The market ride of the past few years underscores the risks
of not maintaining a diversified investment portfolio.
In business, relying on
a few customers, vendors, or key employees also makes for risky business.
Companies that depend on just a few customers for the majority of their sales
can easily find themselves in hot water. What will happen to your business if
your largest customer can’t pay its bills, requests a major price reduction,
starts buying from your competitor, gets bought out, or closes its doors? Even
if your company sells to many customers, you aren’t adequately diversified if
most of your customers are in the same industry.
Remember the banking crisis of the early nineties accompanied by a deep recession
in the real estate market? And who isn’t aware of the recent problems with the
tech industry? Relying on only one or two suppliers is risky as well.
What will
happen to your business if your key vendor suddenly raises its prices, can’t
provide
enough product, or simply goes out of business? If you ship
product to customers, it’s also a good idea to do business with more than one
shipper. Business diversification doesn’t occur overnight. It’s common for new
businesses and smaller companies to rely on a few significant customers,
suppliers, or key employees. To help ensure long-term success for your
business, implementing aplan to make your company more diversified is a good idea.
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