Raise your hand if you know that you should diversify your investment portfolio?
Literally everyone raises their hand. This is so obvious that you knew it before you understood why you even needed a portfolio.
But how does this translate to your business?
Don’t allow a single customer or client to comprise more than 30% of your revenue.
This can sound easy, but it isn’t always. I have always heard a cautionary tale of a sock manufacturer who got their big break from a big-box store. They had to double their capacity to accommodate the new customer, but the first order, if delivered on time, would double their annual revenue. Then, once they deliver (and are late for pre-existing customers), the big-box ups the order for next time. Before you know it, the big-box is 80% of their revenue.
Then the big-box demands a 30% price reduction.
Then another reduction. And another.
Pretty soon, your quality is in the tank, your margins are so razor thin that they are imaginary, and your other customers are gone. Your only choice, if you want to stay in business, is to dance with the devil.
Diversify. Diversify your clients, diversify your income streams, and that will diversify your business portfolio.