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Are all your eggs in one basket?

If you are managing a business that relies on one key client or one major supplier you have a significant potential risk. A time bomb waiting to explode. Ask yourself the question "Are all my eggs in one basket?"

Further ask yourself the following questions: if my main customer fails how will this affect my business? Or if your business relies on one main supplier, ask yourself; how will my business be impacted if this supplier doubles my prices or worse still goes out of business? If your business would be significantly impacted by these events then you probably have "all your eggs in one basket".

Many businesses today are making good money but have a high risk of failure because their business is dependent on one main customer, supplier or income stream. The value of their business may also be affected as discerning buyers may consider the risks too high to consider purchasing such a business. Buyers are looking for businesses that are flexible, which can readily adapt to changes in the market place.

Businesses with "all their eggs in one basket" often fail to have a clear strategy or targets and lack processes in key areas such as marketing and finance. The owner managers of these businesses are often working "in" the business rather than "on" the business. They would say "we are working very long hours" and can't find the time to spend on strategy and marketing plans. In addition many business owners would struggle to prepare a strategy or effective marketing plan as it is not their area of expertise.

So what can be done to change the status quo? First, the business must have a clear vision of where it sees itself in 5 years time and a clear strategy of how to get there. A strategic review of the business will take into account the personal objectives of the owner, where the business is now and the strategies and processes required to achieve the strategic goals in the future. A critical success factor to come out of this process will be to reduce the reliance of the business on just one or two key customers, suppliers or product streams. There will be early pain as the process of transformation will require investment, in skills the business lacks such as marketing, finance etc., and investment in advertising, marketing and product R&D. This does not mean you must have an enormous budget. Skilled professionals can be acquired on a part time or as required basis. With current technology marketing materials can be prepared at very reasonable costs.

Many owners will now be asking themselves can we afford to make this commitment, to transform our business "They should also be asking themselves, can we afford not to make this commitment."

Bevan Metcalf, The FD Group.

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