I am frequently asked the question, “how do I determine the next best enterprise to add to the future of my business?” In this particular case, the inquiring individual was a small-scale grain operator with poultry. He indicated that the business had plateaued economically. This is a great question and one that commands considerable thought.
Most importantly, understand there is no magic silver bullet in selecting the next best enterprise. First, assess the goals and values of the business, family and personal lives. After examining the goals, ascertain whether adding a new enterprise is consistent with the goals, both short and long-term. It does not matter what the new enterprise may be if the current business cannot support it.
Next, examine the current resource base including land, machinery, equipment and human resources. Will the new enterprise be complementary of resources? Will it reduce the fixed cost per unit with better utilization of the asset base? Time is an especially precious resource and it is important to assess any new, potential enterprise from this perspective. Is the business complementary or competitive to the time requirements already in place? For example, in Nebraska, a farm business added a gate building enterprise to retain the workforce during the down period of the winter season. This is a great example of a complementary addition.
Another crucial factor to consider is the market availability for the potential new products. In recent years, farmers have gone into catfish farming or added broccoli to the operation only to find the market suddenly flooded driving down prices and of course, profits. Not only did the available markets fail to support the new products, these producers were then saddled with the fixed cost investment that remained idle after the new enterprise was unsuccessful.
Finally, exercise introspective judgment concerning new opportunities. Will the opportunity ignite the passion of the owners, managers and employees? Do the individuals have the talent and skill base to economically produce the products or services? In most cases, a good old-fashioned enterprise budget with different price, cost and production scenarios can be the best use of time before contemplating the new endeavor.
In this specific case, the individual indicated the business had plateaued financially. It is important to honestly review the possible reasons for plateau. Is it financial or could it be burnout or overwork due to a downward economic cycle? The emotional elements of goals and opportunities should not be ignored and must be included in the overall decision.
In conclusion, only you can answer the question whether or not a new enterprise is a good fit. Carefully examine and assess your goals, current assets and the potential for any new venture. Often, thinking through an issue thoroughly enough to write it out allows one to see any potential, positive or negative, more clearly. Remember there is no magical profit maker and good change often comes incrementally with deliberate and thorough planning.