Small business success depends on establishing a stable income base, and for the majority of companies, the best strategy is to focus on your strengths. But a narrow professional focus comes with its own risks; a slow month can leave you unable to pay your bills or an important client might pull out, cutting your monthly income dramatically. That’s why, in order to protect your financial stability and improve your company’s cash flow, you should consider diversifying your business’s services and products.
Examine Expansion Options
When working with limited funds, staff, and space, you need to be smart about how you choose to expand your business – you don’t have the luxury of experimenting with a variety of projects. One way to frame this process, then, is by thinking about horizontal expansion versus vertical expansion. So what’s the difference?
Vertical expansion is an ideal approach for professionals with deep expertise. Maybe you offer a few services, such as graphic design or event planning, but you actually have much deeper capabilities. Why not dig deeper and offer a full spectrum of services? This gives you the option to make more sales to your current customer base and compete for new clients against other full service businesses.
A horizontal approach to expansion, on the other hand, looks for what services and products are adjacent to your current niche. So, for example, a cosmetics company might begin offering hair products, toiletries, or small accessories, while a web designer might consider other graphic design services, such as print materials or books. This approach is often more challenging than vertical expansion, but it can also provide greater security by attracting new clients – and a deeper client base means you’re less vulnerable if a core customer stops ordering or changes business directions.
Ramp Up Repeat Sales
Another way to diversify your small business’s sales model is by creating multiples purchase intervals and encouraging repeat purchases. That might mean shifting from a one-time purchase model and pinning your income on customer loyalty and instead introduce a subscription model that automates repeat sales. Many businesses today encourage a subscription sales model, and that alone can stabilize income dramatically and allow your company to focus on other projects.
Repeat sales rates can also be improved by shifting the balance between brick-and-mortar sales and online business. Recent sales trends suggest that, especially for major purchases, people are more likely to browse online to educate themselves and then head to the store to experience a product first hand before they buy. On the other hand, a customer who stumbles into a local business while walking through the neighborhood, may be more likely to make a repeat sale if they can order online. Offering both options maximizes the odds of closing every sale, not just the convenient ones.
Diversifying your small business can be stressful, but making a decision about your company’s growth is less difficult than trying to stay afloat during a slow month or after losing a contract. But the great thing is, diversification also presents an opportunity to dig deeper and chase down the projects you wish you could have taken on when you first opened shop. Those new projects help keep the spark alive because, though there’s never a dull moment when running a small business, we all need to be reinvigorated from time to time.