Several years ago, I was talked with a friend of mine who was a financial advisor. We were discussing his business and discussing the potential risks associated with his company.
To me, his biggest risk was the fact that he had partnered with a bank as the sole source of referrals for his business. Every customer he had came from the bank. In fact, he didn’t even have his own office - he worked out of the bank.
I must have told him a half dozen times that his ultimate threat (from a SWOT analysis) was loosing the relationship he had with the referring bank.
He understood what I was saying, but he was confident of the relationship and, frankly, just didn’t have time to do anything about it.
Sure enough, two years later the bank cancelled the relationship.
For me, I found this interesting. Here was an individual who’s profession advises on diversification (of investment portfolios), yet, he found it difficult to diversify when looking at the business in a perspective of risk.
I would guess that this adviser would never put his entire portfolio into one stock, yet he had all of his “business eggs” in one basket.
The Power of Diversification
Diversification is a powerful strategy as it provides two potential channels for success.
For example, a friend of mine started a company where he does contract work. He was able to find a company that would pay his bills and even provide close to full-time work.
The problem was that he had all of his eggs in one basket. If the company didn’t have any projects, then he would be left without any work.
For this reason, my friend has now starting working with a second company so that he has more than one income stream in the event that one of the businesses no longer have work for him to complete.
Bringing It Home
So the question becomes, how can we diversify in our businesses? This may be as simple as offering a second product or adding additional referral channels.
Either way, the bottom line is to ensure that we have multiple logs fueling the fire so that our success does not dry up if one thing doesn’t go as planned.