Diversification: A gamble that is paying off for Canadian businesses
The economic context of the past five years has been coloured by uncertainty. From the pandemic to the trade war, Canada’s business owners have had to contend with a wave of changes.
Recognizing their overreliance on clients, geographic markets or suppliers, many entrepreneurs have returned to the tried-and-tested strategy of diversification.
A survey conducted by BDC in June and July 2025 clearly demonstrates this. The results show that the country’s business owners have a growing appetite for this strategy, even if they face challenges along the way, because of its perceived significant benefits.
A majority of businesses have taken steps to diversify this year
According to our survey of 545 business owners and decision-makers, over 51% of Canadian businesses have launched a new product, service, or entered a new market within the past year.
This underscores the marked interest businesses currently have for diversification, innovation and growth.
In light of this statistic, it’s not surprising that 55% of businesses questioned across the country already have a formal or informal diversification strategy in place. Even if they’ve implemented a strategy, businesses are maintaining their efforts, with 63% of them planning to diversify further or start to diversify within two years.
What characterizes these highly diversified businesses?
Among the business owners questioned, one in five report high or very high diversification, meaning that they operate across multiple markets or industries and offer a range of products and services.
What characterizes these businesses? First, they tend to be large, with 100 employees or more (35%). Thanks to their greater financial resources, it’s easier for them to diversify than for SMEs.
Next, they are often manufacturing firms (35%). Lastly, they are often also professional service providers (29%) and Quebec companies (29%).
Why do businesses diversify?
The survey identified two key factors motivating Canadian businesses to pursue greater diversification.
In response to a question about what drove their most recent diversification initiative, 57% of business owners reported that they wanted to explore new revenue streams.
The second most popular reason was responding to changing customer needs (46%).
One of the survey’s most intriguing findings relates to the benefits of diversification.
When we asked entrepreneurs to describe the benefits they associate with diversification, over 70% mentioned increased revenue or profitability, and 62% replied that they gain access to new customer segments or markets.
Graph 1: Factors motivating the launch of the most recent diversification initiative (% of businesses mentioning the factor)
Main diversification challenges
Despite its advantages, diversification has its challenges.
According to our survey, the main concern expressed by business owners is the risk of overextending financial or human resources. This challenge was noted by half of businesses, followed by increased operational complexity (41%) and uncertain return on investment (40%).
The main concern expressed by business owners is the risk of overextending financial or human resources.
Alexandra Fioriello
Senior Analyst, Research, BDC
The lack of expertise in new markets or sectors (33%) and difficulty maintaining focus on core activities (26%) are also frequently mentioned obstacles. Other issues, such as difficulty integrating new products or teams (24%), regulatory challenges (23%) and dilution of brand identity (19%) are also concerns.
Note that one in 10 businesses mentions no particular risks with diversification.
Graph 2: Risks and challenges associated with diversification (% of businesses mentioning the risk or challenge)
Keys to successful diversification
To ensure a successful diversification, businesses must rely on certain key capabilities, whether internal or external.
According to our survey, almost half of business owners (49%) consider that financial resources and budgeting flexibility are the most important internal factors. Strong leadership and strategic vision (43%) and a skilled, adaptable workforce (37%) are also key.
Other internal factors are also considered essential, though to a lesser extent, such as operational agility and scalability (33%), and market research and customer insights (33%). Lastly, aspects such as innovation and product development capability (24%), effective project and change management (19%), as well as integrated technology and data systems (18%) round out the list.
Graph 3: Internal capabilities considered essential for a successful diversification (% of businesses mentioning the factor)
A risk-mitigation strategy
While diversification is not a new concept for Canadian entrepreneurs, the past few years have made it more crucial than ever. The pandemic, trade tensions and rapidly evolving markets have pushed many businesses to rethink their products, services and client segments, confirming that adaptability is central to an entrepreneurial mindset.
Our survey clearly shows that entrepreneurs have a growing appetite for diversification. And even if business owners realize that deploying or extending this strategy comes with a series of challenges, they also understand that the benefits are promising and will strengthen their organization’s resilience to the unknown.
Ultimately, diversification is less about taking risks and more about protecting against them. In these uncertain times, it serves as a driver of growth and a safety net for managing uncertainty with confidence.
Next step
Would you like to diversify but aren’t sure where to start? Download our new guide on how to diversify your business.
We can also help you develop a diversification strategy to improve your resilience. Contact us to find out more.