How 5 Single Points of Failure Can Cripple Your Small Business

I was left with nothing.

Before I took over my family business, we had a sales manager who oversaw our aircraft parts business and interior manufacturing (roughly 70% of the company).

A bit of drama broke out (young egos are deadly), and my parents sold the interiors division to him, which left the core company with no key accounts, and in a dire sales situation.

With the interior division gone, the core company had to build its customer base from scratch. This meant investing more time and money in marketing and sales to convert new customers. The time was all on me, which kept the company in a risky situation, as I now became its single point of failure.

So, I learned to replace myself and mentor others so that no one person could completely stall the company's momentum.

That is the only reason this became a problem in the first place:

The key person syndrome.

Key person syndrome is when one person holds onto a key area and creates an intense bottleneck when out. If they never return, sh*t hits the fan, and everyone must pick up the pieces. It also creates a knowledge vortex and team complacency, who rely on a specific person for everything.

From experience, these are the most significant single points of failure threats to any small business. Fix these, and your team will thrive.

1. Over-reliance on an owner or leader.

The company is at risk if every core process and decision is funneled through one or two key people.

If something happens to them, then what?

2. Over-reliance on a key customer.

A small business should never have a client take up more than 20% of its revenue.

It's easier to replace 15% than 75%.

It's like putting all your eggs in one basket; if you drop the basket, all the eggs crack, but if you spread out your eggs, you're less likely to break them all in one drop.

3. Over-reliance on a key sales rep.

Just like relying on one customer, the same is true for sales reps.

If a key rep leaves or takes time off, so do the results. You might not be able to replicate their talent, but having other capable sales team members to take over if needed is crucial.

4. Over-reliance on a key supplier.

Never assume your suppliers have sound business practices.

If they closed their doors and were your only supplier, you'd go with them. Always have a contingency.

5. Over-reliance on a key bank.

The Silicon Valley Bank collapse is an excellent lesson.

Don't rely on one bank for all your money needs, like deposits, lines of credit, and loans.

Once I started to learn these single points of failure and fix them, my business dramatically improved—not just financially, but from a key account or person point of view.

We've built depth and contingencies at every level.

We still have a lot of work to do, but that's the beauty of quarterly goals—we focus relentlessly on what matters the most—you should too.