The Most Dangerous Number in Business

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Here at the-Coaching Chronicle-run by Gerard O’Donovan, our aim is to constantly bring value to those seeking to improve their lives. Therefore we have a policy of publishing articles and materials by guest authors whom we value and appreciate. Today’s guest author is from: Henry Newrick

If I was to ask you what in your opinion is the most dangerous number in business what would your answer be? I’ve asked this question on numerous occasions over the years and the answers have been varied with many getting it wrong and a few getting it right.

The answer is of course ONE (1). How, you may ask can the number 1 be the most dangerous number in business. You may say “it’s having too many employees or too much stock” – and there is some truth in this but at the end of the day it is still “1″ which is the most dangerous. Here’s why.

Are you overly reliant on one employee – such as an IT Manager who is the only person who knows how your computer systems work (software and hardware)? What happens if he gets ill, dies or walks out without giving notice? Where will your business be? Could he hold you to ransom? If he has a grievance could he put a delayed virus into your system? It’s happened before. I once met an IT consultant who confessed to doing just this to clients he didn’t particularly like – on the basis that he’d be called back to sort the problem weeks later. Is everything backed up off site in your possession? What if someone wipes your computer files?

Of course it is not just IT people that this applies to but also any other key employee. As a small business owner you are especially vulnerable because it is likely you only have one key employee in each area of the business whereas larger companies will have an IT department and not be so dependent on a single individual.

What about clients? Is your business overly dependent on just on just one client? Many businesses have gone under because a large client went broke and they in turn were not paid. Spread the risk. Better to have 250 clients paying L2,000 than 2 clients each paying L250,000!

Nor is it just a question of not getting paid. Many years ago when I was a young man there was a large advertising agency in New Zealand where I lived. It had numerous branches throughout the country and one large oil company as its major client. In fact that company accounted for around 70% of the agency’s business and had been with the agency for over 50 years. Then, around 1978 it decided that it needed a fresh approach to its advertising and so the message to the agency was “Thanks for doing a great job all these years – so long, it’s been good to know you”.

It was a slow and painful death for the agency. It shut one office, then another and finally 3 years later it ceased trading – after almost 70 years.

I haven’t mentioned suppliers! What if you depend on one major supplier and it goes broke or raises it prices to an unacceptable level. Do you have another waiting in the wings? What will happen to your business if you can’t supply your customers on time? Will they go elsewhere?

The message then is try to never, ever be overly reliant on one employee; one customer or one supplier – and if you are in this position take action now to spread your risk.

Next time I’ll talk about a subject that is critical to the success of your business. Without this simple strategy in place chances are that you’ll be out of business sooner rather than later.

Source Credit:

About the writer

I’m a Kiwi expat who moved to the UK in 1995. After a lifetime in marketing, management and company restructuring, I now live in East Sussex where I help entrepreneurs develop growth strategies for their businesses.

Fees are not unreasonable and if accepted as a client we’ll speak at least once or twice a week. The first discussion, to see if we’re a good fit, is always free.

I’m also interested in acquiring businesses that are considered ‘distressed’. And, if you are over 50 I feel your ‘pain’ in keeping up with today’s increasingly rapid technological advances. It’s a fast moving world!

Email: Henry@HenryNewrick.com
LinkedIn: http://tinyurl.com/HenryNewrick

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