Is your business adequately
diversified? Relying on too few customers, vendors, or key employees can leave
you open to risks that can be catastrophic. Here's what to consider.
Customers. Do you depend on just a few customers for the majority
of your sales? What will happen to your business if your largest customer
requests a major price reduction, starts buying from your competitor, or is
bought out? Even if your company sells to many customers, you aren't adequately
diversified if most of them are in the same industry. This is known as
concentration risk. Reduce it by targeting customers in different industries.
Vendors. How many suppliers do you rely on for the smooth operation
of your business? Do you have a backup option if a key vendor raises prices,
can't provide enough product, or goes out of business?
Employees. Do you count on the skills and reliability of one key
second-in-command person? What would happen if that individual suffered a
family emergency and had to leave unexpectedly? Sharing information and
allocating responsibilities among employees can keep the work flowing.
When your business is new,
diversification may be difficult. But putting a plan in place to reduce your
vulnerability to manageable risks is essential for your long-term success.
Contact us for tips and suggestions.
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