Diversify or Die: 4 Simple Rules to Stay Alive!
As an entrepreneur, your number one priority should be to strengthen your business' ability to withstand future unfavorable economic events. That's to say, you have an edict to maintain your business as an "Ongoing Concern." This premise should be the basis of every entrepreneurial endeavor.
Don't Put All of Your Eggs in One Basket!
In business, as in life, it is easy to fall into old habits and pick the low hanging fruit. So many young entrepreneurs fall into the practice of allowing one customer to account for over 80% of their revenue. In many cases, this is their first customer.
If you have a customer that accounts for over 80% of your revenue, you are no longer in charge of your own destiny. In short, you are no longer an independent entrepreneur. Instead, you've allowed yourself, and your company, to become nothing more than a contract employee of your largest customer.
While stating that you're simply a contract employee may seem harsh, the fact is, few businesses can survive, for even a short period of time, after losing 80% of their revenue overnight. And remember, customers always have the option of moving their business to a new vendor.
Losing a customer can result from something as simple as a personnel change. The vast majority of sales are based on personal relationships that have developed over time. In many instances, a new manager will opt to buy products and services from a list of trusted vendors that he developed while with his previous employer. So, your best old customer, with a new purchasing manager, could stop buying from your company overnight!
The Four Rules
1. Never stop marketing! Even though your business might be at full capacity, keep marketing. You never know when a longtime customer will stop buying from you.
2. As a rule of thumb, I encourage my clients spread their customer base out and try to keep revenue concentrations below 25%. This is more of a guideline than a rule.
3. Try to develop pool of small but high margin customers. Should a big customer go elsewhere, these are the customers that are going to keep your business "in business."
4. Try to develop personal relationships with all of your customers. A good personal relationship with your customer can provide vital information on planned personnel changes and/or provide intelligence on your competitor's activities. Never underestimate the value of socializing or entertaining your customers.
READ MORE FROM AMERICAN COMMERCIAL CAPITAL
If you're a Houston-based entrepreneur who has been searching for ways to improve your business cash flow and get the capital you need to grow, chances are you've come across a dozen Houston factoring companies who all claim to be the answer to all your problems. Invoice factoring, for those who don't know, is when a business sells its accounts receivable (invoices) to a third-party company at a discount. Factoring helps prevent business cash-flow problems by allowing a business to get paid on invoices immediately rather than wait the typical 30 to 90 days to receive a client payment. This eliminates cash-flow restrictions and helps small businesses stay ahead of the game and grow to the next level. Read more
This week, Marie Forleo offers advice on getting started right now instead of waiting for the right moment, Brendon Burchard reveals strategies for following through on your goals, and Gary Vaynerchuk and Erik Wahl (author of The Spark and the Grind) talk about creativity in business. Plus, Evan Carmichael presents Y Combinator president Sam Altman's Top 10 Rules for Success and the guys behind Hard Money Bankers lay out five steps to launching a new business. Read more
This week's roundup of great videos for entrepreneurs and small-business owners includes Gary Vaynerchuk and Tony Robbins discussing a range of topics, Marie Forleo suggesting that you should probably stop comparing yourself to others, and Brian Tracy outlining what exactly makes a successful salesperson. We also have Ben & Jerry's CEO Jostein Solheim discussing "conscious capitalism" and mega-successful restaurateur Cameron Mitchell sharing some excellent advice for all entrepreneurs. Read more