Small Business Diversification Strategies
Investment advisors and financial planners tell their clients to diversify to protect themselves against financial disasters. In the V and IV centuries a. C., the ancient Greeks divided their goods to transport them on ships. They understood that if a ship sank, this would prevent an entire quantity of a product from sinking in the deep water. Diversification just makes sense.
The way this can apply to you as an entrepreneur is that your marketing and prospecting are your business investments. If you only do one or two things and something changes or goes wrong, the opportunity will overtake you.
You can’t do one or two things and expect great results. First, it will never bring you to the level of income that you are capable of. Second, it’s poor planning to have one or two things to work consistently. Life is not so smooth.
Another interesting way to look at it is if you only had one door to enter your business and someone destroyed the road blocking the entrance to your store, how would people get to you to do business with you? On the other hand, if you had 10 or 20 doors, and some of them were locked, people would at least come to you through other open doors.
Most people in business today do a couple of marketing concepts and hope to build a solid foundation. The diversification strategies to employ are a very important exercise to study where you get your customers from as a percentage of the total market. If there are too many sources above 10-15 percent, it is a clear indication that you are not diversified.
Ideally, you want no source to exceed 5% of the total. For example, you have received 21 new clients for the year broken down as follows:
12 Previously known family and friends – 33%.
2 Ads in magazines/newspapers – 17%.
5 Client References – 11%.
2 References from External Professionals – 28%.
Two conclusions can be drawn from this analysis:
1. The business owner does not make much money because there are only 1.5 clients per month.
2. The reason the business owner does nothing is because there is no marketing diversity.
This is evident by the lack of number and type of activities to generate customers. It is never advisable to put all your marketing in one place. One of the most common things I see in today’s economic climate is a direct correlation between how many marketing secrets a business professional uses and how much money they take into the bank. The more secrets you use, the higher your income.
For example, a small business owner I know said she was making around $150,000 before we met. However, she had no savings due to some personal issues, so she initially couldn’t afford to do a lot of marketing. She started looking for other distribution channels with a small advertisement and got some sales from customers.
Gradually, he reinvested his earnings to add a new secret every month or two. Today, this person earns $175,000 a month. How did she do it? She just added more and more secrets and delegated work that she didn’t need to do herself. However, she started small and she only spent a couple of hundred dollars a month to get business sales up and running again.
Take some time each week to plan. It is important. Here is a simple guide for you to use.
Write down your goal for the total net income you want next week.
Write down the number of new customers it will take to get it.
Write down your goal for the number of repeat customers you want to achieve.
Write down how many service calls you will make if you are a service company.
Write down how many products you have to sell.
Write down the net income from each item and your average income per customer.
You will get the full income you are trying to achieve. Each week write down the actual numbers you want to achieve and you’ll find out if you’re hitting them or not. Then you will know if you need to increase marketing and in what areas. Creating a simple marketing plan like this allows you to keep track of all the numbers and helps you achieve your marketing goals.
The key is to compromise and add more secrets when and if you can afford it. The choice is yours. Anyone can do this. If you have low income, diversify.