Disney CEO Bob Iger once said, “For us to grow globally, it’s not enough to just be an exporter. We have to be a creator.”
Disney is obviously trying to do just that: Its Shanghai Disney Resort -- the entertainment conglomerate’s first theme park in Mainland China -- has already sold out of tickets for its June 16 grand opening.
Nor is Disney just in the Mickey Mouse business: Its multimedia empire includes television mainstays like ABC and ESPN and production powerhouses such as Marvel and Lucasfilm. That’s not even getting into its nonmultimedia-related properties, which range in everything from cruise liners to an entire island.
Entrepreneurship, as Disney illustrates, is more than a vocation: It’s a skill. And one of the talents required for successfully implementing that skill is versatility, which is why so many entrepreneurs excel at diversification.
When I started my first business, I knew I didn’t want just one page in my entrepreneurial portfolio. Like most entrepreneurs, I’m driven by consistent growth and progress. That expansion doesn’t come from acting on just one idea; it stems from pursuing multiple opportunities.
As Warren Buffett advised, “Never depend on a single income. Make investments to create a second source.” For entrepreneurs, businesses are those investments.
The beauty of a diverse portfolio
The value in investing in more than one business is pretty straightforward: It creates multiple revenue streams that will not only increase profit, but also help entrepreneurs remain financially solvent should one or two ideas not materialize.
Take a look at any successful entrepreneur -- from Elon Musk to Biz Stone to Kevin Rose -- and you’ll see a a variety of ventures, some successful and and some less so. The common thread is that none of these entrepreneurs put all his eggs in one basket.
Apple and Google are also excellent examples of companies that created staying power by not resting on their laurels. They aren’t just consistently developing new products; they’re establishing new product categories from which to expand their business models.
Of course it’s true that expanding too fast or too early can spell disaster for an entrepreneur. But if done properly, expansion can mean the difference between staying a step ahead of the competition and falling behind.
To that end, entrepreneurs should follow these five steps when looking to expand their professional portfolios.
1. Leave no stone unturned.
You may have a great idea, but if the market isn’t ready for it -- or 12 other people had the same idea -- then no amount of salesmanship is going to make your new business a success.
Perform due diligence: Use a market segmentation analysis to see whether the product will sell. Determine whether there’s a gap in the market that your business can fill and whether the opportunity’s scope is larger than the cost of this new business.
Related: How to Research Your Business Idea
2. Map out a strategy.
At Forte Strong, we work with "failure-to-launch" young men looking to gain the necessary confidence and skills to live independent, fulfilling lives. We use five steps to guide them all: connect, discover, coach, challenge and repeat. The same logic can be applied to new business ventures.
Once you determine that your new venture can move forward, develop a business strategy for the short, medium and long term. Define the new company’s goals and success metrics (and make sure they’re reasonable). Develop an annual budget and design the organizational needs to make it all a reality.
Related: A Simple Business Plan
3. Seek second opinions.
Bring in interim managers with the relevant expertise that will help you get the startup off on the right foot. This team will not only be crucial early on, but will help you hire the right people to keep the company moving forward.
4. Ensure you’re ready for prime time.
Complete all the requisite testing and research on the intended product before it hits the market.
Even big companies have failed in this regard: Sony sought to make its SmartEyeglass an affordable alternative to Google Glass. The idea was sound, but the company didn’t factor in the public’s hesitancy to adopt the technology or its confusion in regard to how that technology would be best used.
One of the biggest mistakes many entrepreneurs make is pushing a half-baked product out the door too fast instead of first taking the time to get it right. Another mistake, in the case of SmartEyeglass, was not learning from others’ miscues when bringing a product to market.
5. Limit your pace.
The key to successful expansion is moderation. Consider the consequences of expansion options before moving forward.
Nearly one-third of small businesses don’t survive their first two years. Some falter because of personnel reasons, while others suffer from customer disinterest. If ambition starts to outpace physical capacity, then new ventures will soon become overwhelmed.
Successful entrepreneurs are never satisfied -- that’s what makes them so successful. By progressively building up new ventures, they'll find it's possible to diversify a portfolio to secure long-term profitability.
Business growth doesn’t just happen. It starts with you.