There is, of course, also risk associated with diversification, but the potential reward can be substantial. Through tapping into alternative revenue sources, you can make your organisation more adaptable, open leads to new customers and markets and achieve fast growth, while safeguarding your business against becoming over-reliant on any one market or product.

Here are some ways you can spot and capitalise on opportunities to diversify your business, and key considerations to make on the way to achieving profitable and sustainable growth.

Analyse your market and competition

Competition is often the best way of understanding how to improve and diversify your approach, so take a broad look at the industry and market your business operates within and analyse the services competitors provide. This will enable you to learn how to improve your own business and identify which needs your competitors do not fulfil.

Look closely at both the local and international market. It's easy to naturally limit your ideas to your own country, but inspiration can come from sources further away. Competitors in another country may be approaching the same idea in their own way, which you can modify according to your business’ unique audience and demands.

Adapt or expand your offering

Identify ways to adjust your existing product or service so it appeals to a different or broader group of people.

For example, if your business offers a ‘high end’ product or service, providing a more affordable, scaled back version will help attract people on a smaller budget. If exploring this idea, you must be certain your new offering won’t negatively impact your existing business, and that your original offering will remain just as appealing to the audience it already serves. 

You could also launch a new product or service altogether. According to a McKinsey survey, more than 25% of total revenue and profits across industries comes from the launch of new products, and recent research has also shown that companies that focus on creating new products and services while maintaining core competencies across functions grow faster than their peers.

While the process of new product development can be challenging and oftentimes lengthy, if done well, it can be extremely lucrative. Expanding your product range can not only open your business up to a completely new pool of customers who may not have considered purchasing from you before, but it also invites your existing audience to repeatedly buy from a brand they know, love and trust.

Extend your market

Most successful startups begin by focusing closely on one specific market. However, branching out to a wider audience could hold the key to your business’ success as you look for ways to grow and diversify. For example, if you currently sell a product or service to hospitals, you may choose to expand by also marketing to dentists.

Another way to expand your audience is by growing your business on a global scale and targeting new geographical markets. This is a natural route for many businesses, especially those with a unique product or service, and many countries have trade agreements across borders, giving businesses access to diverse markets which may be desperately in need of the products on offer.

However, to make international expansion a success, you must clearly identify any barriers to trade and growing the business on a global scale. There are a variety of different pathways to global diversification, so it’s important to choose the one that is right for your business.

Embrace your competitors

It is not always necessary to go head-to-head with competitors to succeed in business - working together is often far more beneficial.

Partnering with another business or competitor may seem daunting, but this kind of diversification can lead to some significant wins for both parties. It provides a great opportunity to cross-pollinate databases and you may see a variety of positive outcomes, such as better attendance at events and exhibits, higher website traffic and so on. Keep in mind that by assisting your competitors, you may get the support of a much more comprehensive network.

Final thoughts

There is truth to the familiar adage ‘diversify or die’, and doing what you’ve always done is unlikely to be the best strategy to future proof your business.

Diversification is essential to long-term visibility and helps your business stand out from the sea of competitors. It is similar to insurance for your business - if you don’t diversify, your organisation will only exist as long as that one revenue stream survives.

Begin thinking about how you can add diversity to your income and, in turn, see your profit and business value grow exponentially.