You’ve heard the saying “don’t put all your eggs in one basket,” well the same goes for relying on one customer for all of your business. A manufacturer with more than 10 percent of its business tied up with one customer or more than half of its business in one industry is at risk.
If that customer goes away would you have to close your doors? It’s scary to think about, but if diversification isn’t part of your strategy – it needs to be. By diversifying your customer base, you are making your business more resilient and profitable.
The following tips will assist you in taking the first steps towards diversification.
- Take a look at your operations, capabilities, processes, marketing tactics, website, messaging etc. If your business is primarily automotive, but you want to expand into agriculture then you need to customize your approach to fit that market. You cannot talk about automotive in the same ways you would talk about agriculture. Do you have the right machinery? Set-up? Management? Will your existing capabilities transition well to a different industry? If so, what industry?
- Before committing resources to diversifying, ensure you understand the needs of the market you are expanding into. Identify potential competitors and find out more about their prices, processes and capabilities. Determine how you can differentiate yourself and how you will do it. Will you offer better pricing? Quicker turnaround? Improved development?
- Set goals. This is already part of your sales strategy, but needs to be expanded outside of the current industries you are serving. Outline customer acquisition goals and dedicate resources to that plan. If you are not willing to invest time and money to diversify then don’t do it.
- Outline the resources you need to implement your strategy. Marketing will be a large investment, as you are introducing your company in a market you have not existed in before. Beyond marketing, you need to make sure you have the right suppliers, staff and physical space.
Another avenue in diversification is acquisition. If your company is in a strong financial position, consider acquiring a company that is currently serving the market you want to expand into.
Diversification is hard and it isn’t for the faint of heart, but neither is running a business. If you are only focused on short term goals, then you are at risk in the long term. Be proactive and diversify, you will be glad you did.