Depending too much on one customer (3/9)

A complementary rule that goes along with the never running out of cash is to monitor a businesses’ customer concentration. What this means is to avoid having one customer represent a significant portion of your company’s revenue so that the business does not become dependent on one customer. A good rule of thumb is to avoid having one customer represent 20% or more of a company’s revenue. Of course, in certain instances, this may be unavoidable in which case it’s important to plan for growth in a manner that’s conscious of this big risk in the business such as hiring contract labor or investing in the sales team to bring down that number.

Contributors: Carlos Castelán from The Navio Group