Question: should you focus on one thing, or diversify?
You should do both. But in the right way.
Today, Terry Dean posted a collection of 21 habits of successful entrepreneurs. Two that jumped out at me were:
3. Choose one market and focus on it.
It's tough for experienced marketers to manage several different markets at once. A beginner starting out should concentrate on one core market and apply their full attention to growing an income there first.
6. Establish multiple streams of income.
This could equal advertising, ebooks, affiliate income, consulting, etc. Find additional products and services to offer to your current customers. Develop multiple entry points into your business.
When people talk about "multiple streams of income", a common misconception is that you should get into a variety of unrelated businesses in case one takes a nosedive. What Terry clarifies is that you should focus on one business, but diversify your methods of making money from it.
When you do this, you benefit from synergies between the different methods -- something you can't do if your businesses are unrelated. An obvious example is that you can't make money from backend sales if you don't have a front end product (or better yet, a variety of front end products -- "multiple entry points", as Terry said).
If your multiple income streams are unrelated, you might want to pick the one with the most potential -- especially the most back end potential -- and focus on building multiple streams feeding into it instead.