How to avoid the dangers of overdependence 

How to Avoid the Dangers of Overdependence 

Business owners who enjoy profitable and successful exits gave themselves plenty of time measured in years, not months. They gave themselves plenty of options so they’d never feel forced to sell. 

A great rule of thumb is – 

Grow your business today as if you’ll own it forever

but prepare it as if you’ll sell it tomorrow. 

To do this, you need to see your business through the eyes of an investor and if there’s ONE thing that will send a potential investor or buyer running for the hills, it’s the overdependence on yourself, team members, or any one customer.

How You Know If Your Business is Over Dependent

If any of the following applies to your business, you’re overdependent and need to correct the issue before listing your business for sale – 

  • You can’t step out of the business for a two-month vacation without anything going wrong or losing revenue
  • A single customer accounts for 20% or more of your revenue
  • Your stock is dependent on one or two suppliers
  • Your key suppliers are located in an area of conflict (in the same country or overseas)

What to do to Avoid Overdependence?

Avoiding overdependence in any one area starts with strategically building your business’ clients, suppliers, and employees.

Let’s break down each area and how you can solve the problem. 

-> Employee & Owner Overdependence

For many entrepreneurs, their business is their life. But this is the wrong approach. You need to step back and let your employees take the lead as you slip into the background. 

The first step is to make a list of the tasks you could easily delegate, followed by training team members to complete those tasks. That way, one day you could step out to enjoy a vacation or take time off if you face health issues in the future. 

The same is true if you’re too reliant on any one employee. In this case, you’re at a significant disadvantage if they choose to leave or want to negotiate their salary. That’s why you must think long-term by preparing your entire team so if any one left, nothing would change for your customers. 

If you weren’t available 24/7 to manage your team and strategic decisions, how would difficult situations get handled? 

Look at your team and determine how tough it would be to replace your most important sales and marketing employee, or the person in charge of managing the suppliers. 

-> Customer Overdependence 

If your business is too dependent on any one customer or on any one specific type of customer this is a risk for your business.

Avoiding customer overdependence is essential for maintaining a healthy and sustainable business. Here are some strategies to help you avoid customer overdependence:

  1. Diversify Your Customer Base:
    • Aim to acquire a wide range of customers across different industries, geographies, and demographics.
    • Segment your customer base to understand where your revenue comes from and identify any overreliance on specific clients
  2. Offer a Variety of Products or Services:
    • Expand your product or service offerings to cater to a broader customer base.
    • Cross-sell and upsell to existing customers to maximize their lifetime value without relying solely on them.
  3. Build Strong Relationships:
    • Maintain healthy relationships with all customers, but avoid becoming overly dependent on any single one.
    • Regularly communicate with customers to understand their needs and offer solutions.
  4. Invest in Customer Retention:
    • While diversifying your customer base, don’t neglect your existing customers. Provide excellent customer service to retain their loyalty.
  5. Monitor Industry Trends:
    • Stay informed about industry trends and changes that could affect your customer base.
    • Adapt your strategies to address emerging challenges and opportunities.

Remember that it may not always be possible to completely eliminate customer dependence, especially for small businesses. Implementing different strategies can help you reduce the risks associated with overreliance on any single customer and build a more resilient business.

-> Supplier Overdependence 

When assessing whether or not your business is overdependent on suppliers, consider the following questions – 

  • How many businesses or independent consultants do you rely on to provide the services you are offering or the products you are delivering? 
  • Where are your suppliers located? In the same country, overseas? 
  • How impacted were they during the pandemic? 
  • How easy would it be to replace your most important external supplier? 
  • Is your business dependent on one or two key suppliers 

If any of these questions apply to your business, you’re dealing with supplier overdependence and are at their mercy. 

The fastest way to change this is to cultivate a list of suppliers even if you lose some special pricing discounts. To help you find more suppliers, you can contact your network and ask for referrals, so you’ll be ready just in case you need to replace one of them in the future.

You may also be surprised! Maybe they could offer better terms, quality, or price. 

Summary & Next Steps

In the end, it’s important to be proactive instead of waiting for an unforeseen situation to arise that leaves your business crippled. 

If you’re interested in getting support, not only to ensure your business isn’t overdependent in any one area, but to also get it ready to sell for top dollar, I have an exciting new opportunity for you

You can reach out and ask all your questions via Telegram for 30 days!

I’d love to know all about your questions. Comment below and let me know if you are facing overdependence in your business.


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