Business diversification – or don’t put all your eggs in one basket
These days it seems to be sure that nothing is safe. Did we feel safe years ago with a good insurance for our life and a stock for retirement – today that is not safe but a high risk with the economy going up and down and happenings we can’t influence.
Last year, when I still was teaching, we thought about buying a house and talked to the bank clerk. His concern was me because I´m self-employed and that is usually a risk (and a blessing for the one who IS self-employed ). He asked me several questions about my agency and then his conclusion was “What if half of your students don´t come back after the holiday break?”
“Half of all my students?” I asked.
“Yes, it can happen.” He looked at me pitiful.
I remember that I thought that he must be crazy – I really had a WELL going private lessons agency and usually I had to make students fit in as I didn´t have enough capacity teaching alone.
Little did I know what can all happen.
While I had over the first years when I was self-employed all the time the questions inside me – Can I pay the next bill? Can I stand that? Will the students all come back? And, when a student no longer needed me I usually felt pretty sick – if one goes – do the other also leave?
With growing success I had thrown all these ifs and maybe’s over board – and it was good this way, life was easier without this ongoing nagging in me if I can stand it. But the bank clerk reminded me at all these concerns I had in the beginning. I pushed them away harshly and thought that this won’t happen, never did.
The end of the vacation came and with the end the all-year people who finally realized that their kids won´t need private lessons at the beginning of the school year and that they could safe some Euros getting me on the boat later (btw, that is not wise, as I did not just prepare for the next test paper but did some exercising as well!). Anyway, in the economy in later 2010 people wanted to safe money.
I remember the day when my grandpa died in April my husband had to tell 19 of my students to stay at home on that day. In October Monday was my free day.
Why is business diversification so important?
As mentioned – some people wanted to start with the lessons later, others simply didn´t needed my help anymore but the most important factor was one I couldn’t influence – on Monday the schools decided that the students should have lessons in the afternoons
No, I never could have figured that before. I could not have foreseen it. Even if some students just had left as I knew would happen I would have still had several others and filled up with some new students coming. But the reason which actually reduced my income about several 100 Euros per month wasn’t foreseeable.
So, that´s the story.
What does it mean for me today?
I don’t take my income for granted anymore. This does not happen because I´m self-employed but because it is just sure that nothing is safe. And I don’t worry about it anymore. I try to save some money for “bad times”, I have an amount that makes me feel safe to survive some months or a months which gives me less income. That´s how I can sleep nicely at nights
The second thing is – it wouldn’t be any different if I had a “normal” 9-5 job – I could lose my job as well and it would not even have to depend on me but on the management of the company I work for.
So, what does it mean for you and your business? How do you do business diversification?
First – it means – don’t worry too much. Some things you simply can´t foresee and you have to deal with them somehow – and the good thing is that you will. It also means that you should safe some money for everything unforeseen, things you cannot influence.
But the most important factor is – diversify. Today it seems to be better NOT to rely on just ONE source of income. It seems to be much better to spread risks, to build up several sources of income so that not much can happen as one source will make you some income. For me this was my website I had build as a hobby site for digital scrapbooking several years ago. I didn’t mean to create another source of income first (as I didn´t believe that it would be possible with some graphics).
Lately Amazon dropped – because of new tax laws in some states – their affiliates in California. From one day to the other a site based on the Amazon Affiliate program was actually out of business. I don’t want to discuss here if that was necessary and how to get around that – there are several discussions going on about that.
What I mean is: diversifying can safe your business and you to depend on anyone but yourself. You do not really enjoy the freedom of being self-employed (together with the risks and concerns mentioned above) if you put all your eggs in one basket and trust on God and Amazon (in this case) to make things happen.
If you plan a website and Affiliate Marketing is your business model – diversify.
Here are some ideas how to do some business diversification:
1. Do never rely on ONE merchant – add several different merchant and Affiliate programs to your business model.
2. With time, have several websites, not just one – to diversify even more.
3. Don’t take anything for granted – have a emergency plan handy (means: safe some money for bad months)
4. Invest never more than you have – invest a bit, increase your business with the investment, invest again.
5. Find more income sources when you have websites: e.g. create your own products, offer consulting or other services, do some freelance work to get known and to diversify.
6. You cannot foresee everything – try to still sleep well at night – life goes on, no matter what happens and really – as long as your loved ones are safe and healthy there WILL be a way out of any disaster.
Business diversification is one idea to keep your business safe and alive. Also, don’t be shy to adapt your direction and change your goals – here an article why this is no big deal and why you sometimes just have to adapt your business model to the new environment.
All in all you can say that business diversification keeps your business healthy.