Over time, if your business model is successful, your business will grow from a small business to medium-size business. At that point, you may wonder what else you can do to further expand your enterprise. One of the most effective ways to expand a medium-size business is to diversify your business portfolio so that your eggs are not all in the same basket. Not only can diversification add variety to your brand, but you can also tap into markets that were once inaccessible to you. Overall, diversification can greatly increase your business’s value as well as reduce the risk caused by the reliance on having only one source of revenue.
As Tyler Blain points out, one of the easiest ways to diversify your business is to offer a complementary product or service. Finding complementary products that fit within your company’s branding can be a challenging task and requires considerable research into consumer markets. You would need to find products that can easily be launched and supported by your business’s current infrastructure. This can be accomplished by looking at the product lines of other businesses in your industry and current industry trends and innovations.
Another way to diversify your business is to create a spin-off business. A spin-off business can help diversify your business portfolio and protect investors against economic downturns or industry upheavals. According to Teknos, spin-offs are a great way to enhance shareholder value, to navigate regulatory challenges, and even to facilitate vertical and horizontal integration. A business spin-off essentially separates your assets and allows you to enter into a new industry that can be vertically or horizontally integrated to your current industry. The key is to not create a second start-up business. Ideally, you’d want your spin-off to relate in some way to your current business, possibly by using the technology or infrastructure you’ve already established.
Most businesses consider the advantages of mergers and acquisitions because they want a boost to a higher tier of profitability. You would need to invest a considerable amount of time and resource to plan for a successful after-merger integration the post-transition can oftentimes be overwhelming. A merger or acquisition can open up new markets, expand the customer base, increase production capacity, and help your company become more resilient during financial upheavals. Most of all, mergers and acquisitions can help you attain a more competitive edge over your competition.
A small business, oftentimes, is limited in its capacity to grow. At some point, their limit will be reached, and further growth can only be accomplished through bigger business transactions such as through diversification of the business. Business diversification can be the next step to enter a more profitable playing field.
Diversifying your business isn’t always a smooth road, so if you run into trouble, we are here to help with all your legal needs!