As many small business owners know from experience, understanding risk and business diversification are vital when starting, running and growing your business. Running a successful business involves increasing your choices and reducing your dependencies.
I recently visited Gordon Country, a working cattle property that has been transformed into a wonderful, eco-friendly camping ground in the Goomburra Valley in Queensland.
Recognising the opportunity to expand their business beyond cattle farming due to the sheer size of the property has provided the owners with an excellent chance to diversify their revenue stream and reduce the risk of being totally dependent on their farming business.
And so it is with all business ventures. The more dependent you are on a single employee, a single supplier, a single client or a single income stream, the higher the risk for your business.
All businesses are exposed to risks to a greater or lesser degree. In my experience diversification is key to mitigating the risks posed by being over-dependent in any one area.
Diversification can involve looking at new products in new markets or even an existing product in a new market. I believe that regardless of how confident you are in your existing product or service, broadening your horizons and pursuing new opportunities is imperative for a business to remain competitive, grow and survive.
Of course, business diversification brings with it a whole new set of risks and the decision about how much to diversify will be dictated to some degree by your appetite for risk.
However, putting all your eggs in one basket in any area of your business poses way more risk than expanding your choices.
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If you would like to learn more about business diversification or advice specific to your personal circumstances, please don’t hesitate to speak to a small business accountant on 07 3391 1188 or email: email@example.com
Updated 18 June 2020