The Most Dangerous Number in Business

One is the most dangerous number in your business. It makes businesses brittle.

Does your business have only one source of leads? One major supplier? One major customer? Rely on one type of media? Offer one type of product? To borrow a computer system term, does your business have “a single point of failure”? If so, your business is brittle, and a small change in circumstances outside of your control could have a devastating effect.

That’s a very tough situation to end up in. Many businesses were hit hard when Google changed its search engine algorithm. These businesses put all their marketing budget and effort on search engine optimization and literally overnight found their one source of leads gone.

Similarly, when Google started to make changes to the types of paid ads it wanted to show, even advertisers who were paying Google enormous amounts of money each month were hit with the “Google Slap.” That is, Google started to charge them four, five, sometimes even ten times as much as they did previously. This change forced advertisers to stop their campaigns and try to fix the issue or find another source of leads. In the meantime, their business virtually halted. Fax broadcasting was effectively outlawed in the United States and many businesses that relied on that as a sole source of leads went broke.

Some wise words of antiquity recommend that we build our house on a rock mass instead of on sand. That way, when the storm inevitably comes, our house doesn’t cave in. The first step is to identify any scenarios in which the number one can potentially hurt you. Here are some examples:

• What if your largest customer leaves you for a competitor or what if they go out of business?
• What if there is a change of government legislation and the product you currently offer gets outlawed or regulated into oblivion?
• What if your main advertising strategy stops working?
• What if your advertising costs rise dramatically?
• What if your currently high search engine rankings disappear or pay-per-click rates rise sharply?
• What if your biggest supplier raises prices, has a supply shortage or goes ‘out of business?
• What if you rely on email marketing and the government cracks down further on this strategy?

All of these scenarios can and do happen. If you rely on one of anything, you are leaving yourself in an exposed position — you’re effectively building your house on a sandy foundation. When the storm comes, and the floods rise, the house is going to collapse.Identify and eliminate single points of failure in your business. That way, if the laws change, if the advertising rates go up, if all of a sudden one specific strategy stops working as well as it used to, your business will be safe. You’ll be the one with the power because you are not reliant on one of anything. Jim Rohn had an excellent philosophy on the matter:

You’ve got to think winter in the summer. It’s just too easy to get faked out when the sky is blue, and the clouds are fleecy. You’ve got to prepare for winter because it’s coming, it always does.

In the meantime, even if none of these scenarios come to pass, at least you’ll have built a more resilient and valuable business. A common scenario I see when it comes to media strategy is that many small businesses have only one source of new business. I advocate having at least five different sources of new leads and customers. Further, I recommend that most of these five sources be in paid media. In other words, they cost you money to market yourself. The reason paid media is so important is twofold.

First, it’s extremely reliable. If I pay a newspaper to run my ad, there’s an extremely high probability the ad will actually be run. It’s much harder to get such reliable and consistent lead flow from free (or seemingly free) marketing methods, such as word of mouth.

Second, paid marketing forces you to focus on return on investment (ROI). If a paid marketing method is not working, you cut it. You don’t waste further time or money on it. Whereas, when the marketing method is nominally free, such as with word of mouth, we tend to be less ruthless and often end up wasting huge amounts of time because we didn’t have to pay anything up front. However, there’s an opportunity cost that, if careful analysis is done, often translates to a surprisingly large amount of real money.

The art and science of being able to consistently turn a dollar of paid advertising into a dollar or more in profits through direct response marketing will make your business resilient and can help you turn the tap on to rapid business growth.