I just heard an interesting story about some local businessmen who were in the real estate business and made the business decision (smart when times were good), to create buy their suppliers of their business and the companies that serviced them. Bascially they created a conglomerate and received a piece of many pies that were involved in the transaction. Sounds like a good model…”One-Stop-Shop”.
The main business fed the smaller businesses and suppliers and all was well as long as the main business was doing well. Unfortunately the main line of business was hurt badly during the real estate crash. Suddenly no business for not only the main business but all the people down the line too. This was a big bet, and a calculated bet by some good people that deserve to succeed in the marketplace. Despite the ability to reap the rewards from all these models they were betting heavy that their core business wouldn’t slow down.
I think back to what Norm says about not relying too heavily on any one customer. In this case, the biggest customer for the suppliers was the main business. These business were succeeding but ultimately failed with the real estate bust. Diversification is key. Norm’s rule is to not let one customer be giving you over 10% of your business.
I think it’s important to follow Norm’s rule in your business. I do in mine.
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