Over the last 20 years, I have seen entrepreneurs succeed in more than one business during their entrepreneurial journey. In most of these cases, the businesses were related to each other or operated primarily in the same sector or industry. This usually happens when the business owner spots a new opportunity after gaining a deep understanding of the sector their business operates in.<\/p>\n\n\n\n
I have also seen business owners succeed in more than one business that were not even related to each other. This rarely happens with small business entrepreneurs.<\/p>\n\n\n\n
Building just one successful business is not easy. Building two successful businesses is extremely difficult. Now imagine building two successful businesses at the same time. It is almost impossible.<\/p>\n\n\n\n
Even having properly prepared your business idea, drawn up your business plan and implemented the actions to start and build your business properly does not necessarily guarantee that your business will be successful. As you noticed in the previous chapters, from the moment you start your business until it reaches the maturity stage, it takes a long time (usually many years).<\/p>\n\n\n\n
And, indeed, you need to allocate your time and energy to ensure your business is successful.<\/p>\n\n\n\n
I have learned this lesson very well during my entrepreneurial journey, and nowadays I build only one business at a time. And the most interesting thing is that I have to keep reminding myself not to do otherwise. I am doing everything I can to never fall into this common entrepreneurs' trap again.<\/p>\n\n\n\n
When I was younger, I did not have as much experience as a business owner, and I tried to start different businesses at the same time or hold different stakes in different businesses simultaneously, and in doing so I did not achieve the results I expected. <\/p>\n\n\n\n
Many business owners try to build two businesses at the same time. 95% of the time, it is a recipe for disaster.<\/p>\n\n\n\n
Now let's talk about focus versus diversification. And let's also examine two forms of diversification.<\/p>\n\n\n\n
The first is focusing on one business versus diversifying into more than one business.<\/p>\n\n\n\n
The second is focusing on one product or service within a business, or diversifying into different products or services within the same business.<\/p>\n\n\n\n
Finally, we will examine focus versus diversification considering which growth stage (startup and validation, growth, maturity, or decline or renewal stage) your company is at.<\/p>\n\n\n\n
Let's examine the first option. As I said earlier, running a successful business is not easy. When you focus on just one business, you dedicate your full attention to growth, operations and innovation to ensure the business succeeds. This can lead to greater chances of success. As the business owner usually starts the business alone, they do not need to split their time, capital and efforts, which maximises efficiency and reduces the risk of spreading themselves too thin.<\/p>\n\n\n\n
When you concentrate your time and energy on one business, you usually become a specialist in a specific industry or area, building a strong brand and a good reputation.<\/p>\n\n\n\n
In my case, as an example, I have been operating in the fintech industry for around 20 years. Since I started my digital bank, I have become more deeply involved in the sector and, as a consequence of becoming a specialist in it, I have also become a sales broker and specialist consultant in the FinTech industry.<\/p>\n\n\n\n
Having enough understanding to succeed in an industry is not easy.<\/p>\n\n\n\n
Even if you know more than one industry, the main issue is not starting the business but managing it. Managing one business is less complicated than juggling multiple ventures, especially if you are still growing or relatively new to entrepreneurship. I know many entrepreneurs who know very well how to start a business but do not know how to manage it in order to grow it.<\/p>\n\n\n\n
They try many business ideas and keep changing the idea from time to time. Basically, none of the businesses reaches the maturity stage, and the business owner gives up at the startup, survival or growth stage.<\/p>\n\n\n\n
For the sake of argument, you might say you know, have heard of or have read about successful business people holding different stakes in different businesses, even across different geographies. You need to remember that these individuals are usually not business owners; they are investors. They have a different business objective from someone who is starting and managing a company \u2014 and, in this specific case, a small business. For investors, the business model is maximising financial return while minimising risk. And one of the ways to minimise risk is to diversify across several investments. <\/p>\n\n\n\n
On the other hand, the disadvantage of having just one company is that you will depend financially on a single source of income. If the market changes or something goes wrong in your business (for example, economic recessions or industry disruption), your income and investments will be at greater risk. Let's remember, for example, the consequences and impact of COVID. Many business owners who depended financially on just one company lost everything.<\/p>\n\n\n\n
