Strategize to Keep Your Profits in Good Times and in Bad

If you've been in business for any amount of time, you may very well be wondering how the big guys did it. How did they find a product or service that would stand the test of time? The truth is they probably didn't. Successful companies all rely on diversification to one extent or another. Diversification is a business strategy designed to protect the entity's revenue by investing capital in varying products or even industries. That way when one product dies out, it won't throw the entire business into failure, as it will have other on-going income streams.

This is a well-known and well-used strategy that has kept many companies afloat during product failures or competition successes that might have otherwise turned them to bankruptcy. The question for the aspiring entrepreneur is how does the business planner build it into his overall strategy? Can it even be utilized by a small or home-based business?

Definitely, yes! You just need to ask yourself the questions that will lead you to the right opportunity. Of course, you need to get your primary business profitable first. Then it's time to start thinking of diversification. Build off your original business at first. Find something that uses similar skills, resources, or knowledge so you can easily turn it into an income stream. Later you will have more income, and therefore, more opportunity to diversify even further into areas where you may have to purchase new facilities or education to accomplish your goals.

Let's look at a simple example. If your small business is based on your writing articles for other people's websites, how would you diversify to protect yourself in case the demand for website writers disappears? This one's easy to see. You're talent is writing. There are many other outlets for writers. Check eLance or goFreelance or Guru -- websites who match up writers (and others) with those seeking to hire writers. They look for e-Book writers, resume writers, sales copy writers, and many others. You can diversify in your own field, gathering more and more experience, making you hirable for many types of projects, not just articles. Or you could diversify in the direction of website ownership. The experience and talent you've been using for other people's websites can be used for your own monetized website on a subject that interests you. You have another income stream from a totally different source.

Of course, it's harder to see your diversification options if you have a more complex, time-consuming or capital-intensive business. Suppose you own a small craft store. Sales of craft supplies and some finished crafts are the bulk of your business. You need to be there during all open hours, and you have little capital to invest elsewhere. Don't give up on diversification, as it may still help your business in little ways. Can you, for example, run craft classes? Can you sell finished crafts for your customers on consignment? Perhaps you could invite in guest speakers or instructors who would share special techniques with your customers.

If you're just getting started, you're in the perfect place to plan to diversify. You can build it right into your business plan. You needn't start them all at once, but plan early and you won't be caught off guard by sudden business downturns. If you're already established but not diverse enough, start looking around and seeing what else you could add at minimal cost that would gain you a different income stream from a different source. This is one of the best ways to protect your overall income and ensure on-going profitability.

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