You may wish to look at ways of spreading the risk if you’re experiencing or expecting a downturn, or you may want to look at increasing your sales revenue and/or operating profit. Whatever the reasons you wish to diversify, you have essentially got three options:
• Find new products for existing customers
• Find new customers for existing products
• Find new products for new markets
Spreading your business risk across multiple offerings to multiple customers will help protect you to some extent against social and economic threats that are outside of your control but could nevertheless have a devastating effect on your business. This is because if you supply only one product or service and sales volumes fall, or costs significantly rise, your business is very exposed as it has no cushion of other income streams. If you have a variety of products or customer types these may not all be affected in the same way and you are therefore more likely to have alternative stable revenue and profit streams still coming into the business.