By Kim Brockman

If you've been in business for any amount of time, you may very well be wondering how the big guys did it. How did they find a product or service that would stand the test of time? The truth is they probably didn't. Successful companies all rely on diversification to one extent or another. Diversification is a business strategy designed to protect the entity's revenue by investing capital in varying products or even industries. That way when one product dies out, it won't throw the entire business into failure, as it will have other on-going income streams.

This is a wise business strategy, and as companies grow they generally take this direction. But how can the small businessman or sole proprietor take advantage of this recommended method of doing business? Is it even possible?

Definitely, yes! You just need to ask yourself the questions that will lead you to the right opportunity. Of course, you need to get your primary business profitable first. Then it's time to start thinking of diversification. Build off your original business at first. Find something that uses similar skills, resources, or knowledge so you can easily turn it into an income stream. Later you will have more income, and therefore, more opportunity to diversify even further into areas where you may have to purchase new facilities or education to accomplish your goals.

An example that is easy to see is that of an MLM marketer. Suppose you've been successful at selling Avon for years. Now, Avon is a fine company of the highest reputation, and there is no reason to think it would go out of business in the near future. But suppose it does? Or suppose you have friends and neighbors who just don't care for Avon products, but like Mary Kay better? Selling Mary Kay in addition to Avon may be a step in the right direction, but it still wouldn't help you if the demand for all cosmetics products decreased. You might be better off to diversify in a completely new direction. You can use the expertise you've gained selling MLM products and opportunities by choosing another MLM company who sells children's toys or candles or kitchen gadgets.

Of course, it's harder to see your diversification options if you have a more complex, time-consuming or capital-intensive business. Suppose you own a small craft store. Sales of craft supplies and some finished crafts are the bulk of your business. You need to be there during all open hours, and you have little capital to invest elsewhere. Don't give up on diversification, as it may still help your business in little ways. Can you, for example, run craft classes? Can you sell finished crafts for your customers on consignment? Perhaps you could invite in guest speakers or instructors who would share special techniques with your customers.

If you're just getting started, you're in the perfect place to plan to diversify. You can build it right into your business plan. You needn't start them all at once, but plan early and you won't be caught off guard by sudden business downturns. If you're already established but not diverse enough, start looking around and seeing what else you could add at minimal cost that would gain you a different income stream from a different source. This is one of the best ways to protect your overall income and ensure on-going profitability.

About the author: Ms Brockman is a CPA and consultant to small and mid-size

businesses. http://www.tiiezine.com/Top_Picks/5-Bucks-a-Day.php