Diversification and financial performance: A close connection

This report was inspired by a single question: What relationship, if any, exists between diversification and financial performance among small and mid‑sized businesses?

Based on a survey of nearly 1,000 Alberta businesses, this report finds that diversification—whether measured in terms of products and services, geography, or number of customers—correlates strongly and positively with financial success. Not only are the most diversified businesses by far the top performers, but even somewhat diversified firms are likely to outperform those that are undiversified.

Diversification is found to be independent of business age and positively associated with financial performance, regardless of business size. Put differently, diversification appears to be a strategy that many successful entrepreneurs utilize right from the start.