If you have only one company, you may miss other lucrative opportunities or trends in different markets. Some business owners also suffer burnout. <\/p>\n\n\n\n
Basically, they focus excessively on a single business, which can lead to mental exhaustion, especially when things do not go as planned.<\/p>\n\n\n\n
Diversifying into more than one business has advantages and disadvantages.<\/p>\n\n\n\n
In my opinion, the main advantage of diversifying into more than one business is that having multiple businesses creates diversification. If one venture faces difficulties, the others can still perform well, ensuring a more stable income.<\/p>\n\n\n\n
Multiple ventures mean more opportunities to generate income, especially if the businesses are in high-growth industries.<\/p>\n\n\n\n
If your businesses are related, you can use one to promote the other. For example, a marketing agency and an e-commerce business can complement each other.<\/p>\n\n\n\n
You can also try to seize opportunities. You can explore different markets or industries, increasing your chances of long-term growth and success.<\/p>\n\n\n\n
Now, what is extremely difficult is finding a way to organise and run multiple businesses at the same time. Divided focus is wasted energy. Running multiple businesses can dilute your attention and energy, potentially leading to underperformance in one or all of the ventures.<\/p>\n\n\n\n
At the same time, managing different businesses requires more time, resources and effort, which can lead to inefficiencies.<\/p>\n\n\n\n
The main question is: do you have enough resources to run more than one company? Especially at the same time. Financial and human resources can run out, especially if you are still establishing yourself as an entrepreneur.<\/p>\n\n\n\n
In fact, if you take this risk too early, it could lead to failure in more than one business.<\/p>\n\n\n\n
You need to consider many factors before making the decision to diversify into more than one company.<\/p>\n\n\n\n
The main factor is the stage your current business is at. What I have learned is that if your main business is still in its early stages or not yet stable, it is better to focus on building and growing it first.<\/p>\n\n\n\n
If your first business is mature and running smoothly, you may have the capacity to diversify.<\/p>\n\n\n\n
Then the next question is: do you have enough resources for the second company? Do you have the financial and human resources to manage multiple businesses without compromising quality or performance?<\/p>\n\n\n\n
If the answer is that your resources are limited, focusing on one business is a safer bet. Another essential point is that, in my opinion, you should never bet everything on a single diversification idea. You may have to try to diversify more than once before one of those options succeeds. Never put all your eggs in one basket.<\/p>\n\n\n\n
I have also learned that splitting your current team members between two businesses can harm your existing successful company. You need to ensure you have enough human resources for each company to operate successfully on its own. Having a strong team allows you to explore other ventures without neglecting your main business.<\/p>\n\n\n\n
If you do not have a capable team, it is better to focus on mastering and growing your current business.<\/p>\n\n\n\n
You need to examine the market opportunity. The question is: are there new market opportunities that align with your expertise or complement your existing business? If there is a strong opportunity in another area, diversification may be worth pursuing.<\/p>\n\n\n\n
Finally, you need to consider your risk tolerance. Diversifying businesses can increase risks, especially if you are venturing into unfamiliar markets. <\/p>\n\n\n\n
Assess your risk tolerance before proceeding.<\/p>\n\n\n\n
Let me summarise here my thoughts on whether you should focus or diversify:<\/p>\n\n\n\n
Focus on one business if:<\/p>\n\n\n\n
Diversify into more businesses if:<\/p>\n\n\n\n
I believe now is a good time to make sure I explain the risks of diversifying into different businesses without structuring and organising them efficiently.<\/p>\n\n\n\n
One of the critical risks of owning and running multiple businesses is the potential to mix resources and create dependencies between them, which can genuinely become a recipe for disaster.<\/p>\n\n\n\n
Let me elaborate further on this point and why it is important to keep businesses separate when diversifying:<\/p>\n\n\n\n
When you own multiple businesses, it can be tempting to share resources between them (for example: finances, employees, infrastructure) to save costs or simplify operations. However, this can lead to significant challenges, such as: using profits or cash flow from one business to fund another can create financial instability for both. If one business faces losses or cash flow problems, it could drag the other(s) down, even if they were performing well.<\/p>\n\n\n\n
