Competing within an evolving market can mean diversification, which is essentially seizing an opportunity to explore different products or services, or even branching out into new markets or industries.

The PayPal Business of Change 2023 Rethink & Grow Report survey cited that over 77% of SMEs believe it is important to adapt their operations to remain competitive during changing market conditions like the cost-of-living squeeze.

• If you know your market or do thorough market research.
• You have the resources to support added products and/or services.
• You are confident it fits with the overall brand/messaging of your company. 

• Product diversification: A gift shop might introduce a clothing range
• Adapting your service: A consulting service might branch out into training
• Market location: You might consider branching out into different regions or even countries
• Partnerships: Collaborating with another business to enhance your offering or introduce you to a new industry

Diversifying a business can take many forms and it doesn’t have to mean a huge upheaval; it could start off small with tweaks to a product or service or head straight to making inroads into a new sector. Either way, it’s a good idea to know your market inside out.

• Go back to basics and think about breaking into a crowded market.  
• Are your competitors using social media? Have they introduced new products?
• Review your offering regularly – stay aware of any changes in your market, as well as your competitors. Does your company do anything better than its competitors? What are their weaknesses?
• Look at similar businesses both at home and abroad. You might find inspiration from a business based across the world even though you operate within a smaller, local market.
• Talk to staff: It’s a good idea to chat with other people who know your business inside out. They might have ideas or be a source of encouragement and skill while you test a new product/service.
  

Up-to-date digital tools could have a huge impact on growth and staying competitive, both within the business and in external customer transactions.

• Ensure you have the relevant people and the right skills necessary to make the most of this.
• If you don’t already have one, consider creating a website and/or app and build up your presence on social media
• Channels such as TikTok could be used to reach different generations (see Generation Z), as well as genders and socio-economic groups
• You could use tools such as Google Analytics to help clarify your audience, helping you reassess marketing, sales and prices
• Automate manual tasks, enabling payments via an app for a speedy and a frictionless experience, for example

SMEs can be better placed to pivot or see an opportunity to diversify into a new product or service because of their smaller size, according to the World Economic Forum’s Future Readiness of SMEs. The “more open communication and greater proximity of leadership to operations … tend to allow them to identify areas of change”.

Remember to check out any funding opportunities that could help your business.

Amanda Carroll, co-owner of Temple Croft B&B in Alston, Cumbria, talks about how she and husband Paul have maintained their core offering while branching out to meet different customer needs in three key steps.

Nestled on the coast-to-coast cycling route and North Pennine Way, their B&B property is perfectly placed for its unique selling point dedicated to cyclists and walkers: a secure, purpose-built bike lock-up with wall rack and e-bike chargers, plus a drying room. But while this remains a great draw for guests, Amanda says: “The town itself is struggling. The fish and chip shop has gone, hit by the cost of energy. The footfall through Alston is still good in the summer but it isn’t how it was after Covid when people were holidaying at home.” 

Within a couple of years of living there, Amanda and Paul were able to buy the small cottage next door, which was already attached to their property by an archway. “That gave us the flexibility of moving out of the house if large groups wanted to rent this out as a holiday let. That’s something we’ve experimented with this year. We had two lots in August.

Making it work: “It was an incredible amount of work. We locked a couple of our bedrooms and our cellar, but we still had to convert the kitchen into a self-catering space suited to holiday lets rather than a B&B commercial-style kitchen. Our sitting room also had to be redecorated because we had been using it as a private room.” Other key actions included setting up on online channels such as listing on Airbnb to reach potential customers, and ensuring all rooms had reliable wifi.

Another idea tested recently is to rent out the house for spiritual weekend retreats. “We were approached about this wellness idea and we thought it might work because accommodating large groups is obviously more financially beneficial than small numbers of cyclists or walkers.”

Making it work: “As part of these weekends, guests will have full use of the garden and we’ll also take them on walks – my husband will take them on one and I’ll take them on the other. We have to make the walks accessible for all, so we’ve got to make sure it’s OK for everybody. Not too steep, or narrow, and that any stiles are manageable.”

Last winter, during the quieter season, they offered a selection of bistro nights, including a popular five-course Christmas menu. “We took up to 17 people and that went down brilliantly.”

Making it work: “My husband is a self-trained chef and he’s always been interested in cooking. As long as guests pre-order then Paul knows what to expect and can cater to a large group. He changes the menu seasonally and we’re growing our own herbs and veg now. It helps us financially and it’s nice to pick our own vegetables.” Amanda also points out that business owners should be aware of any additional regulation involved in making changes. In this case she was able obtain a “temporary events notice” from the council in order to serve alcohol.

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