When you’re a CEO, risk is always a factor. Every decision means you are taking a chance. There’s no saying what will happen on any given day to throw things off kilter.

CEOs have no way of eliminating risk, and some risks should be accepted and embraced, but they can mitigate the negative effects of risk through diversification. Diversification means they can rely on multiple resources to cater to their business needs. If one resource is unavailable, another can come through.

Diversify Revenue Streams

Businesses that diversify revenue streams will increase their odds of having an alternate source of income if one of the wells runs dry. Here are some ways you can diversify revenue for your organization.

• Expand into New Markets: If your current market is not as active as it once was, you may expand into different markets. Seek out complementary markets that make sense for your company. Identify them early on and determine the products and services you can offer so you are ready to pivot at a moment’s notice.
• Partner with Other Businesses: Businesses may partner with other companies to leverage each other’s products and services to increase profits. Also called collaborative revenue, this business model includes affiliate programs that drive both organizations to profitability. Mergers and acquisitions can also present new revenue opportunities.
• Go Digital: An online presence does more than help you reach your target audience. It allows you to earn revenue through ads and subscribers. Consider how you can make your social media work for you.
• Create an Ancillary Business: An ancillary business provides services to primary businesses. Companies may consider adding an ancillary business to their service suite by expanding from B2C to B2B. For example, you may outsource the services you offer customers to increase your revenue.
• Limit Your Sales Percentage: B2B companies should avoid counting on one customer for their revenue stream. Some companies will put a threshold on the number of sales they generate from one customer before prioritizing new customer acquisition. It allows them to branch out, so they don’t depend heavily on any one revenue stream.

Diversify Product Offerings

Branching out with inventory offers the potential to make money, but it can also increase risk. You can lower risk with the following strategies.

• Offer Complementary Products: Create complementary products that can be used with your current product line. For example, if you sell mops, consider creating various types of mop heads.
• Consider Subscription Services: Companies can branch out their offerings with subscription models. They can offer subscriptions for products and services to appeal to diverse audiences.
• Improve on Existing Products: Organizations should constantly look at their current offerings to identify improvements and offer better value to the customers. They can upgrade products and take old products off the market, or they may offer multiple product tiers at various price points.
• Offer Product Bundles: Product bundles are an ideal way to sell complementary products and upsell offerings. Consider your products to identify which can be integrated into bundles. Offer overall savings to drive sales.

Diversify Vendors

Organizations often rely on vendors to provide the products and services they require. But what happens when one vendor is unavailable? That’s why diversification is so important.

Companies can avoid risk in product and service supplies with the following strategies:

• Identify Multiple Vendors: Most companies have a few main vendors they work with. However, they should always have some alternates on hand. Teams should research to identify multiple vendors they can work with, so they have a backup if one falls through.
• Avoid Signing Exclusive Contracts: Some vendors will ask you to sign contracts to use their services exclusively. They may offer enticing deals to get your company to sign these contracts, but they will prohibit you from finding other vendors if they are unavailable. If you must sign an exclusive contract, include a clause to allow exceptions if the company is unavailable, changes pricing structures, etc.
• Attract Diverse Vendors: Companies wishing to gain a base of diverse vendors may partner with supplier diversity organizations, use e-procurement platforms, and publicize supplier diversity efforts. These strategies will allow you to broaden your network.

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Additional Risk Resources

Balancing Innovation & Risk: CEO Strategies for Successful Decision-Making

Crisis Management and Business Continuity Planning for CEOs