Running different businesses that are complementary to each other can be a good idea if done correctly. When businesses are complementary, they can create synergies and economies of scale that can increase efficiency and profitability. However, there are several factors to consider before pursuing this strategy.
Check out the widest range of financial forecasting models on the net for prudent financial planning in over 40 industries.
First, it is important to ensure that the businesses are truly complementary. This means that they should have some overlap in terms of target customers, products, or services, and that they can leverage each other's strengths to create value. For example, a company that sells home fitness equipment may also start a fitness app or provide online coaching services, creating a complementary suite of offerings that appeal to the same customer base.
Second, running multiple businesses can be complex and require significant resources. It is important to have a clear plan for how the businesses will be managed and integrated, as well as the necessary financial, human, and technological resources to support them. If the businesses are related in some way, you may be able to share resources such as staff, equipment, and facilities, which can help reduce costs and increase efficiency.
Third, it is important to consider the potential risks of running multiple businesses. Diversifying a company's revenue streams can reduce risk, but spreading resources too thin across multiple businesses can also increase risk and create operational challenges.
Overall, running complementary businesses can be a good strategy, but it is important to carefully evaluate the potential benefits and risks and have a clear plan for execution.
Examples of Running Complementary Businesses
Marriott International: Marriott International is a hospitality company that operates multiple complementary businesses, including hotel and resort properties (Marriott, Sheraton, Ritz-Carlton), timeshare vacation ownership (Marriott Vacation Club), and corporate travel management (Marriott Business Travel). These businesses all leverage Marriott's expertise in hospitality and customer service to offer complementary products and services to travelers.
Amazon: Amazon started as an online bookstore, but over the years, it has expanded into a wide range of businesses, such as e-commerce, cloud computing, digital streaming, and AI-driven voice assistants. These businesses are all complementary to each other, as they all rely on Amazon's strengths in logistics, data analysis, and customer service.
Virgin Group: The Virgin Group, founded by Richard Branson, is another example of an organization that runs multiple complementary businesses. Virgin started as a record label, but over the years, it has expanded into a diverse range of businesses, including airlines, mobile phones, financial services, and healthcare. All these businesses are complementary in that they reflect Virgin's brand values of innovation, customer service, and disruption.
Berkshire Hathaway: Berkshire Hathaway, led by Warren Buffet, is a holding company that owns a diverse portfolio of businesses, including insurance, energy, transportation, and manufacturing. These businesses are all complementary in that they generate cash flows and provide opportunities for cross-selling and economies of scale.
Walt Disney Company: The Walt Disney Company is another example of an organization that runs multiple complementary businesses. Disney operates businesses in entertainment, media, and theme parks, all of which are interconnected and leverage the company's strengths in storytelling, creativity, and brand recognition.
Alphabet (Google): Alphabet is the parent company of Google and several other complementary businesses, including Google Cloud, YouTube, Waymo (self-driving cars), and Verily (healthcare technology). These businesses all leverage Google's expertise in data analytics and technology to offer complementary products and services in various markets.
A local bakery that also offers catering services for weddings and events. These businesses are complementary because they both involve food preparation and can be marketed to the same customer base.
A small graphic design agency that also offers website development and social media management services. These businesses both involve creative design and can help clients establish a strong online presence.
A yoga studio that also sells yoga mats, clothing, and other accessories. These businesses both serve the same target market of yoga enthusiasts and can generate additional revenue streams for the studio.
A small engineering firm that also offers construction management services. These businesses are complementary because they both involve project management and can help clients complete complex projects from start to finish.
A boutique hotel that also operates a restaurant and bar. These businesses both serve the same customer base of travelers and can enhance the overall guest experience by offering convenient dining options on-site.
Article found in General Industry.
