How to diversify your small business

We focus on the ways small businesses can quickly diversify (either temporarily or more permanently) by taking a fresh look at what they do, and using it to exploit new opportunities or build greater resilience.


11 min read

As a result of Covid-19, many more businesses are looking to diversify - either to seize new opportunities, or simply to survive in very difficult trading conditions.

Companies often consider diversifying as part of their next stage of growth, moving into new areas related to their core business, while continuing to run the original business.

Diversifying can involve radical steps such as acquiring a new business or moving into something completely different. However, in this article we’ll focus on the ways small businesses can quickly diversify (either temporarily or more permanently) by taking a fresh look at what they do, and use it to exploit new opportunities or build greater resilience in the event of further pandemic disruption.

Ways to diversify

There are probably as many ways to diversify as there are businesses! That said, a lot of them can be grouped under general themes which can give you a framework to brainstorm ideas:

  • Can we adapt how we provide the same service?
  • Is it possible to evolve our service or product in a small way without doing something completely different?
  • Is there a new audience or audience segment we could reach, without alienating our existing customers?
  • Could we link up with other businesses to provide a more comprehensive service?

Adapt how you provide your service

In this instance, you keep your core offering the same, but simply change how you bring that service to your customers. This helps you to reach them in spite of restrictions, or in more normal times it can help you to meet their needs better.

  • Process changes: Minor changes might involve your basic processes so you can still deliver the same service. For example, pre-arrival online check-in for hotels to reduce the time guests spend queuing at reception, or pre-arrival health questionnaires for practitioners such as dentists and physiotherapists so patients don’t spend time completing forms in a waiting room.
  • New systems: For example, online booking for venues, classes and activities to manage demand and reduce the need for staff to work on the premises may actually open up new opportunities in the long term, making it easier for customers to do business with you 24/7 and be aware of the full range of services and add-on options that you offer.
  • Changing location: If customers can’t come to you or stay on your premises, then taking your service to them can work well. Many restaurants and cafes have offered takeaway or delivery for the first time. Photographers have left their studios to do socially distanced door-step photography. Personal trainers have met clients outside in the park rather than at the gym or at home.
  • Trading online: Bricks and mortar shops have adapted by creating eCommerce websites to sell part of all of their product range. Instructors and tutors have successfully adapted how they deliver classes, switching from face-to-face classes to online video such as with dance, martial arts or foreign languages

Making it work

Changing how you deliver your service to customers may mean you have to alter the service you provide.

  • Adjusting the service or product: Some changes may be required to suit the new format. For example, an hour long class may be fine face-to-face, but online it may work better if it’s shorter. Or, your most popular restaurant dish may not travel well for takeaway or home delivery so the recipe or packaging may need amended, or video instructions on how to present it might be needed.
  • Reviewing pricing: In some cases, the cost of adapting is too much for it to be viable long-term without further adjustments. E.g. some garden centres found that doing home deliveries during lockdown kept some cash flow but due to the complexity of transporting delicate plants, they would only be able to sustain it if they charged for delivery.

Evolve your service or product

This is where you still stick with your core product or service but create a different version of it to meet different customer needs and circumstances.

