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Should Your Start-up Branch Out or Stay Highly Focused?

 

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If you are currently running a start-up, you will find that you’re faced with a number of different important decisions to make as time goes by. These decisions will shape your new business going forward and will determine your success or failure in the future while you are forging that identity and modus operandi that will come to define your company.

One such question is whether you want to stay highly specialised, or to branch out into different areas. There is no ‘right’ answer here and each has its strengths and weaknesses, so you need to carefully weigh the pros and cons in order to make the best decision for your organisation.

Knowing Your Options

When you first launch your company, you no doubt be relatively specialised to begin with. In other words, you will probably have come up with a great idea for a product, service or business model, then created your company on the back of that. At this point, your business will sell that one service or product and that’s it – because you won’t have had the time or the funds to do much else at this point.

Assuming this is successful, though, you will then start to build momentum and grow as a company. You’ll have more funds, more experience and more ideas that you can use now in one of two ways.

Option #1 is to use some of your new staff and new funds to take on a new project to run in parallel to your current one. If you are selling t-shirts, for instance, then you might opt to sell hats, too, with similar styles and branding. Alternatively, you might decide to go a little further afield and put up websites. Now you’ve gone from a t-shirt company to an apparel company or a design company, respectively…

Option #2 is to stay highly specialised and to use your increased resources to enhance your current product line: you could offer variations on your current t-shirt design, improve your website, or you could simply increase your marketing.

Making the Choice

So, which is best for your company and what are the pros and cons of each decision?

On one hand, staying specialised will make it easier for you to be the very best at what you do and to really corner the market in that particular area. At the same time, it lets you stay focused and play to your strengths, which limits the amount of administration and the possibility of things going wrong.

At the same time, branching out means that you aren’t putting all your eggs in one basket, so you won’t easily be hurt by a single competitor or by other things affecting your industry. It also potentially allows you to expand your market and to capitalise on ‘cross pollination’ between your different offerings – taking advantage of the brand you’ve built in order to get a head start in new areas.

Ultimately what should drive this decision is the way you see your business going forward and what your long-term goals are. Do you want to be the very best at what you do? Or do you want to create a brand that takes over the world and that offers a seamless experience across multiple different sectors? Moderate this ambition with a little common sense (being too specialist can be too much of a risk in some industries) and you should find the right path for you. Ultimately you need to ask yourself whether you see your business as the next Facebook, the next Microsoft or the next Virgin…

Image credit: CC by David DeHetre

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About the author: Greg Fisher

Greg Fisher is the founder of Berkeley Sourcing Group. He started BSG eight years ago after realizing the need for efficient processes and coordination between manufacturing firms located in the United States and factories in China.

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