Diversity In Business is Essential - Diversify and Thrive

National tragedies often come as a surprise and eradicate or destroy all types of businesses. Hurricane Katrina and September 11, not only had enormous emotional impacts on the lives of many, the tragedies destroyed established businesses and entrepeneurs dreams alike. We certainly cannot predict the next national or international tragedy, therefore how do we protect our business interests if we should fall victim to a devastating event. Most business owners that I researched whose primary business was ruined by these events, had other business activities to fall back on and many were able to build a new, thriving business because of the support, their other business opportunities provided.

Remember it does not take a catastrophic event or a national tragedy for one devastating event to have a major impact on a company, your company. In my vast research, I have seen many businesses and entrepeneurial opportunities devastated or terminated because the business lost one key supplier or customer.

The former CEO of Intel, Andrew Grove once said, "Only the paranoid survive." Though I do not necessarily believe that quote, I do believe that a business must be aware of its overall viability and must assess what the loss of any one customer would do to their businesses overall financial well being. Perhaps this is paranoia. I think this isn't paranoia, however it is prudence, planning and preparation.

We are serial entrepreneurs and it is inherent in entrepeneurship to take risks. However your risks should be prudent, planned and prepared for and strategically diversifying yourself along the way, will enable you to mitigate some of those inherent risks.

Reducing your overall exposure to one catastrophic business nightmare or even an overseen business mistake is best achieved by the following:

1. One primary rule in business is to never get too dependent on one customer or supplier.

I know that if you have a very large and profitable customer, it can be easy for that one customer to become your entire business. However, what happens when this customer switches to another supplier, suffers a setback in business or simply chooses to work with another company.

That big customer was a blessing at the time, however now the departure of that customer may lead to bankruptcy. Therefore, while garnering a great income from that customer, you must grow your business and diversify or broaden your customer base. Additionally try to save money in case that beneficial customer leaves you.

2. Don't ever get too dependent on one sole supplier.

Being involved with one supplier can effectively crush a business overnight. I was reading a story of a man who imported highly desirable dental equipment from overseas. One day, a shipment was late and he attempted to contact his supplier who informed him that it had become too costly to export overseas. His customers simply moved their orders to his competitor and he lost everything.

There are situations where businesses depend on one supplier, however it is now time to start diversifying your supply chain. There are other suppliers of your product. Do the necessary research in order to ensure that you are not the mercy of a supplier who decides to not serve you anymore.

3. Never become dependent on one income stream.

This is perhaps the most beneficial piece of advice and the one that most companies and people must solve fast. Ask yourself if more than 80% of your revenue comes from one service or product. If the answer is yes, you must now take the opportunity to start developing additional services or products.

In a perfect world and even in this one, your additional income stream will be a complement to what you are doing now. For example if you are making vegetarian horse food, you should look into vegetarian dog and cat food as well as other horse related products.

4. Do not get overly dependent on one distribution channel.

There are numerous examples of distribution companies being acquired by another company and these ceasing all distribution channels with former suppliers. Again, take the time now to look into other distribution channels.

Prudent, Planned and Prepared diversification is an ideal strategy for business survival and success. Warren Buffet has stated that "You must put all your eggs in one basket and watch it closely." Buffet's statement is akin to building one business at a time and staying focused, however how big that basket is and what that basket entails is open to interpretation. As Buffet is highly diversified, his business practices clearly indicate that in order to survive and truly flourish in business you must not put all your eggs in one basket and diversify to grow and avoid potential tragedy.