Diversification

By Entrepreneur Staff

Diversification Definition:

A risk-reduction strategy that involves adding product, services, location, customers and markets to your company's portfolio

Many small companies are one-trick ponies, betting their entire futures on a single product, a single service, a single location or even a single customer. And there's nothing wrong with that in the beginning: A narrow focus lets a startup concentrate energy on doing one thing extremely well.

But as you grow larger, you'll find opportunities to add products, services, locations, customers and markets. Diversifying in this way can help your business weather tough times by providing alternate sources of revenue in the event that your original market dries up, stops growing or is hit by new competition. Most companies that survive for long periods of time find that they have to develop new sources of revenue as tastes change and opportunities evolve. Growth through diversification can help your company have options in place when they are needed.

More From Business Expansion

Acquisition

The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets

Alliances

Joining forces with another company or individual to combine talents or strengths in order to attract more business

Franchisable Business

A business that has the potential to be sold as a franchise opportunity, generally having the following characteristics: It is established, offers a unique concept, is teachable and can provide an adequate return to potential franchisees.

Branch Office

A smaller, remotely located office that is separate from a company's corporate headquarters