Diversification Done Right: Lessons from the Field

 

This is the final post in our series about diversification. In our first post, we talked about understanding the critical elements of diversification, the drivers behind it and why conducting a strategy audit is essential. After this initial overview, the first step is understanding if you’re even ready to begin the process of diversifying, which we explored in our second post. 

Before entering new markets and segments, it’s crucial to know where your business stands. After conducting a strategy audit around your market, operations and people to define success, you’ll need to make sure you can execute on your plans. 

But how? Here are a few of the most often-asked questions we get around developing a diversification strategy and advice for how to begin considering answers. 

What are the most common mistakes contractors make when diversifying? 

One of the biggest things we often see contractors do is underestimate the risk and investment needed to be successful. Just because one market or service performs one way in an area does not mean it will be identical in a different location. Be sure to consider the nuances of where you’re planning to operate and evaluate differences so you can plan accordingly. 

Can you share an example of a contractor who succeeded in diversifying? 

Consider these examples. 

Case Study 1: Geographic Expansion A contractor expanded into a neighboring state to follow a key client, only to discover they lacked the local relationships needed to build credibility. By re-evaluating their market strategy and hiring experienced local business developers, they turned the corner and gained traction. 

Case Study 2: Service Diversification Another contractor launched a facilities management division, expecting strong client demand. Initial challenges arose because their project-focused culture wasn’t geared toward long-term service delivery. A strategy audit revealed gaps in leadership and systems, which they addressed to align their operations with their new business model. 

As you can see, it’s important to have the right people enter new markets to implement your culture and systems. The approach of following a client can help offset some of the risks of entering a new market, but you must do so in a thoughtful way. 

How can contractors ensure diversification leads to profitable growth? 

It goes back to having a strategy for your market, operations and people. You should try to evaluate your options and take the ones that don’t fit off the table to help drill down on those that make the most sense for your organization. When done right diversification can contribute to profitable growth but it takes focusing on clarity, preparation and execution to be successful. 

Integrated Strategies: The Secret to Sustained Growth 

Diversification is not just about identifying opportunities, it’s about aligning your market strategy (where to focus) with your business strategy (how to execute). This integrated approach ensures your external efforts are powered by internal capabilities, creating a cycle of sustainable growth. Diversification can feel simple in theory but is often complicated in execution. At FMI, we specialize in helping contractors navigate this complexity through strategic audits and tailored growth plans. Our expertise ensures your diversification strategy is both bold and balanced, positioning you for success in an ever-changing industry. 

Ready to transform your growth strategy? Contact us today to learn how FMI can help you make diversification a winning move.