Back in the late 1970’s I worked for a company that received over 90% of its business from a single client. Not surprisingly – when that client hit hard times, the company was hit hard too. They couldn’t pay their bills, including salaries. That hit their staff, and I learned a lesson then that I still apply today.
It’s why I can tell you that your business cannot afford to have more than about 20% of your business from a single client. Less is better. That insulates you from down turns in that client’s business.
More than that – you need more than a single product type. Imagine being in business in the 1870’s – selling feed for horses was profitable. In the 1970’s selling film that had to be developed was good business. In the 1990’s we still bought “floppy discs”, and now we all use USB sticks. The phone in your pocket has replaced your travel camera, your portable radio/tape deck, your sound recorder, your video, your game console and a bunch of other stuff. Fax machines were invented in about the 1920’s, took about 40 years to become really popular, and now they have been replaced by email with attachments. You can add other examples, I’m sure.
Each of these ‘product extinctions’ was difficult or even impossible to predict before the replacement product had hit the shelves. And here’s the important bit: the rate of product extinctions is increasing.
So you have to ask yourself: what is the next extinction going to be? Only the inventor knows – but there is something you can do to avoid being caught in the downward spiral.
Just as you must not rely too heavily on a single client, you should have more than one or two products or services for sale. What if you had a business that only sold fax machines? Or only sold film? Or cameras that used film? (Interestingly enough Kodak invented digital cameras, but didn’t market the idea because they thought it would draw sales away form their film/film camera business. Well, they were right, and they are now out of business instead of being the major supplier of digital cameras.)
The point is that even the biggest and most secure companies are vulnerable to industry extinctions. That means so is yours.
Once you have established your business then look to add complementary products and services. Then expand again into related products and services. To use the old “better mouse trap” idea: maybe that’s what you did, and the world really did beat a path to your door. So now sell mouse cages, mouse toys, cater or those that want mice as pets. Then, recognising that mice are used in all sorts of ways – breed and sell mice: to scientists, to reptile breeders and so on. Then you could add toys for all sorts of pets, even selling those pets too.
Can you see why your business has to have multiple sales channels and what you have to do to achieve that? Don’t forget to leave your questions and we’ll do our best to answer them. Use the Contact Us page.