Should You Diversify? Or Is There Beauty in Simplicity?

We tend to over complicate things. A simple business that does a few things well and at scale, is a thing of beauty! It is easy to get caught in the trap of doing lots of small things. After all, if someone is making money on the calves I sell, maybe I should background them myself? If the retailer is making a killing on my beef maybe I should direct market it myself? Then my customers want pork, lamb, eggs etc. so maybe I should raise all those. Add to this farming to raise feed, developing my own heifers, raising bulls, and running a farm store. Shew! No wonder we don’t make time for strategic management of our business, when we are burning both ends just trying to keep the wheels from falling off. I’ve heard many well-intended people suggest that diversity is the path to success. I disagree. Diversity is great in ecology, but in small business diversity creates complication. Diversity is not a profit maximization strategy.  It is a risk management strategy. When you break your business down into enterprises and examine each one separately, I bet you will find that one or two things are working well, and the rest are mostly a distraction. An example of this is a discussion I was part of at a recent Executive Link meeting in Colorado Springs. A member was presenting the economics of their ranching business to their board. It was clear the hay business was a money loser. Projections for the coming year showed the hay business costs were $20,000 higher than it wo

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