There are also legal and tax implications. Mixing resources can complicate accounting, tax and compliance. It becomes harder to track each business's performance, creating risks of audits, legal liability or tax penalties. Each case needs to be analysed individually; in most cases, I recommend registering a separate company or legal structure to avoid mixing the current activity with the new activity arising from the diversification. <\/p>\n\n\n\n
Going back to the problems: usually, when you do not keep businesses separate while diversifying, the most common problems are operational issues. Sharing employees, tools or systems across businesses can cause inefficiencies and distractions. Employees may struggle to prioritise tasks, and one business could end up receiving less attention or lower-quality service.<\/p>\n\n\n\n
In my experience, I have also seen cases where, if one business underperforms or fails, it can damage the reputation of your other ventures, especially if customers or stakeholders perceive them as connected.<\/p>\n\n\n\n
Finally, managing multiple businesses is already challenging. Mixing resources and operations adds unnecessary complexity, making it harder to identify problems and resolve them quickly.<\/p>\n\n\n\n
Now let's examine the second diversification option, which is focusing on one product or service within a business, or diversifying into different products or services within the same business.<\/p>\n\n\n\n
In my opinion, to be a successful entrepreneur, you need to understand both the customers you are serving and the service itself.<\/p>\n\n\n\n
You not only need to provide the best service to your customers, but you also need to develop new services that you can cross-sell to maximise customer value and profitability.<\/p>\n\n\n\n
As the individual responsible for the business, you need to make sure you keep improving your services and products. You also need to be able to develop new services and new products, as the market is always changing and your customers will always need something more from you.<\/p>\n\n\n\n
Let me summarise my thinking on diversifying within the same company, considering different products, services or customers.<\/p>\n\n\n\n
You have four different options available:<\/p>\n\n\n\n
Option 1: Cross-selling to existing customers<\/strong><\/p>\n\n\n\n This involves offering new products or services to your current customer base. Essentially, you are expanding your offerings while staying within the comfort zone of your established relationships.<\/p>\n\n\n\n Why I believe this is a low level of difficulty<\/strong><\/p>\n\n\n\n Key strategies for success<\/strong><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n A marketing agency specialising in social media campaigns decides to offer an additional service, such as website development or SEO, to its existing clients. As the clients already trust the agency's expertise, they are more likely to take up the new service.<\/p>\n\n\n\n Option 2: Selling existing products\/services to new customers<\/strong><\/p>\n\n\n\n This option involves expanding your customer base by finding new customers for the products or services you already offer.<\/p>\n\n\n\n Why I believe it is a medium level of difficulty<\/strong><\/p>\n\n\n\n Key Strategies for Success<\/strong><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n A software company selling a project management tool to startups may decide to target medium-sized companies or corporate clients. Although the product remains the same, the marketing and sales approach will need to be adjusted to appeal to a larger audience.<\/p>\n\n\n\n Option 3: Selling a new service to new customers<\/strong><\/p>\n\n\n\n This option is the most challenging because it involves venturing into unknown territory.<\/p>\n\n\n\n It is a new product or service and a completely new customer base.<\/p>\n\n\n\n Why I believe it is the most difficult<\/strong><\/p>\n\n\n\n Key Strategies for Success<\/strong><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n A retail company specialising in clothing decides to launch a new line of eco-friendly skincare products. As this is a completely new service and a new customer base, the company must educate potential customers about the product and build a reputation in the skincare market.<\/p>\n\n\n\n Option 4: Strategic partnerships, collaborations or acquisitions<\/strong><\/p>\n\n\n\n This approach involves working with other companies, forming alliances or acquiring existing businesses to diversify your services or expand your customer base.<\/p>\n\n\n\n Why I believe it is a viable option<\/strong><\/p>\n\n\n\n How this option can work<\/strong><\/p>\n\n\n\n Advantages of Option 4<\/strong><\/p>\n\n\n\n Challenges of Option 4<\/strong><\/p>\n\n\n\n When to consider Option 4<\/strong><\/p>\n\n\n\n Conclusion<\/strong><\/p>\n\n\n\n You have four options:<\/p>\n\n\n\n See the diagram below:<\/p>\n\n\n\n Existing service New service to be implemented<\/p>\n\n\n\n New customer Option 2: Selling to New Customers<\/strong> <\/strong>Option 3: Launching New Services to New Customers<\/strong><\/p>\n\n\n\n Existing customer. \u2014\u2013 Option 1: Cross-Selling to Current Customers<\/strong><\/p>\n\n\n\n <\/strong> <\/strong> <\/strong>Option 4: Strategic Partnerships, Collaborations or Acquisitions<\/strong><\/p>\n\n\n\n In my opinion, it is always cheaper to sell a new service to an existing customer who already knows you than to sell to a new customer who has never heard of you before.