What is your thought about business diversification? Is it more profitable to put your money in many businesses as a good way to build passive income or focus on just one portfolio?
How many times have you thought about diversifying into other businesses?
Do you think it’s the way out from business failures.?
Well, I have thought about it countless times and am sure many people still consider diversifying today.
If you don’t, am sure you’ll like to have that feeling which comes with putting your money in several businesses and become an investor.
Well, before we proceed, what is business diversification in a very simply term?
What Is Business Diversification?
Business diversification is a term used to describe the act of spreading out to venture and invest into many businesses.
It could be buying shares in different businesses to become a share holder as an investor.
In another word, it’s as simple as spreading your eggs in many baskets.
That is to say, being in different sectors of businesses at the same time.
However, what are the dangers involved if business diversification goes wrong?
What should we know before spreading out in business?
Hence, let us check out some 6 factors you must consider before diversifying in business.
1. You Stand To Lose Control Of Everything:
Spreading out your business portfolio without good business knowledge can ruin your chances of being a successful business owner or investor.
In the real sense, spreading out your business portfolio without knowing how business diversification works will make you lose everything.
Its easier to carry 12 eggs in a create of egg then holding 6 eggs on two different hands.
Hence, learn risk management and business control properly before diversifying in business.
Also Read: 10 Powerful Reasons You Need To Become A Business Owner.
2. You Become Less Professional:
Imagine the energy, education and time required to be an expert in more than one field.
It’s just like trying to become a movie star and still aiming to be a world best footballer at the same time.
Diversification might make you less professional.
Hence, you might be called “jack off all trait and master of none”.
This is because it is cheaper to devote time, energy and resources to one channel and become a legend in that field with time.
Also Read: Top 14 Important Reasons To Start A Family Business.
3. It Steals Your Ability To Become An Industry Expert In Any Field.
Business diversification will steal away your expertise ability.
How will people know where you belong when they truly what to do business with you.
This blog is highly dedicated to business and that is what we have been doing since inception.
Becoming an expert in one field becomes a pain in the next when diversification goes wrong.
Major experts in various areas of life are people that choose one part and followed it through to success.
Also Read: 6 Outstanding Qualities Of An Hub Investor.
4. You Risk Your Business Management On The Hand Of Others:
You tend to put most of your business management on the control of others.
It’s not possible to be physically present in America, Europe, Africa and Australia at the same time.
Hence, you’ll depend on people to manage those in areas you’re absent and ineffective.
Well, there are good project managers out there you can easily employ, but this will also incur more cost on you.
Also Read: 3 Most Important Cost Of Business Success.
5. Business Diversification Requires More Business And Financial Education:
You need a good level of business and financial education to succeed here because of its numerous demands.
According to one of the best selling finance author of all time “Robert Kiyosaki”, Financial education is the key to becoming a successful entrepreneur.
In many of his teachings, he emphasized that schools do not teach about money.
Hence, people who only go to school to get rich will become disappointed.
Even though you must engage in business diversification, ensure you get good business and financial education.
Risking your investments in different businesses without knowing how those business works is dangerous.
Ignorance is costly, don’t toil with it.
Also Read: How To Build Streams Of Passive Income In 2022.
6. There Is Less Flexibility In Business Diversification When Compared To A Single Portfolio:
It’s more rigid to control different type of businesses when compared to just one sector.
Focusing on one business sector will make you succeed faster as an entrepreneur and help you scale up your business quickly.
For instance, Bill Gates devoted so much time in his early days focusing on building Microsoft and today Microsoft is a multi-trillion dollar business.
Also, Jeff Bezos focused on Amazon with all sincere determination and today Amazon is a multi-trillion dollar company.
Similarly, Elon Musk in spite of his numerous companies devoted so much time in building Tesla in it’s early days.
Hence, we can say his focus paid off and today he sits as the world richest man according to Forbes billionaire index of November 2021.
Therefore, what is your opinion about business diversification? Drop your contributions at the comment section.
Also Read: How Will Metaverse Technology Promote Businesses In The Future.
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