Hundreds of Australian businesses yesterday discovered that China was blocking their exporting of products to that country. According to news reports, Australian wine, copper, barley, coal, sugar, timber and lobster are set to be banned from Friday.

This is dreadful news for the businesses, those who work for them and the communities that rely on them for income and purchases. The ramifications across Australia could be extraordinary.

Hearing the news of the move by China, I wondered – what would happen to your business if a key income stream was cut off overnight?

Would your business survive? Do you have a plan B? Can you move quickly enough to recover? Were you too exposed to and too reliant on the key revenue stream?

These are questions you can discuss with clarity with hindsight. Better still, they are questions you can discuss in advance.

I raise the questions today because considering them before you face the challenges being faced right now by Australian exporters of wine, copper, barley, coal, sugar, timber and lobster gives you the opportunity today to be less reliant on a single revenue stream.

I get that this can read as a ho-hum topic, something not worth worrying about today. However, I bet there are wine makers, sugar farmers and fishermen who several days ago would have thought the topic ho-hum too.

What if the most important revenue stream to your business was cut off overnight, without notice?

Actions I think anyone reading this could consider include:

  1. Assess income to understand the income category streams on which the business most relies and take immediate steps to broaden these.
  2. Assess income sources. In retail especially most income comes from a shop or physical presence. Broaden this, rely on more than the physical presence.
  3. Assess the importance of suppliers by looking at percentage of revenue attached to each and taking steps to broaden these.
  4. Look at your business finances and consider the impact if any supporting finance arrangement was removed overnight.
  5. Workshop with key people as to what it would mean if any supplier was cut off from you or if any product category or brand was overnight stripped from your business. Those participating in this need to challenge each other.

In terms of the situation that has emerged in China this week, we need to look at our reliance on product from China, especially is we rely on people connected with wine, copper, barley, coal, sugar, timber and lobster. For example, if we have customers who work in wine businesses that export to China. How will they feel purchasing product from us that are sourced from China when China has struck so hard at the core of their income source?

What has happened in China is a reason for us to take stock, look more carefully at our businesses, and ensure that we are better structured to trade through unexpected decisions by others.

A personal story: Decades ago, my software company developed software for radiology practices, managing patient accounts and reports on x-rays. I wrote a word processor to make it easier and faster for radiologists to write report. It was a hit, gaining terrific early sales. A year and a half in, an international x-ray film supplier offered radiology practices free software from the US if they contracted to buy their film for 5 years. Our sales stopped overnight. I decided then that my company would never rely on a single customer or a single channel for the majority of business. It’s why we are now in 12 specialty retail channels, why we only sell to sell business retailers and why we will not borrow to fund the business.

0 likes