @cornett.