5 Real Risks of Putting All Your Eggs in One Basket - Ascendis Solutions

5 Real Risks of Putting All Your Eggs in One Basket

Why You Should Understand Your Break-Even Analysis
12 December 2018

There are many ways business don't address risk. You may have increased risk in several ways with having all your eggs in one basket. Five areas of risk for you to consider are:

  • One Major Customer
  • Single Supplier
  • Key Personnel
  • One Main Product/Service
  • Becoming Comfortable

One Major Customer

It might be a great win to have a large customer feeding your coffers but this comes with significant risk. There are always competitors looking to take your customers away. And customers change direction, update their offering and look to keep ahead of their own competition. If you find yourself relying on income from a single source, put some attention and effort into reducing this risk and spreading your revenue across multiple sources. This way if you lose a customer for any reason, you are less likely to lose your business too.

Single Supplier

Often we source from a single supplier which makes sense. We get better buying power, knowing the quality and service. But is this enough for us to rely on? Anything that happens to this supplier can impact your business. They could change their products or services, increase prices or suddenly cease trading. You need to be aware of alternative suppliers, have relationships ready to roll and a contingency plan in place. You don't want to risk your business on a single external factor.

Key Personnel

Similar to suppliers, relying heavily on key people in your team without having alternatives is extra risk to your business. Certainly people can choose leave for many reasons but there can be reasons they leave that aren't their choice. You need to identify these people, their skills and look at a plan should they suddenly be no longer available to work. Can you employ or contract someone else? Maybe it's something you can outsource as an immediate solution?

One Main Product/Service

If most of your revenue is with a single product or service you might not be considering factors outside your control. There are competitors always working towards achieving a competitive advantage. You'll find there can be substitutes, technology and needs continue to change. Your customers evolve themselves and will seek alternatives for their own sustainability. Keep aware of the future, where your industry is heading, competitive advantages to be gained, additional revenue sources and reduce your risk.

Becoming Comfortable

Taking into account all of the above, being complacent and also reluctant to look forward is a sure way to head to an end. Relaxing and feeling too comfortable often means you won't be delivering your best. If you're not aiming to get in front of the pack you risk being left behind. And there's the external factors you may forget to keep in mind, the PESTLE analysis. Changes in political, economic, social, technological, legal and environmental factors may catch you unaware and impact your business.

A recent client chat...

In the last two months I've had one client facing two of these. The first issue came about when their single supplier increased their prices significantly. This also took place at the same time as a significant change in exchange rates, multiplying this cost increase even further. They've had no alternatives in place, no real bargaining power with the supplier so have looked into how they can reduce this risk through having alternative suppliers in place.

The second issue came about when they realised a major customer of theirs was to become the main source of their revenue. Their entire business structure and operation needed an overhaul to manage it. This also put them in greater risk, and a change in the amount of business expected from that one customer has already impacted their plans. This gives them even more reason to go after other significant clients to mitigate the risk and spread their income across others. An opportunity to leverage and strengthen their position in the market.

Take an objective look at your business and the risks. Denying and not addressing having all your eggs in one basket means risk. That risk is much easier to manage now than when things crumble and your find yourself in a struggle to survive.

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