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Diversity

Jan 8th, 2016 | By | Category: Jack Schrock's Blog

Jack SchrockThere was a large midwestern mail order firm that favored new products. When they found a new gizmo they bought a quantity (at fair market price) to test the market. With good sales they reordered again and again until the supplier had extended himself financially to fill these additional orders. Then, the firm demanded a lower price and made a “take it or leave it” offer to the supplier. But, this lower price was even below the supplier’s cost, however he now had substantial debt to service. What to do?

Our T & R friends in England have gone through a different but similar situation in that the auto club they had all towed for decided not to renew their contracts. Most had substantial debt against new tow trucks they had purchased to service the auto club account. When their contracts were not renewed, some were forced into bankruptcy, the largest in fact did so only hours after the notification.

Don’t put all your eggs in one basket. Diversify and limit the business with a single client to less than 50 percent of your total sales. In doing so, you can survive an abrupt termination while developing a valuable new venture that secures your business future.