Why diversification should top your resolution list for the New Year
There’s something about turning the calendar page to a new year that I find so refreshing. It’s a simple act that inspires us to dream big about the year ahead. It’s the great reset—where anything is possible if we set the bar high enough.
Well, there’s a particular goal I’d encourage entrepreneurs to reach for this year, and that’s adding a new dimension to their business.
Diversified businesses are resilient businesses
Diversification is also a proven way to build a more resilient company. By helping you reduce your reliance on one big client, line of product or geographic market, you’ll be better equipped to generate revenue and grow.
Typical examples of diversification include:
Selling goods and services in new markets
You may want to consider selling in new Canadian markets or new countries. This will make your business more resilient to recession in a specific market. You can also think about opening operations in more than one Canadian city. This can help limit the risk faced by your business in the event of a natural disaster.
Expanding in new unrelated sectors
Overdependence on a single client or sector could leave you vulnerable to that client letting you go, or a sudden contraction in your sector of activity. Broaden the scope of your offering and diversify your client base to make your business stronger and more resilient.
Offering new products and services
You can have a broad customer base and sell in several markets, but if you depend on a single product or service, you will remain vulnerable to changes in tastes and technology. Look for ways to widen your reach by developing new products or services.
A great example of resiliency through diversification is Airbnb—the platform offers a one-stop shop for accommodations, information about nearby attractions and landmarks, and a simple way to pay for it all.
The pandemic could have destroyed the company. But, thanks in part to its diversification, it’s instead enjoying a multi-billion-dollar IPO.
Diversification can help you thrive in uncertainty
Founders that embrace this multi-faceted approach will thrive during the new normal.
There are endless combinations to create complementary “crossovers” and it’s never been easier to access the digital tools to bring them to life.
How about a tuition assistance platform with built-in payment plans (edtech plus fintech)? Or a telehealth platform with personalized micro-insurance policies (healthtech plus insurtech)?
The needs of customers have likely changed forever; entirely new business models will serve them best.
ESG: A key element in your value proposition
Of course, one of the most important dimensions that entrepreneurs can bring to their businesses is a renewed focus on environmental, social, and governance (ESG) values.
The importance of ESG took a quantum leap forward in the last year. Investors and customers are increasingly expecting that businesses will demonstrate that social good is a central part of their purpose rather than an afterthought tacked on for show.
Home furnishings marketplace Goodee is a wonderful example of the power of purpose. Founders Byron and Dexter Peart carefully curate products designed with sustainability in mind from vendors that champion social impact causes. They’ve crafted an extremely visible brand with a loyal following and have continued to grow through the pandemic.
Create value with a multidimensional business approach
One final dimension for founders to ponder: the flexible workplace.
While businesses everywhere were forced into an overnight digital transformation, the training wheels should be off in 2021. Cultivating a working culture optimized for in-person, remote, hybrid—and most importantly, periods of flux—will be a requirement for your next fundraising.
Of course, if investors are asking for new dimensions from entrepreneurs, then it’s only right for entrepreneurs to demand the same.
Seek out investors who are renewing their focus on mentorship, strengthening their ties with accelerator programs, and advancing data-driven decision-making. A commitment to new dimensions bodes well for their commitment to their founders!
Adding a new dimension to a business is as audacious a goal as any New Year’s resolution, but it’s one worth putting at the top of your list.