Diversification Helps Handle Economic Blues

Long-time Sales Rep (and friend) Gene Roberts called this morning to offer a quick update on a high-frequency component supplier he was planning to visit later in the day. It could have been any company, but this one represented the classic example of a startup company that found its niche and sold high-performance components mainly to laboratories performing precision RF and microwave measurements. Over time, this company has built a sterling reputation for quality and high performance, especially over the extremely broad bandwidths needed for measurement systems.

The company is also an example of the type of firm that might most be hurt by an economic downturn. When business heads south, one of the first things that companies cut is their capital expenditures, such as on new test and measurement equipment and its associated accessories and components. For any company that sells to one group, or one market, a downturn that affects that group or market can be fatal businesswise. But by diversifying, not just in product lines but in markets served, a downturn that hurts one market may leave another unscathed. It may be an oversimplification, but diversification can help weather the worst economic storm and the high-frequency companies that realize this fact have already taken the steps necessary to diversity their product lines and the markets they serve.