Do you feel yourself signing up to more and more work with one big client? Unsure how to improve your customer concentration and develop your client base? Securing a big client when you first start a small business can feel like a big achievement, and rightfully so. A major client can do wonders for the credibility of your portfolio and the development of your business network. One of the main charms of a large account is that they pay well for your services, or at least, they promise as much.
However, devoting too much customer concentration to one big client can do more harm than good to your long-term business development. This article explains why this is the case, what you can do to protect your business and how our team can help.
What is customer concentration?
Customer concentration is the percentage of your business revenue that relies on one particular client. If you are dependent on an account for a significant proportion of your revenue, you have a high customer concentration with this client.
The risks of relying too heavily on a big client
If you have a growing business, becoming too dependent on one or two big clients can become restrictive and potentially hazardous. Placing too must trust in one account to support your company gives them the power to make or break your small business.
Despite maintaining an ongoing relationship with a big client, they could potentially disrupt your cash flow if they know you’re completely reliant on them. They could begin to take advantage of this dependence by paying late or asking you to lower your charges.
Devoting too much time, energy and resources to one big client can also cause you to overlook your other clients, leading them to look elsewhere for business.
How to free your business from the pressures of a big client
Fortunately, there are several steps you can take to protect your small business from becoming too dependent on one big client. Here is our advice for improving your business strategy to protect your client base.
Secure your small business
One of the best things you can do is put financial safeguards in place to protect your company. Conduct credit checks on all consumers and impose contractual penalties for late payments. Ensure that your contracts with vendors are also safe. This minimises the risk of servicing a big client whilst investing money into securing your company’s finances.
Expand your client base
Another tip is to maintain your relationships with smaller clients. This acts as an insurance policy if the major client chooses to withhold payment or take their business elsewhere. You can also shift your focus to developing new partnerships with other businesses, which will help you recover balance in your firm without jeopardising your current client base.
Invest in marketing
The most efficient method of expanding your client base is to make a long-term investment in marketing. Acquiring new customers will not only help you distribute your profits but will also boost your market presence. As you gain more brand exposure, more new clients will become aware of your products. This in turn will increase your client base, meaning that you are less reliant on that one large account.
How we can help you manage your client base
One of our clients came to us with concerns about their reliance on one big client. They were highly dependent on one client who began to withhold funds because they didn’t have the money to pay them. In reality, this client was using this money to invest in their own projects. Our customer was, in essence, unknowingly and unwillingly giving this client a free loan. The big client didn’t pay them for over a year, which crippled their company.
Fortunately, our team of highly-trained management consultants could help this company to hone their business strategy, delegate their time effectively and to set clear boundaries and payment terms with all clients. You can read our small business case studies to learn how we worked with small companies to significantly improve their business development.
If you would like to receive our specialist advice and support for your small business, fill out our short contact form to get in touch with our team today.