STRENGTHEN YOUR BUSINESS – PLAN FOR RISK
Many businesses will fail if they lose one large customer or supplier. Creating a disaster plan will help you cope with the worst possible scenario.
It is the nature of entrepreneurship to take risks. But by being strategically diversified businesses can lessen the impact of an unforeseen difficulty.
How can you increase your chances of business survival and reduce your exposure to one catastrophic business occurrence? Here is a list of key points to think about:
1. Increase your customer base. When you have a very large, profitable customer, it is easy for that one customer to become virtually the entirety of your business.
Many companies, even large businesses, often become totally dependent on being a supplier to a local corporation, such as a manufacturing plant. What happens when that big business gets acquired or moves away?
If you have a good relationship with that one big customer, use the steady income stream to grow your business and diversify your customer base and start putting away substantial sums of money in case that customer disappears.
2. Over reliance on one supplier. If that supplier goes out of business or has to shut down, it may take weeks, even months to find a new supplier. Meanwhile your business will lose customers to the competition.
If your business depends on one supplier – whether for a product you resell, raw materials you depend on, or the manufacturing of your product – it is time to start looking into ways of diversifying your supply chain.
However, there are disadvantages associated with having more than one supplier, such as separate fees and accounts. Having one supplier means you are paying an uncompetitive rate, research all options available to you to figure out the most cost effective way of dealing with your supply chain.
3. Vary your income streams. Does more than 70 per cent of your revenue come from one product or service? If so, it is time to start developing additional products or services. For instance, if you sell low fat dog food, you might want to start making low fat cat food or other dog-related products. When you are overly dependent on one product or service, you are overly vulnerable to new competitors.
4. Do not over rely on one staff member. If you have a great employee who helps you with the day-to-day running of the business, make sure you or at least one other staff member can take over their role if they were to be sick or go on holidays for a long time. If one employee is responsible for one job long term, they may try to steal from you or even commit fraud in your name. Although this is uncommon, it is worth being aware of.
5. Look at multiple your data storage options. It goes without saying that you should be backing up all your computer files, preferably offsite. That way if your premise becomes inoperable, due to a fire or flood, you will still have all your files and records.
A good way to do this is to have a cloud based storage system in place where your files get stored on the internet. If you do not feel comfortable with this, a more expensive option is to have an external hard drive and keep it somewhere else.
Careful diversification is a strategy for business survival. Certainly, you need to build one business at a time and stay focused, but when you do not put all your eggs in one basket, you are better able to survive the unexpected, even the truly tragic, events your business may face.
Oculus are small business experts, we have helped numerous business owners plan to minimise their risk. We can also help you. (07) 5536 3755.