How can diversification benefit a small business?

Diversification is a strategic approach that can significantly benefit a small business by spreading risk across different products or market segments. When a business diversifies, it ventures into various areas, which can mitigate the impact of market fluctuations or economic downturns in any single sector. For instance, if one product experiences a decline in demand, other products may still perform well, ensuring the business remains stable and profitable.

Additionally, diversification can lead to new revenue streams, helping a small business become more resilient. By offering a wider range of products or services, a business can attract different customer segments, thereby increasing its market presence and potential profitability. This strategy not only minimizes risk but also paves the way for sustained growth and longevity in a competitive environment.

The other options do not align with the benefits of diversification. Focusing exclusively on a single product can make a business vulnerable to market changes. Reducing investment in research and development can stifle innovation and hinder the ability to introduce new products. Likewise, increasing employee turnover is typically detrimental to a business, leading to instability and loss of valuable expertise.