3 Ways to Make Your Company less risky

Company building is inherently risky business. Here's how to improve your odds of success.

Based on a recent article by the Author of Built to sell and the creator of The Sellability Score the following three areas represent the largest risk factors that could destabilize your business based on your strategy

“These three constituencies make up the legs of the dependency stool. If you're overly reliant on any one leg, your business wobbles easily and the value of your company goes down.” John Warrillow

Here's an overview of how to improve the value of your business using The Switzerland Structure:

Employee Dependence

Close your eyes and imagine you're sitting at your desk when you hear a knock at the door. It's an employee who is tendering their resignation. Before you open your eyes, consider which of your employees would you least like to be standing in your doorway. This is the person who your business has become too dependent upon.

To increase the value of your company, start weaning your business off its reliance on this person by cross training other staff on parts of their job and documenting their unique approach to doing their work.

Customer Dependence

To increase the value of your company, ensure no one customer amounts to more than 15 percent of your overall revenue. If you find yourself overly reliant on one buyer, you have two choices:

1) Dramatically increase your revenue while keeping your business from this customer constant, or

2) Stop cross selling so much. Most of us cross sell to our best customers so much that we end up selling too many products and services to a handful of friendly customers. This feels good but can detract from the value of your company because you end up selling things you have no business providing and becoming overly dependent on a handful of loyal customers.

Supplier Dependence

Often overlooked, supplier dependence can be just as scary to a potential investor as customer dependence. If you have one company that supplies most of what you sell, you're vulnerable if there's a change in your supplier's business. Imagine for a second your main supplier decides to start selling directly to your customers or closes up shop entirely.

“Like a good baseball manager who always has a reliever ready to pitch, cultivate a bench of one or two alternate suppliers and give them a piece of your business, even if it means giving away a point or two on price. The supplier diversification will serve you well when it is time to sell your business.” John Warrillow

By targeting a strategy at lowering the risk in each area you will not only substantially de-risk your business but also significantly increase its value. Take the free Sellability Score today and see how wobbly your business is.