Client Portfolio Diversification Makes Business Safer

With startups and entrepreneurship being at the forefront these days, most business owners might only learn from their mistakes on the way up — as they go through growing pains. Unfortunately, some may not learn until it’s too late.

The idea of shutting a business down gave me a completely different set of optics and I felt compelled to share a few key lessons.

It’s important for any business to be diversified in all aspects: client base, service offerings and industries served. Also, anticipate the unexpected. It’s really no different than developing a healthy asset allocation within a financial portfolio.

If possible, BSCs should diversify their revenue streams so that they are a healthy mix of recurring and variable income. This will help with cash flow as well.

When it comes to the customer portfolio, make sure it is diverse. If feasible, ensure that no single client makes up more than 15 percent of your total revenue. Be mindful that when a company becomes great at its core offerings, customers may look for help with other services. This was exactly the case with us and, admittedly, it was flattering. Work was being handed to us. Yet, the scales were tipping and slowly we became beholden to one major client.

The moment when an owner realizes that he or she is offering a bunch of services to only a few clients, the reality is that it’s probably just an expensive job and the organization is in trouble. Placing more of an emphasis on customer acquisition will allow owners to weather unforeseen storms. In addition, it will help to create a more attractive company when it comes time for an exit strategy.