Effective Path to Fast Growth with Diversification
In conversation with Franchise India, Umang Tewari, founder of Big Fish Ventures, the driver behind multi-format restaurants and bars like Garam Dharam, Junkyard Cafe and LIV bar, throws light on the concept of diversification and unravels a lot more about the restaurant industry.
Diversification seems like a dicey move to get ahead with your entrepreneurial journey. In order to make it safe and profitable, what are the diversification strategies that you should adopt? Will it actually help minimise the risks? Is it the right time to diversify your product line? Many such questions start popping up in the head while thinking of diversifying a business. However, time and again, the diversification strategy has worked in favour of business people across industries and has helped them avoid financial risks. Answers to the above questions can be found in this interview:
Why is there a need for any business to diversify?
It is a conventional notion that businesses can run well without diversifying into other product lines or verticals. So, how does this strategy benefit companies? Diversifying your business into new verticals and service lines can provide an effective path to fast growth as you sell more products to existing customers or establish new markets. But it’s vital to weigh up the risks as well as the opportunities. Businesses diversify for a number of reasons. Perhaps the most basic of these is survival.
By definition, a company that focuses on a narrow range of products will only have access to a finite number of customers. That’s fine if the market as it stands is big enough to support several competing businesses, but if the pool of customers is small, the cost of running the company may outstrip the potential for revenue. In these circumstances, diversification into new lines may be essential to the long-term viability of the company.
When is the right time to diversify?
One of the biggest growth drivers for any business is its competition. With various trends emerging in the industries, the target consumers get divided as competitors grow. That’s why many companies prefer a diversification strategy to keep ahead of their competitors and increase their revenue. Before diversifying, companies must look at how they can launch innovations to combat cut-throat competition and rise to being the biggest brand in the industry. Many a times, established brands find it feasible to mark their presence in different sectors to stand out from their competition.
For example, I started my journey with ‘Out of the Box’ when I realised a serious void in the category of customised cuisine and made an effort by filling the gap with our multi-cuisine restaurant and bar. Then, we moved forward with an opulent dhaba called ‘Garam Dharam’, inspired by veteran actor Dharamendra Deol as well as food joints like ‘The Junkyard Cafe’ and ‘OMG’. Among other ventures there is ‘Bandstand’ for live bands and gigs and a brewery to be called ‘3 Pegs Down’.”
How should one diversify?
It is important to keep the different sets of target audience in mind while planning for diversification. One needs to work on different verticals as per the clients’ requirements and customer demands. Different demands require different outlets. In my own case, it’s not that I started thinking of expanding midway. The thought was there from the first day of setting up my venture. I had always wanted not to stick to one particular thing but keep my business multi-functional. So I worked in pubs, cafes, fine dining places, et al.