Why Businesses Need to Diversify Everything Right Now Diversification, when done correctly, can grant a business a certain relief when it comes to withstanding crises and global financial and professional turmoil. As tough as diversifying may be, every leader who is averting their eyes off it is exposing their team and business to risks, especially with the global market changing rapidly.
By Daria Leshchenko Edited by Micah Zimmerman
Opinions expressed by Entrepreneur contributors are their own.
I have been praising diversification for years. It has proven to be one of the most effective approaches to managing a business that I have come across through my tenure as a CEO and Managing Partner.
There are three things a business owner can diversify: the team, the client base and the revenue streams. So let's look at each of these closer.
The team
We are living in a world that is constantly changing. Just during the last three years, we have witnessed the Covid-19 pandemic, quiet quitting, the threat of recession and even a full-scale war in Europe. If this experience taught me anything, there is no saying where and when the next crisis may strike.
When diversified, a team can serve as a buffer between a company and any crisis. This helped our company withstand the pressure caused by the Russian invasion of Ukraine at the end of February 2022. While almost the entire Ukrainian team was relocating away from the front lines and searching for safer homes, the members of our international team kept on providing services to our client's customers. As a result, we could provide uninterrupted services even during the hardest times when a part of our team was indisposed.
To successfully diversify and expand the team globally, a business should:
- Look for local HR professionals who will be able to not only channel a company's values to candidates but also understand a candidate on a cultural level, which can create a stronger bond with a company from the get-go.
- Establish intercultural and interdepartmental team-building sessions to ensure free and productive communication.
- Promote your brand within your existing team to make sure they become brand advocates and can refer their friends to you, further enriching your company and team.
According to data, teams outperform individual decision-makers 66% of the time. Diverse teams perform even better. Tough as building it may be, a diverse team can become a backbone of a well-functioning business.
Related: As We Emerge From a Global Crisis, It's Time to Rethink How We Work
The client base
Nothing has taught businesses how to diversify their client base like Covid-19. Back then, we watched whole industries collapse. Travel, hospitality, logistics, and even manufacturing were in trouble. And so were businesses that worked with them.
Diversifying a client base might not be on top of a business's priorities list. It is also not the easiest of tasks, as it often means a business needs to fan and spread its attention — not something every company can afford. It also requires a larger team, the members of which have different education, background and experience. That makes the search for them more difficult.
With all the difficulties that come along with it, diversification of a client base is a safeguard that can protect a company during global turmoil. Big and small businesses operating in different industries in your client portfolio can mitigate risks. If one of the clients decides to change vendors or closes the shop, it would barely reflect on you as a service provider.
One of my personal favorite side effects of diversifying a client base is that it requires creative solutions. How to organize the workflow? Who to hire to have eyes on all processes? How to set up team communication to make sure everything works like clockwork? These questions cannot be answered without creativity and diversity in the approach to the process.
Related: Don't Neglect This One Crucial Step of Leading Through Constant Change
The revenue streams
Diversification of revenue streams may be the toughest of the tasks as it requires extensive knowledge about different industries and markets as well as a plethora of information that needs to be updated regularly.
To properly diversify revenue streams:
- Look for the right partners — diversifying revenue streams is a risk. Partner with the right businesses and people to protect your company when venturing into new industries.
- Make sure all your offerings complement each other — there is no point in trying to develop an AI-powered chatbot if your main industry of operation is hospitality. There will simply be no touchpoints between the two, and everything can fall apart.
- Satisfy a market's demand — do not reinvent the wheel. Research the market and fill open niches rather than trying to squeeze existing players off it.
Diversifying revenue streams is risky because it can make or break a business. If done right, it can help a business gain more revenue from their existing clients, win new clients (obviously), and reduce a business' dependency on just one industry. All are crucial in the ever-changing world we live in.
