During challenging economic conditions do businesses need to diversify in order to survive? According to the Guardian’s Small Business Network, diversifying can help businesses survive in a crowded market place, but also presents significant risk.
Businesses can diversify in a number of ways from exporting to new markets to launching new products. Managing the risk involved when expanding business operations can make all the difference to a business’ stability and success.
The article for the Guardian’s Small Business Network said, “Diversify or die: it’s an adage that sounds a warning about the dangers of staying in the same place for too long. It is a warning that many small firms have heeded by finding new products or services, new markets and new revenue streams.
“It can be a risky strategy. Business owners must be able to focus on their new venture without neglecting core business, yet in trying to control everything, they risk spreading themselves or their resources too thin and losing everything.”
When businesses diversify it often includes expanding the supply chain. Ensuring that the supply chain remains strong is vital for mitigating risk. Late payments, bad debt and insolvency within the supply network can cause knock on effects that may place businesses in jeopardy. If a business is already placed under pressure and resources are stretched these risks can have a larger impact.
Using a risk monitoring service, such as Graydon’s CreditWatch, enables businesses to reduce the likelihood of knock on effects. CreditWatch sends clients’ email alerts the second any critical news occurs allowing businesses to react quickly should they be placed at risk. The service examines 30 critical events and is fully customisable to ensure that customers’ needs are met.
Expanding to new markets and exporting is also a key way businesses can diversify. International trade presents its own risk as business cultures differ around the globe. Businesses should thoroughly research the region they intend to operate in before making any decisions.
International credit reports should also be obtained for potential foreign business partners in order to assess their stability and creditworthiness. By taking a proactive approach to credit risk management and thoroughly researching the market businesses can diversify with the minimal amount of risk as possible.