Why you need to diversify your business interests (and how to do it)

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We are entering a period of market instability. Inflation is at an all-time high and the costs of basic necessities, from food to gasoline, keep rising. The best protection against inflation is real estate, and the best protection against relying on a single stream of income is diversification.

Diversifying your business interests insulates 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 diversifying my business. My food business has been hit hard as tourism has temporarily come to a screeching halt due to government-mandated closures. In contrast, even though Sin City Cupcakes was hit hard, shipping, real estate, and e-commerce had their best years. People started home-based e-commerce businesses and fled high-tax states to settle in Nevada. If I hadn’t been diversified and only relied on one business as my main source of income, I would have been in a world of trouble. So how can you diversify your business interests?

Related: Do You Focus on One Thing or Diversify?

Read and pay attention to 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. It is a low-maintenance, low-overhead item that generates stable, consistent, and recurring revenue. The only problem was that I knew nothing about running a mailbox rental/packing and shipping store. So, I walked up the street from my house to the local independent mailbox rental store and made an offer to the landlord: I’ll pay you $10,000 if you let me follow you for two weeks, m drive in your store and capture your business processes for you. I’ll compile everything into a how-to manual for you and be the best intern you’ve ever had. He agreed and the next day I started my 2 week apprenticeship for which I paid well. I viewed the $10,000 as an investment in the business model.

Protect yourself against global circumstances and focus on stable and recurring income

Regardless of what conflicts may arise overseas or what the outraged crowd is currently obsessing over, there are constant truths: mailbox rentals are monthly, recurring revenue and insurance premiums are revenue. monthly and recurring. I’m invested in an insurance company, and it’s not a business model that I had paid much attention to before. Still, I was a willing consumer and paid each 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 sectors offer products or services that generate monthly and recurring revenue? These are ideally coupled with a mandatory or strongly suggested monthly cost by law or community – not glamorous, not sexy, but essential. For example, auto insurance is required in the state of Nevada to register and drive a vehicle on public roads. As a result, people will find a way to make sure their monthly car insurance premium is paid, regardless of what’s going on in the world around them.

Related: 4 Ways An Entrepreneur Should Diversify Their Income

Stay tuned for opportunities

My entrepreneurial adventure began with my bakery. I didn’t start Sin City Cupcakes because I had a passion for baking and hoped to one day start my own bakery. My co-founder Dannielle and I were catching up on the phone one night in November 2011, and she shared that she had been playing around 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 festive item.

Las Vegas is an international destination where people come to overspend, binge, buy and do things they won’t buy and do at home. We needed alcohol-infused cupcakes in Las Vegas, and I wanted to help start the business. I had no baking experience and had to learn to cook when we started the business. It turned out to be a popular idea, and now we’re so grateful to have an amazing staff who have baking degrees and more baking experience than I could ever hope to attain myself. Hire well, and get out of their pit.

Subscribe to newsletters and mailing lists that feature different business sectors

You don’t know what you don’t know. The best way to learn about different business models is to receive them frequently in your inbox. I like to subscribe to tactical newsletters like “Contrarian Thinking” which feature examples of entrepreneurs owning “boring businesses” that I wouldn’t usually think of investing in. I also contacted local Las Vegas trading brokers and asked to be added to their mailing list. In my opinion, most businesses that are listed with a business broker are either overvalued or tend to rely on very superficial financial calculations to determine a selling price.

However, the value of being on the mailing list is twofold: firstly, it gives me insight into various business models, and secondly, I can understand trends happening in my local market, which is always good information. for later. For example, if there is a group of businesses in the same or overlapping industry all for sale at the same time, or if there are multiple businesses for sale in the same part of town, all of this micro information is good information to help assess macro environments like real estate.

Related: The Importance of Portfolio Diversification for Your Investments

Research investment vehicles that reduce the risk of investment loss, while pressing an impact or goal button for you

I joined a $10 million private equity fund last year as a general partner. The fund supports entrepreneurs who are in the pre-seed and seed stages of their business (i.e. just getting started) and focuses on founders who are veterans or military spouses. My dad had a career in the US Air Force and then worked for the Department of Defense while I was growing up. He passed away in 2020 and I know he would have liked my involvement with the Veterans Fund. Supporting our American military families is very important to me, and this fund is pushing that impact button for me. From an economic and business perspective, the fund also serves as an investment vehicle through which I can be part of companies in various spaces, from virtual markets to climate technology to data centers on the moon. More importantly, the fund invests in these varied companies with as smooth and risk-free a procedure as possible.

Many private equity funds avoid pre-seed or early-stage companies because starting a business is usually the riskiest stage. My partners and I looked at the failing points of most startups in the country and approached each through the fund’s investment criteria, as well as how we present ourselves to founders. We don’t just write a check and rest on our laurels waiting for a company to do it or not. We put our entrepreneurs through an acceleration program with the Founder Institute and also built a star team of LPs and Venture Partners who are subject matter experts in their respective industries.

You can go as far in your diversification as you want. Start small and regular. For example, if you have a 9-5, W-2 paying job, keep it as a source of income and start a side business. Be prepared to work nights and weekends on your own, while your main job earns you a stable income.

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