What happens when you put all of your eggs in one basket?

That’s what a client whom I met last week did. He shared how he had to rebuild his business after committing the cardinal sin of having only one client who accounted for 80% of his revenue.

His client’s business was sold, and the new owner brought in their supplier and gave the contract to them. What hurt even more, was their experience and credentials did not match his.

When I asked,” what made you allow that to happen even though deep down you knew better.”

He said I was caught in the dilemma of wanting to ensure that we served the client so well that there were no hiccups.

He was honest and said it hurt to lose that contract because it was very profitable, took up all of his time, and he did not focus on building his pipeline. The experience hurt. At times, it was hard to keep going, and it took him a long time to get over it and focus on how he will do things differently in the future.

His experience reminded me of John Caudwell, who founded the now-defunct mobile phone business Phones 4u

In 1987, he had a major distribution deal with Motorola, which accounted for 90% of his revenue, and had 60-70 employees with large overheads.

The general manager he worked with terminated his contract and opened his own business as the leading distributor of Motorola in direct competition with him because they did not like his business model and how successful he had become as their leading distributor.

He had to find a solution. And looked around the marketplace and made new deals with the service providers who were also working with Motorola.

He was facing bankruptcy and believed you could find a way if you’re prepared to knuckle down and think hard enough.

Now he advocates the 10% rule. Only have 10% of your supplies with any one supplier, 10% of your sales with only one customer, and only 10% responsibility with one employee.

It insulates you from any catastrophe. You have to create a % that works for you. This may not be practical, but it’s a good benchmark.

As for my client, he is looking at new markets, reviewing his positioning, developing a new growth plan and balancing his risk. Fortunately, he has an excellent team and increasingly feels good about the future.

If you are an employee, generate additional income, commonly known as the side hustle, because there are no jobs for life anymore. If you’re a business owner is easy to have that one client and relax, but you are miles too vulnerable.

Just like investments, have a balanced portfolio and spreading risk is the way to go.