<\/p>\n\n\n\n A new service to be delivered to a new customer is probably the most expensive option. It is essentially a new business that you will have to establish.<\/p>\n\n\n\n The point I am trying to make here is: you should always be ready to try to sell your existing services to new customers first, and always be ready to cross-sell a new service to your existing customers.<\/p>\n\n\n\n I have seen many business cases in the past where the company was unwilling to develop new services or diversify because there was no one in the company responsible for doing so.<\/p>\n\n\n\n Someone needs to be responsible for diversification.<\/p>\n\n\n\n In a small business, the company founder is usually the one who decides whether the company will diversify or not.<\/p>\n\n\n\n Some companies have someone responsible for developing new services to ensure the company is always analysing diversification options.<\/p>\n\n\n\n This individual is usually responsible for ensuring the company is delivering a good service, developing new services, staying informed about the market in which it operates, understanding how other segments can influence its market and, finally, how technology affects its business, since technology nowadays is one of the main drivers of change.<\/p>\n\n\n\n Now, let me give you 20 tips to help you create new services to offer to your customers:<\/p>\n\n\n\n Understanding focus vs. diversification in relation to the stages of business growth<\/strong><\/p>\n\n\n\n As one of the reasons for writing this book was to help entrepreneurs like you prepare your company to grow safely, I would like to explain how the concept of focus versus diversification changes according to the stage your business is at in the business growth cycle.<\/p>\n\n\n\n Each phase of the business growth cycle \u2014 startup and survival, growth, maturity, and renewal or decline \u2014 requires a different diversification strategy to maximise success while minimising risks.<\/p>\n\n\n\n Obviously, this is not a recipe that can be applied to every business in a generalised way, as each business behaves differently. Every business must be analysed individually.<\/p>\n\n\n\n As you will also see below, there are many exceptions to each generic principle.<\/p>\n\n\n\n Let us analyse each stage individually.<\/p>\n\n\n\n 1. Startup and Survival Stage<\/strong><\/p>\n\n\n\n At this stage, the business is newly established and focused on proving its viability. The main goal is to validate the business idea, achieve product-market fit and establish a stable customer base.<\/p>\n\n\n\n The company should focus on perfecting its core products\/services and stabilising operations. Diversification should only be considered if the core business achieves stability and generates sufficient surplus resources.<\/p>\n\n\n\n Exceptions to the Rule: When diversification can take precedence over focus<\/strong><\/p>\n\n\n\n There are exceptions to the principle of focusing exclusively on a single business or product during the Startup and Survival Stage. Although the general advice is to focus on perfecting the core offering and avoid diversification, certain circumstances or business models may justify, or even benefit from, early-stage diversification.<\/p>\n\n\n\n Below are some key exceptions to this rule:<\/p>\n\n\n\n 1. Business models that depend on diversification<\/strong><\/p>\n\n\n\n For example:<\/p>\n\n\n\n 2. Serving multiple customer segments (minimum viable diversification)<\/strong><\/p>\n\n\n\n If the startup's survival depends on attracting different customer segments, limited diversification may be necessary.<\/p>\n\n\n\n For example:<\/p>\n\n\n\n 3. Pivoting in response to market feedback<\/strong><\/p>\n\n\n\n Startups often operate in uncertain environments, and initial assumptions about the product or market may prove incorrect. In such cases:<\/p>\n\n\n\n For example:<\/p>\n\n\n\n 4. Industries with high dependency risk<\/strong><\/p>\n\n\n\n In industries where dependence on a single product, supplier or customer poses significant risks, some diversification may be prudent even during the startup stage.<\/p>\n\n\n\n Examples include:<\/p>\n\n\n\n 5. Startups with access to significant resources<\/strong><\/p>\n\n\n\n Startups that are well funded or have access to substantial resources (for example, from venture capital, angel investors or a parent company) may have the capacity to experiment with diversification from early on.<\/p>\n\n\n\n For example:<\/p>\n\n\n\n As most small businesses do not have access to substantial resources, this method of diversification is not common among small businesses.