Peanuts and Profits

jimmy carter and George washington carver shaking hands in a peanut farm

What happens when you’re a farmer and your whole livelihood is dependent upon one crop.

And that crop is getting harder and harder to grow and so your income at harvest goes lower and lower.

This was the case in the US South at the end of the 19th century.

And a man who was born and orphaned as a slave became an unlikely savior.

And revolutionized food production around the world, influencing even today’s farming techniques like organic production, crop selection, etc.

George Washington Carver helped teach Crop Rotation to farmers throughout the south and everywhere else.

Through alternating cotton crops with plantings of sweet potatoes, peanuts, soybeans, and cowpeas, farmers were able to replenish soils depleted of nitrogen and other nutrients.

Once farmers began following crop rotation, they not only improved the yield of their staple cotton crops, but generated income on their alternative cash crops.

They ended up diversifying their customer base and avoided tying their fate to one specific customer, industry or crop.

And they became more profitable in the process.

Diversification is key, not just in agriculture, but also in terms of your customer base.

Businesses that rely on any one customer for more than 15% of its revenues are seen as inherently risky.

And it makes sense.

If you rely too much on one customer than they can hold you hostage.

And even if they are not bad actors, you can find yourself in an impossible situation if something were to happen to them.

And things happen all the time.

The customer leaves that specific line of business and you’re stuck scrambling to replace half of your revenues.

Or you look to exit, but no one wants to invest in your company because they do not want to risk being held hostage by a large dominant “Whale” client’s demands.

You don’t want to get too comfortable by selling everything to one great client and then finding yourself in a tough spot.

Just as rotating crops helped replenish the soil.

“The More the Merrier” (within reason) can sometimes by the most important business concept you can practice.


Thinking About Selling Your Business

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But you need to start getting ready now. Don’t be like the 7 out of 10 business owners who put it off until tomorrow and then find out they’re stuck with profitable businesses that no investor wants to buy, or child wants to inherit.

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