I once knew a man who took a revolver to his head and shot himself. He had miscalculated the market and his business (and life) was in ruins.
It’s an extreme example but a business strategy can go awry very quickly, especially in volatile markets leading to great pain and even tragedy.
We’ve all seen how Covid-19 has impacted millions of businesses because of the lock-down. It came so suddenly, without warning, that it was very difficult, if possible, for business people to do anything about it.
However, many business experts have urged business people, whether the solopreneur, small business owner or even large businesses, to diversify. Some have even advocated having parallel businesses — to provide more than one source of income.
This is probably sound advice but it is difficult to make it a reality. As soon as you want to do something else, get into some other market, start a new side business, you are faced with opportunities and risks.
Strategic planning can assist with your decision making. It involves looking at the opportunities and the risks which come in many forms, including market risk, customer risk, social risk, political risk, environmental risk, reputational risk, legal risk and technology risk.
Knowing what to do requires analyzing the strengths, opportunities, weaknesses and threats of any business proposition as well as an environmental scanning using analytical tools.
An analysis will only take you so far. You need to have a “feel” for whatever you are getting into. You need to make sure that a market exists and that there are customers that will pay for your product or service.
Some entrepreneurs can spot a business opportunity and after doing their research go straight ahead and make things happen. For example, I know a business person who during the lockdown identified an opportunity, found low-cost premises and started a new business in level 4 of the lockdown.
His new business is five times the size of his previous business. Imagine that. I visited the business the other day and was astounded by the volume of customers and his attractive location. (Just by the way, this business person has owned and managed very large factories and is now in another business line after his factories had to be shut down because of ineptitude by authorities who have allowed the local market to be flooded with cheap imported products. But let’s not dwell on that now.)
Parallel or sideline sources of income are available to entrepreneurs and small-business owners unlike the large corporations who are under huge pressure from activist investors to focus on their “core”. Today it’s all about picking the eyes of well-run businesses and breaking them up piece by piece. There’s no room for a portfolio of businesses and if any one of them is not a “strategic fit” it is divested.
Starting something new in addition to what you are doing is one huge ask. But for those who want to give it a go, despite the enormous efforts involved, it remains an important way to diversify risk and rebalance your “portfolio” in these volatile times.
BA (Unisa), MBA (Heriot Watt)
ISO 22301 Lead Implementer (BCLI1015573-2018-05)
ISO 22301 Lead Auditor Certificate No. BCLA1015573-2016-11