When it comes to stability, I’ve got another farming metaphor: don’t take a one-horse show on the road. You are extremely vulnerable when you have all your eggs in one basket. (Okay, that was two farming metaphors). It’s great to have an initial big-name customer; in fact, you can and should use that to build credibility with other potential clients. The same goes for a customer that buys lots of your product; once you have them, go out and get ten more. Don’t let losing one account make you lose your business.
During the early stages of our endeavor, Ron and I landed a large New York City music label. This was a big deal for our budding venture. We celebrated at a nice restaurant in Time Square. A couple of bumpkins from way out West had scored a Big Apple icon as a client! The deal was penned for a six-month term. Six months may not be long, but our client was big, and it would have been easy to coast for a little while.
What I have learned is that when you get a lucky break like that, it’s fortune’s way of giving you time to set up for your next one. It’s okay to celebrate your newfound breathing space—in fact, I’d encourage it. You’ve done well. You deserve a pat on the back and a nice dinner. Just don’t go for six months of back-patting and dining out. While income from the big client is driving your business, you have time and money to gain more clients, large and small. For Ron and me, in the six months that followed we went and got more business. When this contract came to a close, we didn’t worry about the financial viability of our company. We had several clients in place, and were safely out of the pasture without stepping in anything messy.
Just as important as the number of customers is their diversity. When this deal ended, we had toeholds in a number of other viable arenas. I’ve been in situations in the past, however, where one company or one market was my primary source of revenue.
I remember a sad happening between Google and me: one day, Google decided to up and change how it managed its organic traffic. And when Google rewrote a simple algorithm, it completely killed my business. With that one tweak of a little line of code, my venture was sunk. As a matter of fact, I’ve seen some reports that Google’s “Florida Update” drove somewhere around 30,000 small businesses into the ground with that algorithm change. Products hadn’t been diversified, and a whole wing of the market collapsed.
Securing a diversity of suppliers is likewise critical. You can rest assured that if one of your suppliers steps into the sort of unstable cow pie that you are avoiding, you will be left unsupplied. If you can get one product or service from several different sources (without exorbitant costs), try it. If a mismanaged client base is like stepping in a cow pie, your major supplier’s downfall can be like kicking your feet out from under yourself and landing hard in the mess. You’ll stand up from the field dirty and smelly if you don’t have backup plans in place.
Porter’s Points – Stability
- When that big customer puts pen to paper on the dotted line, celebrate! Your venture has been validated! Now get back to work.
- Diversify and expand your clientele. See how many niches your product applies to, and get as many customers from each as you can. If one wing of the market takes a hit, you should still be able to fly because of the customer base you’ve built.
- Your suppliers are running a business just like you—but perhaps unlike you, they may have not taken a good look at the pasture lately. Don’t count on all your supplies coming through one route. If one of your suppliers hits a cow pie, things could start to stink for you. Diversify and expand suppliers.
Next time we’ll talk about the last cow pie Rich and Ron address in Bootstrap Business – the necessity of continually assessing your environment.