If one area suffers a setback, the other acts as a buffer
Starting a business is not always easy. There are so many things that affect startups, but the major challenge many startups face is financial. If you sunk in all your investment in the business and are looking at your business as your source of income, then it becomes a problem when it is not generating enough to pay your employees and you. Often, you will find yourself taking out of the business more than you are putting in, In the end, it all becomes messy, and you may end up closing shop because you cannot afford to pay others let alone yourself. If say, your start upsells computers, but you are also selling computer software, the hardware may not sell as much but the software and computer accessories will. This will still bring in money as you find ways to boost sales of your significant stock. This is a critical part a person should consider when starting a business because he needs to be concerned about his survival.
A customer may have come to your shop looking for a particular item but ends up buying more than he came from because your shop just became a one-stop shop. Many clients would instead purchase things from the shop, especially if they have faith in the quality of products you sell. Getting all the items they need in one shop also means the customers save time and money as they do not have to keep moving around looking for what they can get from you. A business owner who diversifies hardly ever has any cash flow problems because there will always be money coming in from one stream and this will encourage him to find ways of widening his business as this is about his ability to deliver as many related products as possible.
It is easier to get funding
Many lenders are not concerned with the amount of money you are making. They are more concerned about sustainability and consistency. If they see you have money coming in and out of your accounts, it shows you have the potential for growth and may need a cash injection to make this happen. This would not have been possible if your accounts had transactions with many gaps in between. Lenders would be worried about your ability to make repayments if your sales are so low and far in between. A business owner battles with this kind of record because it has a significant impact and has a direct reflection on and about his business. Although the cash at the beginning of a startup can be a challenge, it is crucial to consider diversification when setting up the company.