Enterprise

Perils of relying on one customer for enterprise’s survival

boards
murori

Summary

  • If your business cannot operate without you, then you are more of an employee – employed by self – than a business owner.
  • One of the major cause of founder dependence is the owner’s inability or unwillingness to let go certain decisions and responsibility to others as the business grows.
  • It is a failure to institute systems and structures and train management team that is capable of running the business in the absence of the key person.

I am still mourning the death of one of my clients, a firm that had supported me over the years.

Trouble started when Tuskys Supermarket ran into storms. The supermarket had been contributing more than half of their revenue directly. So when Tuskys experienced challenges, the firm was hit hard and eventually went down.

In our last meeting in my desperate attempt to get paid, the business owner confessed to me that he made a terrible mistake to go against the common sense and relied on one key customer for most of his sales. But then, he told me, Tuskys was doing very well and expanding rapidly. He saw no need to worry, and he was not worried until things started going south. By then, things happened so fast that he lost control and he had to swallow the bitter pill and close shop.

Well, my client is not the only one in this situation. Whereas many traders have been victims of this phenomenon, several more are still sitting perilously on the precipice because their survival is anchored on one or few clients. This is called client dependence.

As a matter of fact, if you get bulk of your sales from one or few customers, you are more of an independent contractor than a business owner; your survival depends on the survival of your contractee. It is high time to start thinking of ways to expand your customer base and ensure no single customer contribute more than 10 percent of your sales either directly or indirectly.

There is also another dependence that is equally dangerous to enterprises but mostly ignored by many business owners. It is called founder or owner dependence.

This is a situation survival of an enterprise depends almost entirely on the business owner. This is the case where it is the owner who knows or does almost everything for the smooth running of the business.

If your business cannot operate without you, then you are more of an employee – employed by self – than a business owner.

One of the major cause of founder dependence is the owner’s inability or unwillingness to let go certain decisions and responsibility to others as the business grows. It is a failure to institute systems and structures and train management team that is capable of running the business in the absence of the key person.

A business that is founder dependent is an entity with a deadline. Should something happen to the founder such as inability to work due to legal, family commitment, age or death then the business will drift quickly towards the deadline.

Allowing your business to entirely depend on you also denies you another awesome benefit of owning a business – freedom and relaxation. it makes you to be always on your toes, working long hours and prone to fatigue and burn out.

Even if you feel others cannot do things as good as you do, it is better you train them and be patient as they learn because the ultimate success and stability of your business depends on them. It takes time to build structures, systems and sell your vision to your team but there is no shortcut.

Mr Kiunga is a business trainer and the author of ‘The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market’.