<\/p>\n\n\n\n 1. Network effects and first-mover advantage<\/strong><\/p>\n\n\n\n Certain industries require achieving scale quickly to establish a competitive advantage. In such cases, diversification can accelerate growth by:<\/p>\n\n\n\n For example:<\/p>\n\n\n\n A small independent coffee shop builds a loyal customer base through high-quality coffee and a cosy atmosphere, then expands by diversifying into related offerings such as artisan pastries, speciality teas, cold brews and coffee subscriptions. It increases revenue with branded merchandise and extends its reach through delivery services. To foster loyalty and word-of-mouth growth, the shop hosts community events such as open mic nights and coffee workshops, turning itself into a community hub and lifestyle brand. These complementary strategies help the shop broaden its customer base, strengthen its market position and gain a competitive advantage.<\/p>\n\n\n\n 2. Startups tackling complex problems<\/strong><\/p>\n\n\n\n In some cases, startups may need to diversify their offerings from the outset to provide a comprehensive solution to a complex problem.<\/p>\n\n\n\n For example:<\/p>\n\n\n\n 3. Test-based diversification for market validation<\/strong><\/p>\n\n\n\n Some startups may experiment with limited diversification as a way of testing multiple hypotheses about market demand.<\/p>\n\n\n\n For example:<\/p>\n\n\n\n 4. Startups in emerging or uncertain markets<\/strong><\/p>\n\n\n\n In emerging industries where customer needs are not yet well defined or where the market is highly volatile, diversification may be necessary to mitigate risks or capture opportunities.<\/p>\n\n\n\n For example:<\/p>\n\n\n\n Caution when diversifying at the startup stage<\/strong><\/p>\n\n\n\n Although these exceptions justify early diversification in some cases, it is important to approach it cautiously:<\/p>\n\n\n\n 2. Growth Stage<\/strong><\/p>\n\n\n\n At the growth stage, the business is scaling rapidly, gaining market share and expanding its customer base. Resources and revenues are increasing, allowing for more ambitious strategies.<\/p>\n\n\n\n Controlled diversification is encouraged, especially if it leverages the company's existing customer base or industry expertise. However, the focus should remain primarily on scaling the core business.<\/p>\n\n\n\n Exceptions to the rule: When diversification can take precedence over focus<\/strong><\/p>\n\n\n\n There are exceptions to the principle of focusing primarily on scaling the core business during the Growth Stage, and there are also notable examples of how companies have navigated this stage by adhering to or deviating from this principle.<\/p>\n\n\n\n Below, we will explore both exceptions to the rule and real-world examples to illustrate these concepts.<\/p>\n\n\n\n Although the general advice at the growth stage is to focus on scaling the core business and cautiously explore related diversification, there are certain scenarios and contexts where diversification, even into unrelated areas, can make strategic sense:<\/p>\n\n\n\n 1. First-mover advantage in emerging markets<\/strong><\/p>\n\n\n\n 2. Mitigating market saturation risks<\/strong><\/p>\n\n\n\n 3. Leveraging surplus resources<\/strong><\/p>\n\n\n\n 4. Market-driven demand for complementary products<\/strong><\/p>\n\n\n\n 5. Adapting to disruptive threats<\/strong><\/p>\n\n\n\n These examples show how small businesses can diversify strategically during the growth stage to address specific challenges or opportunities. Whether by capitalising on emerging trends, responding to customer demand or mitigating market risks, controlled diversification can help small businesses achieve long-term growth and sustainability.<\/p>\n\n\n\n 3. Maturity Stage<\/strong><\/p>\n\n\n\n\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Option<\/strong><\/th> Difficulty Level<\/strong><\/th> Main Focus<\/strong><\/th> Risk<\/strong><\/th> Advantages<\/strong><\/th> Challenges<\/strong><\/th><\/tr><\/thead> Option 1: Cross-Selling to Current Customers<\/strong><\/td> Low<\/td> Leverage existing relationships and trust<\/td> Minimal<\/td> Easy to implement. Lower marketing costs Higher chance of success Builds loyalty<\/td> Limited to your current customer base Requires understanding customers' needs for new services<\/td><\/tr> Option 2: Selling to New Customers<\/strong><\/td> Medium<\/td> Expand your customer base by finding new customers<\/td> Moderate<\/td> Proven product\/service Opportunity to increase market share Can significantly expand the business<\/td> Requires robust marketing efforts May face strong competition Higher customer acquisition costs<\/td><\/tr> Option 3: Launching New Services to New Customers<\/strong><\/td> High<\/td> Develop new services and win a new customer base<\/td> High<\/td> Great growth potential Opportunity to enter untapped markets Creates a diversified portfolio<\/td> No existing track record High investment in R&D and marketing Higher risk of failure<\/td><\/tr> Option 4: Strategic Partnerships, Collaborations or Acquisitions<\/strong><\/td> Medium to High<\/td> Form partnerships or acquire companies to expand services or markets<\/td> Medium to High<\/td> Faster market entry Access to existing customer bases Leverages partner expertise Shared costs and risks<\/td> Requires alignment of goals with partners Integration challenges (in the case of acquisition) Profit sharing or loss of control<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n \n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n