How diversification can strengthen your business
- Esther Riphagen
- Background
- 7 July 2025
- Edited 15 July 2025
- 3 min
- Managing and growing
Has the demand from your customers changed over the past few years? Or are you facing risks due to changing import duties? Make your business better prepared for expected and unexpected changes. Learn how to diversify and how spreading risk through diversification can make your business less dependent on a single product.
Diversification is a strategy you can apply at any time as an entrepreneur. It means spreading risks by investing in new products, services, or markets, or operating in different sectors. This way, you are less dependent on 1 source of income and protect your company from competition and changes in the market.
Why choose to diversify?
Diversification has multiple benefits for your business. You expand your product range, which means less risk of a dip in sales. With a diverse sales flow, you also better protect your business against unexpected changes.
Real-life examples
- A bakery that cannot bake bread for a day due to a power cut loses sales. If they also offer workshops or sell long-life products, such as jam and other toppings for bread, they always have a secondary income.
- A flower grower whose exports slow or stop due to trade restrictions can sell locally through subscriptions or cooperation with supermarkets.
- A clothing shop that notices that customers are increasingly choosing sustainable alternatives can add sustainable brands or even clothing rentals to its range.
| Type of diversification | How | Example |
|---|---|---|
| Horizontal | Expansion of the current offering. | A bike shop that will also sell electric steps. |
| Vertical | Extra tasks in the chain such as production. |  A coffee bar that starts roasting and selling its own beans. |
| Concentric | New product or service for current customers. | Yoga studio that also offers healthy food or coaching. |
|
Conglomerate | Extra market or sector. | IT company that invests in real estate. |
What is the impact of diversification on your business?
Diversification affects the day-to-day operations of your business. It means change for you, your staff, and your customers. Examples include:
- Licences and regulations. New products or services may be covered by different rules. For example, if you add catering to your shop, you will have to follow HACCP and alcohol regulations.
- Staff. You may lack skills and need to hire new staff. Or you may want to retrain staff. The SLIM offers financial support for retraining.
- Customers. Make sure your existing customers know about your new offering and that new customers can find you. Think about your marketing. Will the new offering fit on your current website, or will you need an extra one? Do you need to order new business cards and flyers? Make a marketing plan.
- Finance and administration. Keep new revenue streams separate. Make sure you know what your new offering will generate in terms of turnover and profit. That way you can evaluate whether it is a success or not. If necessary, ask your accountant for advice.
- SBI code. If you add new activities, you may have to change your registration in the Business Register. Your SBI code affects your insurance, among other things. Check whether you need to change your SBI code.
- Company name. Your company name may not match your new offer. For example, if your company name is Allround Events and you also start a pop-up campsite. You can then change or add an extra company name to your KVK registration. Be careful, a different name may mean people cannot find your company. Make sure you actively communicate your new name to customers, suppliers, and other relations.
Adding new activities to your business
Do you have a new idea to make money with your business? Adding an extra business activity affects your registration in the Business Register. Your accounting and taxes will also change. Read our tips when starting a new business activity.
Tips for diversification
Adapting your offering costs time and money. Think carefully about the type of diversification you choose and what you offer. These tips will help you make informed choices and increase your chances of success.
- Stay true to your mission and vision. A bakery selling car tyres is confusing for clients. Customers may then wonder about your expertise. Be enthusiastic about your new direction because change takes time and energy. Ask yourself, will I still want to offer those services or sell to that market in 3 or 5 years?
- Do market research. Where are the opportunities? What trends do you see in your sector or region? Get advice from your sector association.
- Know what the customer needs. What do your customers want now and in the future? Do customer research, for example via a survey, social media, or in-person in your shop.
- Do a competitor analysis. What do your competitors sell and how can you stand out?
- Start with a test phase. Use samples or only buy a small amount of stock. Give products away with a purchase by a current customer or offer bundle discounts. This way, you can test whether there is interest in the product and ask the opinion of your customers about your new offering.
