Small Business Diversification Strategies

Posted on

Investment advisors and financial planners tell their clients and customers to diversify in order to protect against financial disasters. In the 5th to 4th centuries BC, ancient Greeks split up their merchandise being transported on ships. They understood if a ship sank, this would prevent an entire quantity of a commodity from going down into the deep waters. Diversification simply makes good sense.

How this may apply to you as an entrepreneur is that your marketing and prospecting are your investments in business. If you only do one or two things and something changes or goes wrong, the opportunity will surpass you.

You cannot do one or two things and expect excellent results. First, it is never going to get you to the income level you are capable of. Second, it is poor planning to count on one or two things to consistently work. Life is not that smooth.

Another interesting way to look at it is if you had only one door to get into 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 a few were blocked off, people would at least get to you through other open doors.

Most people in business today do a couple of marketing concepts and expect to build a solid foundation. Diversification strategies to employ are a very important exercise to study where you get your clients from as a percentage of the total market. If there are too many sources above 10-15 percent, it is a clear indication you are not diversified.

Ideally, you want no one source to be above 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 Magazine/Newspaper Ads – 17%.

5 Referrals from Clients – 11%.

2 Referrals from Outside Professionals – 28%.

There are two conclusions that can be drawn from this analysis:

1. Business owner does not make much money because there are only 1.5 customers per month.

2. The reason business owner does not make anything is because there is no diversity of marketing.

This is apparent from the lack of both numbers and type of activities to generate clients. It is never wise 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 are marketing, secrets a business professional uses, and how much money they take to the bank. The more secrets they use, the higher their income.

For example, one small business owner I know said she was grossing about $150,000 before we met. However, she had no savings due to some personal problems, so she could not afford to do a bunch of marketing initially. She began seeking other distribution channels with one small ad and received a few customer sales.

Gradually, she reinvested her profits into adding a new secret every month or two. Today, this person grosses $175,000 a month. How did she do it? She simply added more and more secrets and delegated the work that she did not need to do herself. But, she started small and was only spending a couple hundred dollars a month to get business sales rolling again.

Take some time each week to plan. It is critical. Here is a simple guide for you to use.

Write down your goal for your total net income you want next week.

Write down the number of new clients that it will take to get that.

Write down your goal for number of repeat clients that you want to achieve.

Write down how many service calls you are going to make if you are a service business.

Write down how many products you have to sell.

Write down the net income for each item and your average income per client.

You will come up with the total income you are trying to achieve. Each week put down the actual numbers you want to achieve and you will find out if you are reaching them or not. Then you will know if you need to increase marketing and in what areas. Creating a simple marketing plan like this enables you to keep track with all the numbers and helps you to achieve your marketing goals.

The key is to make a commitment and add more secrets when and if you can afford it. The choice is yours. Anyone can do this. If you are low on income – Diversify.

Leave a Reply

Your email address will not be published. Required fields are marked *