BUSINESS GROWTH THROUGH DIVERSIFICATION

 

Have you ever met a business owner who didn’t want to increase sales? I doubt it. I know I certainly haven’t! While there are various ways to increase sales, one way is to achieve business growth through diversification. 

 

Diversification can result in business growth AND protect your business against downturns.

We’ve all heard the saying “don’t put all your eggs in one basket.” But, often, businesses do. They are focused on one product or service category and that’s it. What happens if a strong competitor steals your customers? Or, what if the market shifts and your products or services are no longer in demand? What if you’ve maxed out what you can do in your market with your current offerings? 

When first starting a business it is common to focus on one product or service category. The main reason for this limited focus is often capital. There simply may not be enough money to do anything but focus. However, as time goes on it may be beneficial to consider diversification options. Diversification can result in business growth AND protect your business against downturns.

 

 

Three Types of Diversification

 

• Offer new products or services to existing customers/markets.
   
  Example:  An auto repair facility that starts offering tow truck services.

 

• Find new markets for existing products/services.
   

  Example:  A clothing manufacturer that makes yoga clothes that starts marketing their clothing to other fitness niches.

   
• Offer new products or services to new customers/markets.
   
  Example:  A craft store that starts selling teaching materials.
   

 

When considering diversification options look for products or services that are related to your current offerings.  Consider your resources – your knowledge, your staff, your space, etc. You may think that you do not have the space or even the capital to diversify but there are many options that don’t require a lot of space or a lot of capital. You may also be able to outsource the diversification. For example, a fabric store could offer scissor sharpening. They may not do it themselves but instead outsource it to another business that provides the service which the fabric store marks up. Another way to diversify is finding wholesaler providers. One example is an office supply store that offers wedding invitation printing. They may use a printing wholesaler to provide the invitations. Collaborations like these can be a win/win for the businesses and also for their customers. 

 

 

Diversification Examples

Big chains are not the only businesses that can diversify. Small businesses can also experience business growth through diversification.

• Antique Store — organizes estate sales
• Art Gallery — restores paintings/prints
• Bakery — adds sugar-free and gluten-free options
• Camera Store — adds photo processing 
• Carpet Store — offers carpet cleaning services
• Clothing Store — adds alteration services
• Computer Store —  offers computer classes
• Copy/Print Shop — adds graphic design services
• Dance Studio — sells dancewear
• Daycare —  offers after-hours birthday parties
• Fabric Store — sells and services sewing machines
• Gym — sells nutritional supplements
• Jewelry Store — adds coin collecting supplies
• Kitchen Supply Store — offers cooking classes
• Liquor Store — offers off-site bar services for events
• Nursery —  sells outdoor power equipment
• Office Supply Store — refills printer cartridges
• Restaurant — adds catering services 
• Screen Print Shop — offers embroidery services
• Stationery Store — adds mailing/shipping services
• Toy Store — adds books and story times

 

 

Hopefully, these examples will generate some ideas for your own business. However, most good ideas will be the result of simply listening to your customers. If they call or stop by and ask for something that you don’t offer, make a note of it. Seriously — write it down. At my business, we have a small “Lost Sales” notebook. My staff writes down everything that people ask for that we don’t offer. Sure, some ideas wouldn’t be a good fit but sometimes I discover gems. 

 

In addition to listening to customers, pay attention to your community. If a business is moving or closing, there may be an opportunity to pick up products or services. Or maybe there are products or services that simply are not available in your area that you could offer.

 

People are busy. They are pulled in multiple directions. They want to save time any way they can. If you can diversify, you can make doing business with you more convenient for your customers. 

 

Now, for my story . . .

I started my business in 2004. I wanted to open a scrapbooking store that offered color copies, a computer rental station, and UPS shipping. I thought those added services would compliment scrapbooking supplies sales. As I was searching for a location, I discovered that a small copy/print center was for sale. I purchased the copy/print shop, added scrapbooking supplies and changed the name. 

Before opening under the new name, I visited other similar paper craft stores. I didn’t want to duplicate what they were doing; I wanted to focus on different brands and product types. When opening I didn’t offer rubber stamps, for example. There were 5 other independent stores and 2 big box stores within 20 miles offering rubber stamps. In time, as those other stores stopped stocking rubber stamps or decreasing their product offerings customers kept requesting that we stock rubber stamps. So, we did. Now it’s one of our largest product categories. 

In the last 14 years, I’ve experienced business growth through diversification based on customer requests, staff recommendations, and market changes. Another example is teaching materials. The only locally-owned teacher supply store closed. When the owner told me she was closing, I asked if there were any products that she carried that may be a good fit for my business. The owner shared with me what her top-selling product types were. Having been asked by customers for teaching materials for years, I was already open to the possibility. I even purchased some of the displays from the closing business. This product category is a nice fit. 

Another area that we really expanded was office supplies and stationery. Since printing is a large part of our business, office supplies and stationery are a natural addition. In fact, we often print on the labels, envelopes, and papers that we sell. And, we now even offer a great selection of greeting cards.

While everything in my business is paper-related, we are very diversified. From time to time people will comment on how “lucky” I am to have such a diversified business. I honestly want to scream everytime someone says I’m lucky. The diversification is the result of listening to my customers, my staff and noticing needs in our community. I am lucky, however, because I love what I do and I love the challenge of operating a small business!

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Sondra Kirtley

Sondra Kirtley, MBA, is an entrepreneur who owns and operates a retail and service business in Eureka, California. Known for her helpful nature and small business expertise, Sondra founded SmallBizpathway.com to share tips and experiences with other small business owners.

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