Entrepreneurs are creative by nature. That is a core value and advantage. So it is not unusual for an entrepreneur to think of new business ideas that could be additions or diversifications for the existing business.
Some of these ideas will differ radically from their core business.
- Should they be implemented?
- If they should, how should they be put into practice?
- What are the things to look out for when you move away from your core business?
Entrepreneurial businesses thrive and grow by innovation; by adding new products, by fresh approaches to old problems and by creative development of new markets.
This is one of the attributes that allows them to compete with large corporates. Diversifying is generally a great way to grow the business. Sadly it can also be a way of reducing existing business to shells. The difference is how the entrepreneur manages the diversification.
New ideas can arise out of boredom. Many entrepreneurs are enthralled by the activity and challenge of starting something new but are not happy with routine management. I call them the ‘firestarters’.
The disadvantage of firestarters is that they get bored doing all the hard and repetitive work of growing a business after it has developed a toehold in the market.
Their business can fail as the entrepreneur neglects it or strips it of resources to build a business based on the new idea.
If you recognise yourself in this category then either become a serial entrepreneur, building and selling businesses as they mature, or find a partner or series of partners you can hand the core concept to when your mind starts to wander.
This is a great way to build a huge business empire or personal fortune.
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Things to watch for
Often a new idea looks attractive only because the core business is not succeeding. The entrepreneur will be thinking of ways to make the business survive and prosper.
Adding synergistic opportunities to a business which is not producing expected results can be a great way to inject life and success into that business.
Doing something radically different to cover up the failure of the current business to deliver on expectations can kill it.
If the core business is not performing then either fix the business or close it, and create a new business with the new idea.
It is easy to persuade yourself that the great new idea is really just an extension of your business, when it is actually a different business entirely.
Some tests: Can you share the same resources and skills, sell the products and services to the same or similar markets, or expand the reach of both? Synergies should mean the old and new ideas should feed each other. Avoid the risk of one business being annibalized for cash, the best staff members and sales opportunities.
Starting and growing the new opportunity needs big slices of your time, and probably cash. The further apart the business concepts are the more this becomes a problem. Two different businesses take about twice as much capital and time to manage as one business.
Growing by diversifying
Once you have eliminated or catered for all the things that could get in the way then dive right into diversifying.
It reduces the risk of a catastrophic failure in the core business bringing everything down, it gives new opportunities for growth and it keeps the entrepreneur excited and involved.
Plan carefully, as with every new venture, don’t be afraid to invest, even if that means going into debt again, and make sure the core business will continue to develop.
In effect you will be starting a new business with all that implies in learning, hard work, anxious moments and exhilarating successes. Some entrepreneurs say it gets easier the second, third and subsequent times you do this, but it is unlikely ever to become boring.
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Before you launch your 2nd business, take the test:
- Can you share the same resources and skills?
- Can you sell the products and services to the same or similar markets?
- Can you expand the reach of both?