  • Respond to new circumstances: Lockdown removed the opportunity for special social occasions, but the time people had at home increased. So, some specialist bakers responded by offering kits of ingredients for customers to make their own cakes. This worked brilliantly when flour was not available in standard packets in the shops, but suppliers could repackage their large bags into smaller quantities to meet demand. On a similar theme, some restaurants provided ingredients for meal kits rather than cooked meals, and crafters created sewing kits rather than just finished products. Photographers collated individual images to create virtual class photos for schools. Some professionals unable to serve customers in their normal way offered 1-2-1 tuition, with chefs offering private cooking lessons online. Although lockdown was extreme and hopefully temporary, the pandemic will lead to some longer term changes in circumstances, and businesses can respond to these as well as the general shifts seen over the years related to technology, culture, travel, and the environment.
  • Meet new needs: The pandemic showed us all how in a matter of days, a previously dull product like hand sanitiser could create a frenzy in a supermarket. Distillers and brewers quickly adapted their production lines from alcoholic drinks to alcoholic gel to meet demand. With face coverings now a requirement in shops across the UK, a whole new need has been created. And over-enthusiastic exercisers launching into intensive regimes in lockdown, may need injury treatment and recovery plans.
  • Service new ‘wants’: As with everything, ‘needs’ lead to new ‘wants’. Building on the example of hand sanitiser and masks there is opportunity to create premium or luxury ranges to meet new customer ‘wants’ for something different, designer or even giftable.
  • Anticipate new customer priorities: The pandemic has boosted health up the agenda. Those shocked by being unable to access the treatment they needed during lockdown may now be more focused on maintaining their health. For example, chiropractors and physiotherapists may find there is more demand for services on optimising back and joint health rather than just treatment. With the recognition that obesity increases the risk of negative outcomes from Covid-19, personal trainers and nutritionists may be in demand to support longer term health changes rather than the usual quick fixes before weddings and holidays.

Making it work

  • Remembering different regulations: If you are adapting your offering for a new purpose, you may need to check if you need to comply with different regulations. For example, the percentage of alcohol in hand gel had to be much higher than drinks. If your meal kits become a permanent offering, then ingredients labelling may be required and sewing kits for children may need to be marketed and labelled within safety regulations (or even formally tested) for an appropriate age range.
  • If the change in circumstances or need was only short-term: You may be able to build on the new relationships and goodwill created when you temporarily met a need. Your new contacts may happily recommend you or become customers using your core services when normality returns. Or perhaps your adapted service could become a small but valuable sideline to meet a need no one had considered before. E.g. the photographer creating virtual class photos may be able to provide a service for schools and parents in more normal times where a few pupils were ill on the day of the official class photo.

Reach a new audience

At any time, it’s worth businesses considering if they can adapt their offering for different audiences, however the pandemic has led to some rapid shifts in the short to medium term at least.

  • Different age groups: Lockdown was a catalyst for many people picking up new hobbies and interests. Where parents previously only considered music lessons for their children, learning a new instrument or refreshing their own skills became possible. Adults too shy to attend actual dance or yoga classes, could do so through the relative anonymity of a video call with the camera off. More children became confident with food preparation, cooking and baking - moving beyond the standard packet cake mixes. These shifts create new opportunities for teaching providers with different age groups,
  • New local audiences: The rules around home working and quarantine have meant many businesses have lost office-workers and international customers. However, in some areas, businesses will have a different audience from normal with local residents working from home. When it comes to holidays and ever changing international quarantine regulations, visitor attractions and hotel accommodation now needs to reach the bigger ‘staycation’ audience instead of international tourists.
  • Wider domestic or international: Many providers of face-to-face classes have created new digital products which can transcend local restrictions. Online courses and 1-2-1 classes could mean a maths tutor previously working only with local children can reach much further afield within Scotland and the UK, or even internationally. Small shops with an eCommerce offering are now no longer restricted by the footfall past their premises.

Making it work

  • Review your marketing and content: When reaching new audiences e.g. different ages, genders, socio demographics, or locations you need to understand who you’re speaking to and consider how you need to adapt any copy and images to reflect their needs, culture or language. You may also have to adapt the channels you use. A city centre restaurant normally attracting office workers, may need to reach the local audience with promotions on different social media channels or targeted leaflet drops.
  • Adapt your service or approach so it’s relevant: Some small changes to your offering may be needed for different audiences. For example, a bike shop which previously mainly serviced committed and experienced cyclists may now be able to reach a wider family audience who need services (at an appropriate price range) specific to kids’ bikes or need products and support at a more basic level. A guitar tutor with more adult pupils may need to change the music and approaches in their standard lessons to include something of more interest to an older audience.

Leverage other business relationships

The pandemic has led to a greater sense of community and this has been seen with businesses too. To build resilience, more businesses are open to support each other and collaborate to make the most of any new business leads or to provide a more holistic service to customers. For example, SEO consultants cross referring lead web designers or a physiotherapist bringing a nutritionist into the practice.

