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
In this week’s business video roundup, Gary Vaynerchuk speaks with Tilman Fertitta, the owner of both Landry’s and the Houston Rockets. Together they discuss Fertitta’s new book (Shut Up and Listen! Hard Business Truths That Will Help You Succeed) and dive into other topics surrounding entrepreneurship, including the hospitality business. Other videos on deck: Grant Cardone’s top 10 rules of success, how Ugg founder Brian Smith turned a fledgling California…
In this week’s roundup of great videos for entrepreneurs and business owners, the CEO of Farmgirl Flowers reveals how transparency saved her business, Patrick Bet-David discusses why so many business plans fail, and Gary Vaynerchuk talks with Marie Forleo about building a business and a life that you love. Plus, a few tips on writing more effective emails from Steve Jobs and an in-depth exploration of why Dunkin’ Donuts…
In this week’s business video roundup, Gary Vaynerchuk discusses the business strategies you should be focusing on for the rest of the year in a mammoth 70-minute speech, Brian Tracy offers up six tips for new entrepreneurs, and CNBC explores why Canada’s fast-food giant Tim Hortons has failed to catch on in the United States. Plus, a few things business owners can learn from Jeff Bezos and the strategies he…