Over reliance on a single product or product range places the business sales revenues at added risk. Products can go ‘out of fashion’, become obsolete, or can be replaced by competing products and new entries into the market. So too, it is the case with services. No product or service will continue without threats emerging. Businesses over reliant on a limited product range or service are at a higher risk because of the increased likelihood of revenues falling or failing as a result of changes in the market demand and competition.
Diversification and research and development of new products and services and new markets, adds to revenue sources of the business. It also reduces volatility and adds to steady and reliable predictable revenues.
Products and services with a dominant position in a niche limits the possibility of the entry of competition. Brand ‘recognition’ further adds to secure revenues. Businesses with an eye for opportunities to grow can usually demonstrate growth. Continuing trends in growth adds to confidence in the outlook for the business profitability going forward.