Published: July 3, 2020
Managing risk (uneven ground) in any business is a key responsibility of all company directors and senior leaders. Business risks come in many forms – with cashflow and business profitability being core. However, one of the biggest risks we see is ‘trading risk’ ….an over-dependence on one customer, one key market or one product/service. That’s why we invite you to adopt the metaphor of the ‘three-legged milking stool’ as an everyday tool in designing your business or function for the long-term. Here’s how it can work for you….
Does your business have a minimum of three different product/service ranges to offer? Does your business have a minimum of three clear market positions? Does your business have a minimum of three different routes to market for each of those market positions? Is your business overly reliant on just one or two customers? Is your business overly reliant on just one or two suppliers? Is your business overly reliant on the skills and knowledge of just one or two employees (including yourself)?
Can you see where we’re going with this? Is your business as stable and sustainable as you previously thought? These questions can also be applied in larger companies – even on a department by department or divisional basis?
Whilst it may be a necessary evil for new or rapidly growing companies to be exposed to a higher level of trading-risk, it should otherwise be avoided and only accepted if done with your eyes wide open.
At Enrichyou, we would suggest that ‘3’ is the minimum number that will give you the very best chance of success at business sustainability into the long-term. Of course, the more legs you have on your ‘milking stool’ the better – but remember.… the more legs you have, the more time and energy you’ll have to spend managing them! It will ultimately depend on the capability and capacity of you and your management team, but it’s generally better to be managing three strong income streams than juggling multiple weak ones – and, where possible, for each of those income streams to have different trading cycles that complement each other during changes in market conditions or seasonality.
The Enrichyou Sustainable Business Management Framework can help you better understand and map each of your trading ‘legs’. Along with our Sustainable Business Growth programmes, we help CEO/MD’s and SME business owners identify and engage with all the risks and opportunities that lie ahead through a unique lens of commercial understanding.… and can then help you to build a sustainable business and people strategy to set your company along a path of continuous improvement, innovation and functional excellence.