The Question Every Business Should Ask Itself

It’s worth asking what could go wrong because the goal is to address issues before they become a crisis.

By Ami Kassar

One thing I’ve noticed about entrepreneurs is that we’re often at our best in a crisis. When something goes wrong, we tend to get very focused very quickly. We make the tough decisions, have the uncomfortable conversations, and stop worrying about the things that don’t really matter.

I’ve certainly seen this in myself. What I’ve been thinking about lately is why it so often takes a crisis to create that kind of urgency. I’ve had risks in my own business that were sitting there in plain sight for months, sometimes years, and I knew I needed to address them. But when things are going well, it’s very easy to tell yourself you’ll get to it. Then something happens, the risk becomes real, and suddenly it moves to the top of the list.

I spend a lot of time talking with entrepreneurs about growth—revenue, hiring, financing, acquisitions, and new opportunities. Those are obviously important conversations. But lately I’ve found myself asking a different question, including about my own business: What could bring this business to its knees? For us, one answer is lender concentration. And yes, this is one of those risks that has been sitting in plain sight for years (in fact, I’ve written about a related concern previously).

Most people think of lenders as financing partners. In our business, they’re also suppliers. They’re every bit as important to us as the company supplying steel to a manufacturer or food to a restaurant. Without strong lender relationships, we can’t do what our clients hire us to do.

Today, nearly a quarter of our funded volume—and a similar percentage of our forward pipeline—flows through one lender. It’s a great relationship, and I hope we continue to do a lot of business together. But when I looked at the numbers, I also had to acknowledge that it’s a concentration risk.

It doesn’t mean I think something is going to go wrong. But that’s the point. You don’t want to start addressing a concentration risk after something goes wrong. Lenders get acquired. Credit policies change. Leadership changes. Markets change. Relationships change. Most of the time, you don’t control any of it.

So we’ve been spending a lot of time expanding our lender relationships and strengthening the ones we already have. Not because we’re worried about a particular lender, but because I don’t think any one relationship should become so important that a change outside of our control can materially affect our business.

The other risk I’ve been thinking about is really the same issue in a different form. Just as I don’t want too much of our business depending on one lender, I don’t want too much of our future depending on too few producers. The obvious answer is to hire and develop more business development officers. The problem is that you can’t just decide you need more great producers and have them six months later. It takes time to find the right people, train them, coach them, and help them build relationships. There really aren’t many shortcuts.

That has been an important reminder for me because I tend to associate urgency with speed. If something is urgent, I want to fix it now. But some of the biggest risks in a business can’t be fixed quickly. In those cases, acting with urgency means starting now because you know it’s going to take a year or two to get where you need to be.

I think that’s where entrepreneurs sometimes get into trouble. We’re very good when there’s a fire to put out. We’re not as good at working on something today because it might become a fire two years from now. The more I think about it, the more I believe every entrepreneur and every leadership team should periodically ask the same uncomfortable question: What could bring this business to its knees?

The answer is going to be different for every company. Maybe too much of your revenue comes from one customer. Maybe you’ve taken on too much debt. Maybe there’s one employee who knows things nobody else knows. Maybe you’re overly dependent on a supplier. Maybe your industry is changing, and you’re hoping it changes back.

Whatever it is, I don’t think the point is to scare yourself or create another list of things to worry about. The point is to turn the answer into a strategy. If it’s customer concentration, start diversifying. If it’s debt, strengthen the balance sheet. If it’s one key employee, start developing other people. If it’s a supplier, start building alternatives. And don’t wait until you have to.

As I said, I’ve come to believe that most entrepreneurs are pretty good at handling crises. We get plenty of practice. The harder part is creating that same sense of urgency when everything is going well. Maybe that’s what strategy really is. It’s not just deciding where you want the business to be three years from now. It’s being honest about what could prevent you from getting there and having the discipline to start addressing it while it’s still a risk you can manage instead of a crisis you have to survive.

Ami Kassar is CEO of MultiFunding.