Putting All Small Business Eggs in One Basket Is Bad for Business

small business eggs in a basket

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3.  One Product or One Project Line:

If the line is popular others will try to undercut your pricing. 

If the line does not create enough buzz, the company will have to have an ongoing marketing budget and perhaps pay sales commissions.

Items that have limited shelf life that are confronted with the perils of a disaster such as Irma, will undoubtedly result in a loss of revenue. Many products cannot survive the lack of air conditioning or an increase in humidity. No available product = no sales.

If faced with a natural disaster a business that has a seasonal market can lose a year of sales if they miss the strong season. i.e. winter clothing in the northeast or flower sales in February (Valentine’s Day) or June weddings. Or heaven forbid, the Christmas season.

There are other emergency situations that unfortunately from time to time should be address by small business owners.

Clients or competitors may write negative blogs; your product line may lose its fashion appeal; heavy local traffic may impede growth of your local market, delays in shipping may slow down deliveries and thus slow down revenue. In every situation, additional dollars and creative marketing concepts are required to get back on track.

4.   One Customer:

A one customer business can be impacted by a change of management or a change of management policy. Products can be cut from their budget. 

Not nice, but it has happened. The customer could be a Federal Government Agency that is impacted by a budget cut and that policy change could put you out of business.  it is not unusual that a retailer tries to go around a distributor and buy directly from a factory, thereby cutting his costs and improving his profit margins.

 If a business is narrow in scope - one customer, one market, one product, or one location, long term survival is questionable, until the business gets big enough to control a market. 

And, trying to get financing for a company that has a narrow base of customers or a narrow product line is very difficult.  The best way to finance this type of company is to finance a contract which can be expensive, or if the company has long tern history a bank may provide working capital.

Of course, you need both good personal credit and a strong balance sheet to obtain these funds from a bank.

There are lending programs that are currently being offered to small business that need assistance to get back on track. Beware of the short term offers that appear attractive but can turn into long term debt.

Recovery always takes longer than planned and if the company needs additional working capital, the disaster financing may interfere with its ability to access the needed capital for expansion.

Related articles: 

Planning Is Core To Small Business Success 

Customer Service Still Matters

Turning Business Mistakes Into Opportunities to Fuel Growth  

7 Business Pitfalls to Keep Top of Mind

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About the author

Marjorie Weber

Marjorie Weber has been educating entrepreneurs and guiding them in their search for capital for the past 16 years: combining business training programs with one-on-one mentoring. Marj is currently a financial advisor for Florida SBDC at FIU. She was Chair of SCORE Miami Dade from 2010 to 2014. She also serves as an advisor to the Goldman Sachs 10,000 Small Business Program and the SBA Emerging Leaders Program and provides training for Veterans seeking an entrepreneurial path upon retirement from the service. She has been facilitating workshops under the auspices of Miami Bayside Foundation for the past 3 years. She commenced her career as a real estate investment banker in New York and Miami.She uses these long term relationships to assist her clients in accessing capital. She knows both the process and the people and has assisted in providing financing for hundreds of businesses in Miami Dade.