One way to protect your business against any downturn in trade is to diversify. By broadening the scope of your business you’ll be less susceptible to changes that affect any one product, service or business stream. Of course, things are never quite that clear cut. Diversification can be just what your business needs but it is not without its own risks. Some of the potential benefits and pitfalls of diversification are outlined below. Understand these and you’ll be better placed to decide whether diversification is the way forward for you.


Tax should be one of the first things you consider, before you make a decision on diversification. A new structure will almost certainly affect your tax obligations. In some cases it will be preferable to start a brand new business; in others, it will be in your interests to keep both operations under a single umbrella. There is no single answer to this; the implications will differ in almost every case. The advice is simple – know your options.




If your existing business specialists in web development, diversifying into share trading may not be the best idea. Developing the business to offer SEO services, however, could make a lot more sense. The key is to diversify just far enough away from your core business that you develop new opportunities to make a profit but not so far that the skills, experience and expertise within your business lose their value. Balance is paramount. Diversification is most effective when the new and old parts of the business are genuinely complementary.


One huge advantage of diversification is that you have the opportunity to generate new revenues without having to put the entire infrastructure into place that would be needed by a brand new organisation entering the same market. You will already have service functions, such as accounts and human resources, established. As long as you ensure they are equipped to handle your new diversified business, this represents a significant saving. If you have not strayed too far from your original products or services, there could be further efficiencies to be found. A share trading business that diversifies into offering financial advice, for example, will have lots of technical expertise to draw on.


Never underestimate the power of your brand or how easy it can be damaged. If you’re running a successful business, the reputation you have built up is an incredible tool in the continuation of that success. This can help as you diversify; your reputation will encourage customers to give you a try in a way that a brand new business couldn’t hope for. The corollary of this is that your new and existing brands are inextricably linked. If your diversified business is not successful, it’s likely your new brand will suffer and, in turn, so will your original business.


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Tahir Mehmood

Tahir Mehmood is an SEO executive and co-founder of this website"UploadArticle". You can found him on Google+, twitter, and Facebook.


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