The Unspoken Responsibility
When we think about the role of a founder, CEO, or president, we often picture someone relentlessly driving growth, chasing new opportunities, and pushing the business forward. But there is a hidden, essential responsibility beneath all that energy. One that often doesn’t get enough attention.
Especially in family-owned businesses, where the stakes are multi-generational, survival must come before growth. One of the small business operator’s foundational jobs is build a company that can’t be easily destroyed by a single bad decision, unexpected event, or loss.
My overarching duty is to make sure I never put the company in a position where a single decision could jeopardize the company’s existence.
Resilience is not a constraint on growth; it’s the foundation that makes sustainable growth possible.
Understanding Business Fragility
At the heart of business fragility is the concept of “single points of failure.” These are critical dependencies within a company—maybe a client, employee, supplier, or system—that create existential risks.
Ironically, many of these vulnerabilities emerge from early successes. The big customer that put the company on the map or the founder’s unique skills that drive early wins can become Achilles’ heels if over-relied upon.
The paradox is clear: your greatest strengths can become your greatest vulnerabilities. For example, if a huge portion of your revenue depends on one client, you have gained a lot but also exposed yourself to devastating risk should that client leave. Similarly with a key supplier.
“Betting the company” on risky decisions should be forever off the table. CEOs must distinguish between smart risks and existential gambles that could topple everything they’ve built.
Where might you be vulnerable?
To protect the business, CEOs need to watch four main risk areas:
- Customer Concentration Risk: When one client brings in over 20% of revenue, or when the company depends heavily on a single market or region, the exposure is significant. I lived this one in the early 2000s when Nortel was over 30% of our book. We grew like crazy at the time, but so did they, and they stayed an overly large proportion of our business. Until they didn’t.
- Key Person Risk: Founders, CEOs, or critical employees without documented knowledge or succession plans create vulnerability. I once took on a temporary role running a small manufacturer. They had a single person on staff who knew how to design and quote the products, and a single person on staff who could build them. None of the management knew how to do any of this. Had either of these individuals left for any reason, production and sales would have screeched to a halt!
- Operational Dependencies: Relying on one supplier, facing technology bottlenecks, or regulatory risks can disrupt business continuity. I was part of a startup that built a proprietary device for those who fish but don’t own a boat with a fish finder. This was dependent on a single supplier of custom technology, and that supplier had other customers and product lines that were more strategic for them, often leaving us high and dry.
- Financial Fragility: Dependence on one revenue stream or overleveraging tied to a single contract can leave the company financially unstable. So can overtrading or taking on a contract that’s too large for your current size. I was on the board of a company they took a single contract that was almost equal to their annual revenue. They couldn’t support it financially, had to abandon it, and had a severely damaged balance sheet.
Ok, there is a fifth area. Stupid fucking decisions! You can make a bonehead decision in any area of your firm. That’s why any big decision should be contemplated, and only after receiving counsel from as many viewpoints as possible.
Strategic Approaches to Risk Diversification
Managing these risks is an ongoing CEO responsibility. Early-stage companies often face unavoidable concentrations, and since they’re small, every decision is large, relatively speaking. So they must be handled deliberately. As you grow, diversification—without losing core strengths—becomes vital.
Building resilient systems—like documented processes, cross-training, succession plans, financial buffers, and backup technology—is essential. Equally important is knowing when to say “no.” CEOs need to weigh risk-adjusted returns and prioritize long-term resilience over short-term wins, even when tempting opportunities arise.
If you liked this, you might like this related post about goal setting.