Making it work

  • Shared mindset: For any successful collaboration or partnership, it’s best if you share the same attitude to customer service, the same values and ethics for doing business, as well as the same level of ambition (e.g. ‘just surviving’, growing steadily or world domination). If not, you’ll end up out of sync, with conflicting agendas and a lot of stress!
  • Trial basis: Best to take a slow and steady approach - try how it works out on one or two projects, or on a trial basis for a month, and then review.
  • Longer-term commitment: If the arrangement becomes more permanent, you may want to discuss having a formal agreement, contract or joint venture.

Adapting long term

The pandemic has been unusual as it has required many businesses to diversify just to survive in the short term. But as we move forward, some businesses will want to retain the success they’ve achieved or restart in new ways.

  • Keeping new customers as lockdown eases: Many businesses which were overrun with demand during lockdown are now needing to work hard to keep them, such as dairies home-delivering milk. With supermarkets more accessible, some customers will inevitably be lost, but there is still opportunity to entice customers to stay with great service and perhaps a wider product offering. For restaurants, perhaps the new takeaway or delivery service could be maintained on certain days of the week and focus restaurant hours only on peak days (assuming takeaway is permitted when planning regulations are enforced again).
  • Look at trends for inspiration: At a time of such global change, keep on top of trends such as the growth in cycling at the same time as there’s increased use of technology by older age groups. This can inspire new ideas for products, services or even content.
  • Watch out for changes in mindset: For some customer segments, the pandemic has had such a big impact that things that used to be top priority for them may have been overturned in recent months which may mean businesses need to adapt their approach and tone of communications. For example, some restaurants have found that price, environmental sustainability, a busy atmosphere and 'instagramability' are far less important than hygiene and creating a calm sense of space. Innovative ways to reassure customers about safety may now generate real cut-through. After a survey found that 25% of previous customers would be reluctant to return, one Scottish restaurant and pub chain began offering ‘Reassurance Hour’ appointments for people to come in at a quiet time, enjoy a coffee and see how the venues were set up for social distancing.

Test and learn

As with anything in business, there’s always costs, risks and complications for anything you do. This is why for small businesses in particular, diversifying by carefully evolving one element of your approach or audience is much safer than leaping into something completely new.

In the heat of the pandemic, many businesses had no choice but to plunge into different ways of working, but when the situation is a little steadier, you can minimise risk by:

  • Gathering feedback from staff and customers on your existing offering and any new ideas
  • Running a small pilot project to test your idea, without committing to any long-term contracts with suppliers or customers

Finally, don’t be afraid to consider another option to diversify if your first attempt didn’t go to plan - often the process of trying something new will help you generate a new ‘light bulb moment’.

Business Gateway can help you plan to diversify or restructure your business. For 1:1 support from an experienced adviser just get in touch with your nearest office today.

Want to speak with your nearest Business Gateway team?

Your local Business Gateway can offer you free 1:1 advice and online support to help you with anything to do with your business or if you are just thinking about starting up then we can support you with that too.

Fill in the form below and we will get back to you to help.

1. Tell us a bit about your business or idea (such as, sector, stage…) 2. What are your main reasons for contacting us today? 3. Is there anything else we need to know before we contact you?

Enter your postcode

How we use your data

We will use the information you provide to respond to your request, and to provide business advice and support services to you. For more information please view our privacy notice.

You might also be interested in

Employee wellbeing

This video tutorial will help businesses gain a deeper understanding of employee wellbeing and mental health and provides guidance on how to maintain physical wellbeing and implement a positive mental health culture in the workplace.

Federation of Small Businesses – Membership Information

FSB are delighted to offer a 10% discount in association with Business Gateway.

Keeping your business safe online

So much of your business is now being carried out online, so it’s even more important that you stay safe and avoid a cyber attack that puts your business (and/or your customers’ data) in jeopardy. The fact you are a small business does not mean you are invulnerable, on the contrary, the consequences for small businesses are potentially all the more significant.