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The aim of this dissertation is to highlight the importance of business diversification in
micro and small size firms. The central part of this study takes Portuguese micro firm
Perfect Fit Services, where the consulting project took place. According to financial
information gathered in the firm, was tested hypothesis that micro firm pursues unrelated
diversification due to poor financial performance. This hypothesis was accepted with an
investigation of relatedness of business lines and reasons for diversification. Initially, it
was proved that Perfect Fit Services has unrelated diversification in its business. Two
business lines with different activities: one in the textile and another one in the hardware
baby products industry. Consequently were discovered motives for diversification in a
micro firm. The knowledge of industry and rich background of business co-owner lead to
a decision to launch the second business line. The financial aspect was also highly
important reason and taken into consideration during the decision-making process to
diversify. Finally, in order to test a hypothesis, was investigated the relation between firm
size and diversification. This relation considered as a positive base on micro firm’s
financial performance.