How to avoid over-reliance on one or two clients

The Risks … and Rewards?

Everyone knows this business message:

'Don’t rely on only a handful of customers for the majority of your turnover or profits.’

Sometimes easier said than done. How do SME’s avoid falling into the trap?

At some time or another, you may have had a reliance on a pharmaceutical company, a national transport company, or major public sector client.

I’ve been in this position myself.

And I know from my own experience, in good times inaction is the easy option. For example:

·         Maybe we can’t see anything changing at those client businesses.

·         Perhaps we’re too busy – doing well – to find time to win new clients.

·         Or even if we had the time, we’d find it hard to get alternative, lucrative clients.

·         And anyway … why prepare for rain when there isn’t a cloud in the sky?

Over-reliance and over-dependence on customers is a slippery and potentially damaging slope.

Those ‘wonderful customers’ can, over time, put pressure on your prices and therefore your profits. Secondly, they can divert your attention away from other clients. And thirdly, your investors and bank may start to question where your business is heading.

Also, how safe is it to rely on those lovely clients?

Have you thought what would happen if, for example, they were bought, merged with another firm, had a change in their top management, lost their main client … or your contact left the company?

Time to take action … ?

Turn this threat into an ADVANTAGE

So, there are negative outcomes of relying on one customer, but there are also gains from taking positive action.

Contrary to expectations, when you are busy working with a few lucrative clients that is precisely the best time to be actively looking for new ones.

And here’s why:

1.     Your business is more attractive when it’s doing well – When business is going well there are more energy and more good stories to tell, to attract and impress others. Conversely, when we are less busy, it can communicate less energy and less attractiveness, and sometimes even desperation. Success breeds success.

2.     Maximise sales – While products or services are in demand with key clients, it’s important to exploit all the markets we can, to ensure our innovations reach as many appropriate customers as possible.

3.     Keep your investors happy – By looking for new customers and markets you will reassure and impress both your investors and stakeholders that you are keeping your mind open to changing market scenarios, which will also help build your longer-term profitability and growth.

In my view:

‘When the going is good …wise businesses ramp up their marketing.’

If you are worried about over-reliance on one client, or want to avoid falling into this trap, contact me on 01235 606077, email or use the contact form.

I’m happy to have an informal chat, or meeting.

Photo by rawpixel on Unsplash