As a manufacturing organization, your eyes are set on the future like a chess master planning out his next seven moves. If you take a long-term approach, this will help you achieve sustainable growth that will last years rather than months. After all, you’ve invested blood, sweat and tears to maintain and grow your business — so in this post, we’ll outline the necessary steps to take so you can have proactive control of your company’s stability.
Diversification is Your Friend
In the same way experienced investors spread their capital among different industries and companies, you should consider the benefits of approaching your manufacturing business in the same way. The more uniform your consumer base, the more you’re putting all of your eggs in one basket. Ask yourself: what would happen if this particular type of consumer no longer existed? Chances are, you’d probably have a difficult time sustaining your bottom line. And this is why we stress the importance of diversifying your markets and your products.
A prime example of how having only one focus in your manufacturing products can be a limitation involves the economic recession that our country endured in 2008 which didn't help the manufacturing job losses the U.S. was already experiencing.
According to a report published by the Information Technology & Innovation Foundation (ITIF):
What’s the reason, you ask? Well, when CMTC talked to the manufacturing communities during this time, we noticed that the companies closing were the ones that served just one or two customers or industries. So once that demographic dissipated — so did these companies.
One of our clients, California Faucets, was able to steer clear of this path and continue economic growth, albeit slower than previous seasons, as opposed to no growth during this period because they had a diversified customer base. In fact, when the recession hit, they might have had other factors to consider, but diminished growth wasn't one of them — they still reaped the benefit of having a thriving business, nonetheless. Maintaining their stability provided their team with a peace of mind knowing they had the ability to manufacture alternative products for their customers who were not part of their main sales demographic.
“How is it done?” you may be asking yourself. Rest assured, we’ll outline three steps to help you diversify your products and/or services so you can steer clear of the negative consequences that hundreds of manufacturers endured during the recession.
Dig Deep to Analyze WHAT You Can Offer
What are your company’s strengths? What other markets would you like to target? What kind of products can you redesign to suit other needs?
These are key questions for your organization’s decision makers. It’s important to develop a strategic plan so you can outline all the potential ways you can diversify your business. After you’ve compiled a list of potential markets and products, prioritize the list based on estimated investment and an estimated ROI.
Great examples of companies diversifying can be found in our very own state. Many manufacturers who saw their business decrease in the aerospace industry due to the loss of DOD contracts, turned to developing products for the automotive industry.
Research Your Intended Market
Who are my market’s competitors? What do they offer that’s doing well for their consumers? Which market shows the most promise for revenue growth? What similar businesses in this market are growing? Can I partner with a company within the market to mitigate the risks of market entry?
Before you branch out into a new market or target new customers, look at the key players already succeeding. Make a list of potential products and collaborators using this market research and assemble a trusted team to think of a plan of action.
Get in the Trenches
With the lists you’ve created and the market research you’ve conducted, now it’s time to identify the best options — ones with limited risks and a great chance of a solid ROI. By enlisting the help of CMTC, we would be able to assist you to minimize the cost of implementing your diversification strategy. Your diversification team should include marketing/sales representatives, production experts and engineers so that each individual team member can contribute and offer their different perspectives.
No matter what products you produce, diversification should be considered as part of your long-term growth and sustainability plan. Taking charge and being proactive can only help you sustain stability and growth across a number of future economic situations. At CMTC, we can assist you in developing a diversification strategywhich is why we open our doors for you to contact us to help you and your team achieve sustainable growth!