We all know that putting all your eggs in one basket can be disastrous. I mean dropping the basket could mean you have egg on your face, or worse no eggs at all. This adage is often used in the area of financial advisors and retirement plans. When talking to most investment advisors, they are going to tell you that having too much of your money in one stock or fund could be a problem in the long run and therefore you should spread your risk by diversifying your portfolio.

Well the same applies to your business. You don’t want all your income coming from one client or one industry. If over half of your income comes from one client and that client either goes out of business or decides to purchase from someone else, you’ll find yourself scrambling to keep your business afloat. If all your income is from one industry, and if that industry is threatened by a new technology your business will be at the same risk of survival as theirs.

This is complicated by all the marketing gurus trying to get you to choose a niche which is basically relying on one industry to hold up your business.

So, what do you do about it. First you do need to identify a niche to give your marketing a focus but that doesn’t mean when someone outside of that niche asks about your services you turn them down simply because they are not in your niche. It also means that you must keep up on the industries that you service as well as your own – let’s say you work with paper manufactures who use only wood fiber to make their paper. Right now, those businesses are being threatened by the manufactures who use alternatives to wood for making paper such as hemp. Now you need to reposition your business to work with both those using wood and those using hemp. By doing so you now have not only widened your horizons, but you can also offer alternatives to your clients who are struggling by introducing them to how they can also start using these alternative means of making paper and possibly save their business at the same time you are saving yours.

How do you know if you need to start looking for other clients or industries to work with? The answer is that you never stop looking in the first place. But a good rule of thumb is to never have more than one quarter to one third of your income from one source. Several years ago, about half of my income was coming from one client. I didn’t realize that because that one client encompassed several different projects. When they closed their business, I was in trouble. It took about a year to recover from that but I learned a valuable lesson that forced me to look at other means of reaching new clients and new industries. That meant by the end of that year I had not only replaced that client, but also doubled the income I had from that one client.

This week you need to analyze your client list and see if you would be able to handle losing your top clients. If so, you are in good shape; but if not, what can you do now to diversify?