You’re a CEO. You want to expand your business. But you’re not sure where to begin. Might I suggest playing a rather sophisticated game of “connect the dots?” Let me explain.
Years ago, I started in the mobile home management business. However, I soon realized that opportunities existed on the mobile home manufacturing side as well. As a result, I added manufacturing into my portfolio, which led to the realization that I was bringing $1.5 million into our state in manufacturing costs. So I invested in the trucking and shipping side of things.
Each time I embraced new and diverse income streams, auxiliary opportunities seemed to pop up. Though each decision brought with it challenges, those challenges led to consistent business cycle expansion through calculated diversification.
And all I had to do was kept my eye on the way the “dots” connected.
How to grow based on a vertical diversification
I’m a firm believer that every lifelong CEO should maintain and follow a diversification strategy. The world is in a state of constant flux. If you’re not changing and growing, you’re going to end up getting disrupted by startups and competitors. Consequently, it makes sense to diversify wisely by taking what works in one area and applying it to another area.
For example, I started in banking. When financing got tough for the manufactured housing industry, I didn’t give in. Instead, I launched a mortgage company.
To people on the outside looking in, my move might have seemed risky. It may have been, but not because I was unfamiliar with the field. I wasn’t. I understood banking principles, regulations, and other considerations. As a result, opening up a lending company became a matter of transferring existing confidence, knowledge, and processes into a different vertical.
We all know that opening any kind of business can be tricky. It might not work, after all, even if you’ve validated your concept to the hilt. Yet the rewards can be super-high, particularly if you adopt a philosophy of vertical integration. In other words, you eliminate the “middle man” so you can keep more profits in-house. When I took over the responsibilities I was paying suppliers to do, I was able to recoup extra money monthly.
To be sure, you might find it challenging to know when or how to turn yourself into a “jack of all trades” entrepreneur. I’ve outlined a few pieces of advice and strategies that have worked for me, and that I believe can work for you as well.
1. Vet and research markets and opportunities.
Before you make the leap into any vertical, conduct due diligence. Ask yourself if the need is there. And if it is, be honest about whether or not someone can fill it better than you can. If you’re sure that the opportunity makes sense, continue researching everything by digging further.
When I got into the trucking business, I figured I’d need to buy some trucks as a capital investment. But I didn’t stop planning at that point. Instead, I anticipated that if I owned trucks, I could lease them and other equipment to make extra money. By thinking of all the possibilities and drawbacks early, I was able to fulfill my own needs, fill the needs of others, and expand into a related market.
2. Lay out your diversification strategy.
After you make the decision to move forward with vertical diversification, figure out what type of tactic will net you the most returns. Do you want to buy an existing company? Partner with another organization? Create a brand from the ground up? You probably have more choices than you might have realized, and it’s essential to contemplate them all.
To help you determine which diversification path makes sense, I recommend writing out your company’s strengths. That way, you can leverage your business’s core competencies as you springboard into other markets.
3. Create an industry or vertical “hot list.”
You likely have a sense of which parts of your industry are on track for fast growth. Use your expert knowledge to diversify into an area that will potentially grow quickly and bring you faster returns.
If you’re unsure of where the buzz is in your industry, go back to step one. Research everything that’s happening not just in your vertical but in the verticals that support it. Knowing where the buzz is will help you put money behind ideas that could explode in a great way.
Owning a company with a diverse portfolio of businesses may not have been your goal when you founded your first enterprise. Nevertheless, I recommend it as a way to protect your wealth and grow your footprint wisely. And getting started is as simple as connecting all the dots that are right in front of your eyes.
The president and CEO of DeLine Holdings, Greg DeLine is an entrepreneur and philanthropist and has started and owned more than a dozen successful companies. He has a passion for helping others reach their full potential.