Why You Need to Diversify Your Business Interests (and How to Do It)

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We are entering an unstable time in the market. Inflation is at an all-time high and the costs of basic necessities, from food to gasoline, are steadily rising. The best hedge against inflation is real estate, and the best hedge against depending on a single income stream is diversification.

Diversifying your business interests isolates you from circumstances beyond your control. My business portfolio is wide and varied: food and beverage, real estate, shipping and e-commerce. The 2020 pandemic was the ultimate justification for my business diversification. My food business was very successful as tourism was temporarily halted due to government-ordered closures. In contrast, since they were Sin City Cupcakes, shipping, real estate, and e-commerce had their best years. People started e-commerce businesses at home and fled the high-tax states to move to Nevada. If I hadn’t been diversified and only relied on a single business as my main stream of income, I would have found myself in a world of trouble. So how can you diversify your business interests?

Related: focus on one thing or diversify?

Read and pay attention to the industries or business models that catch your eye

I started Ship Las Vegas in 2018, because I was intrigued by the mailbox rental model. Mailbox rentals are miniature storage units. They are a low-maintenance, low-cost item that produces consistent, consistent, and recurring revenue. The only problem was that I didn’t know anything about running a mailbox / packaging rental store and shipping. So I went up the street from my house to the local locally owned mailbox or boat rental shop and made a proposal to the owner: I’ll pay you $ 10,000 if you let me follow you for two weeks, train at the your store and capture it. your business processes for you. I will compile everything into a procedure manual for you and I will be the best apprentice you have ever had. He agreed, and the next day I started my two-week apprenticeship that I paid good money for. I saw the $ 10,000 as an investment in the business model.

Protect yourself from global circumstances and focus on steady, recurring income

Regardless of the conflicts that may be going on abroad or what items the outraged mob is currently obsessed with, there are some constant truths: mailbox rentals are monthly, recurring income, and insurance premiums are monthly and recurring. I am invested in an insurance company and it is not a business model that I would have paid much attention to before. Still, I’ve been a willing consumer and payer every month without much effort, thanks to automatic payment. It’s an expense I will continue to pay, no matter what happens in the world.

Consider investing in business models that are “safe bets”. Which industries have products or services that have recurring monthly revenues? Ideally, they are associated with a mandatory monthly cost or strongly recommended by law or community: it is not glamorous, nor sexy, but essential. For example, car insurance is required in the state of Nevada to register and drive a vehicle on the public highway. As a result, people will find a way to make sure their monthly car insurance premium is paid, regardless of what may happen to the world around them.

Related: 4 Ways an Entrepreneur Should Diversify His Income

Stay tuned for the opportunity

My entrepreneurial journey began with my bakery. I didn’t start Sin City Cupcakes because I was passionate about cooking and hoped to one day start my own bakery. My co-founder Dannielle and I caught up on the phone one night in November 2011 and shared that I had been playing with alcohol-infused cupcake recipes. A bell rang in my mind and I was immediately captivated by the idea. Alcohol-infused cupcakes are a fun and celebratory item.

Las Vegas is an international destination where people end up spending too much, buying and doing things they won’t buy and won’t do at home. We needed cupcakes with alcohol infusion in Las Vegas and wanted to help start the company. I had no baking experience and had to learn how to cook when we started the business. It turned out to be a popular idea, and we are now very grateful to have amazing staff who have pastry degrees and more baking experience than I could ever hope to get myself. He hires well, and comes out of his well.

Subscribe to newsletters and listings featuring different lines of business

You don’t know what you don’t know. The best way to learn about various business models is to send them to your inbox frequently. I like to subscribe to tactical newsletters like “Contrarian Thinking” that include examples of entrepreneurs owning “boring business” in which I would generally not think of investing. I also contacted local Las Vegas business brokers and asked them to add me to their mailing list. . In my opinion, most companies listed on a business broker are overpriced or often rely on very superficial financial calculations to determine a sale price.

However, the value of being on the mailing list is twofold: one, it gives me an insight into various business models, and second, I can understand what trends are happening in my local market, which is always good information for more come in. For example, if there is a group of companies in the same industry or superimposed all for sale at once, or if there are several companies for sale in the same part of the city, all this is good micro information to help evaluate macro environments such as local. real state.

Related: The importance of portfolio diversification for your investments

Look for investment vehicles that minimize the risk of a loss of investment, while pressing an impact or purpose button for you

I joined a $ 10 million private equity fund last year as a general partner. The fund supports entrepreneurs who are at the pre-seed and seed levels of their business (also known as, just starting out) and focuses on founders who are military veterans or spouses. My father made a career in the U.S. Air Force and then worked for the Department of Defense while I was growing up. He died in 2020 and I know he would have loved my involvement with The Veteran Fund. Supporting our American military families is very important to me, and this fund presses me on that impact button. From an economic and business point of view, the fund also serves as an investment vehicle through which I can be part of companies in different spaces, from virtual markets to climate technology and data centers on the Moon. Most importantly, the fund invests in these varied companies with a procedure as mitigated and with as few risks as possible.

Many private equity funds move away from pre-seed or seed-level firms, as starting a business is usually the riskiest stage. My partners and I examined the points of failure of most startups in the country and addressed each through the fund’s investment criteria, as well as how we presented ourselves to the founders. We don’t just write a check and rest on our laurels, waiting for a company to do it or not. We have put our entrepreneurs through an acceleration program with the Founder Institute and we have also created a team of LP stars and Venture Partners who are experts in the field in their respective industries.

You can delve deeper into your diversification as you wish. It starts small and steady. For example, if you have a 9-5 and W-2 income job, keep it as an income stream and start a side career. Be willing to work nights and weekends by your side, while your main job is to maintain a steady income.

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