Don’t Diversify: How Concentration Creates Fast Business Growth

Business wisdom says diversification is the key to stability, but for many, it’s a slow road to mediocrity.

This is the power of concentration and how it creates fast business growth.

The power lies in betting on one bold idea, mastering it, and scaling fast. When you put all your chips on focus, the risk isn’t just worth it; it’s a game changer.

In my experience, many business owners I’ve worked with have struggled because they spread themselves too thin, trying to tackle multiple markets, services, or products before mastering one.

Our most successful companies master one particular niche within their industry and then own it. One California general construction company shifted to low-income, affordable housing and has grown its business from $750,000 to over $10 million in the past several years. Diversification is hailed as the gold standard of business strategy, but this conventional wisdom can be a roadblock rather than a road map.

Concentration—putting all your effort and energy into one area and refining it until it’s a standout—can yield greater rewards than diversification. It’s the key to scaling faster and building a strong, sustainable brand.

The Pitfalls Of Diversification

Diversification seems like a logical way to hedge against uncertainty. Traditional thinking says if one area of your business falters, another will pick up the slack. The challenge is this strategy can backfire, especially for newer companies and startups that lack the resources of larger corporations.

When you diversify too early, you spread your time, money, and attention across too many fronts. It’s the adage “jack-of-all-trades, master of none.” Diversification can be a distraction, leading to a loss of focus and dilution of the brand, making it harder to establish a standout identity in the marketplace.

Apple is an example of the benefits of concentration. In the late 1990s, the company was on the brink of collapse. Its overly diversified product line lacked cohesion. Steve Jobs famously reduced Apple’s product line to a handful of core offerings.

Focusing on perfecting a limited number of products, Apple transformed into one of the world’s most valuable companies. Their focus allowed them to innovate and deliver products that changed entire industries.

The Power Of Focused Expertise

I’ve found that consumers and clients are drawn to specialists over generalists. Businesses can build expertise and become leaders in their niche by concentrating on one core offering.

At Sunwise Capital, we’ve experienced this firsthand. By focusing on a limited number and type of business loan rather than diversifying into multiple financial services, we’ve optimized our operations and better understood our client’s unique needs, leading to higher client satisfaction and faster growth.

Concentration allows businesses to understand their target market and optimize their processes. Instead of constantly switching gears between different products or services, companies can focus on refining a single offering to perfection. This focus translates into better customer experiences, more efficient operations, and faster growth.

Streamlined Operations And Increased Efficiency

One significant advantage of a concentrated approach is operational efficiency. Businesses focusing on one product or service can streamline their processes, reduce overhead costs, and eliminate redundancies. Efficiency enables them to reinvest in innovation or marketing, creating a cycle of continuous improvement and customer satisfaction.

When Amazon first launched, it concentrated strictly on books. This focus enabled Jeff Bezos to build an efficient logistics and delivery system before expanding.

Building A Stronger Brand Identity

Concentration benefits operations and can powerfully impact brand identity. When a company focuses on a single core offering, crafting a straightforward, compelling story that resonates with customers is easier. In an age where brand authenticity and story-driven marketing are more critical than ever, concentration helps companies cut through the noise.

Our story is simple: We help businesses grow through tailored business loans. By concentrating on this one core offering, we’ve crafted a brand identity centered on trust, expertise, and personalized financial solutions for entrepreneurs and business owners.

Consider luxury brands Rolex and Ferrari. These companies have built their identities around being the best in their respective niches—watches and cars. This singular focus enables them to command premium prices and maintain a loyal customer base.

Speeding Up The Path To Market Leadership

Concentration also allows businesses to scale faster. Instead of spending time and resources developing new products or markets, concentrated businesses can double down on what is working. The focus will enable them to gain market share rapidly and become the go-to choice.

This is important for startups, where speed is often the difference between success and failure. Startups don’t have the luxury of time and capital. A startup spreading itself too thin will likely burn through resources before establishing a foothold in any market. Concentration allows them to build momentum quickly, dominate and then, if desired, expand into new opportunities.

Knowing When To Expand—After You’ve Mastered Concentration

It’s important to note that concentration doesn’t mean sticking with one thing forever. Once a company has established a dominant position, it can expand into related areas. That’s where strategic diversification can complement a solid foundation of focus.

Companies that focus first can afford to diversify later because they have built solid operational systems, a loyal base, and a clear brand identity.

Fast Business Growth: The Case For Concentration

Concentration may seem risky, but it’s a disciplined approach prioritizing excellence over mediocrity. It’s about ensuring that every effort and dollar spent drives toward mastery and market leadership. For businesses willing to focus their efforts, the rewards can be immense.

Mark J. Kane, CEO of Sunwise Capital, leverages psychology expertise to empower businesses with strategic financial solutions.