By , Doug and Polly White
Published June 28, 2016
Many of the entrepreneurs we work with seem to have "magpie" syndrome: They are always chasing after the next shiny object. Once they get past start-up phase, they get bored. They begin thinking about diversifying into other businesses and recapturing the thrill of creating something new.
Related: 4 Best Practices for Expanding Your Expertise Into a New Market
While diversifying beyond your own core business may seem like a profitable move, it can also be a cash-sucking money loser. We would offer the following advice to help ensure that you stay on the positive side of the ledger.
If your current business is floundering, we’d suggest resisting the temptation to diversify. Diversification may seem attractive; the grass is always greener on the other side of the fence, right? Unfortunately, though, diversifying will inevitably increase the complexity of your challenge and therefore reduce your probability of success. If your core business is not succeeding, you may make the decision to shut it down and launch a new venture. However, if you aren’t ready to throw in the towel, we suggest that you work to push your current business into the black, before diversifying and increasing complexity.
If your core business is successful, pursue more of the same. The advantage is that you already know how to succeed in this endeavor. So, now, grow the enterprise you know before accepting the risk associated with a new venture. Consider expanding your business geographically. Open an office in a new city. Seek new distribution. Expand your product and/or service offerings.
It can be tempting to forward- or backward-integrate. After all, you are familiar with these businesses. You buy from them or sell to them. However, there are risks.
Related: How to Diversify Your Company and Tackle New Industries
If you have made the decision to diversify, do it in a way that minimizes risk and maximizes the likelihood that you will succeed. Look to diversify into:
Related: Staying on Track While Diversifying a Business
Moving into a new industry is risky business. Following these tips when you are considering diversifying your business can help you avoid costly missteps and increase your probability of success.
https://www.foxnews.com/us/risky-business-should-you-diversify