Business Diversification - Planning To Branch Out?

You -- and most of the small business owners in the country -- have done everything you can over the past few years to boost your bottom line. If trimming expenses and improving efficiency haven't done the trick, what else can you do?

Business diversification is one possibility. But don't be too hasty. A successful expansion -- whether it's adding new products, tapping into a new market, or acquiring a competitor -- requires a well-thought-out strategy coupled with realistic expectations.

A BIG Step

Consider your strengths and weaknesses and look at how they will affect -- and be affected by -- an expansion. Yes, you already know how to run your business. But, if you decide to diversify, things will change. And those changes could have a major effect on many aspects of your business. Anticipating what those changes will be and assessing what adjustments will be necessary can greatly improve your chances of success.

You'll need a written business plan that outlines your goals and addresses financing, staffing, and marketing issues. Estimate capital costs as well as the cost of any additional debt you'll incur. Run revenue projections and income statements. Consider what effect an expansion might have on your relationship with your current financial partners.

Smaller Steps

Before you go ahead with any big changes, there might be some small changes you could make that would improve business. For example:

• Add value. If you're in a competitive market, you may be able to capture a larger share by adding some extras. Beefing up customer service, speeding up deliveries, or making sure your sales staff is knowledgeable might give you a competitive advantage.
• Focus on sales. If you don't currently have a salesperson, think about hiring one. If you have a sales force, consider expanding it.
• Leverage your current customers. Learn more about your customers' business needs. You may be able to customize your products or services to bolster existing relationships.
• Expand your customer base. Don't rely on one or two big customers to provide the majority of your sales. Branch out by looking for smaller customers.