Big Mistake

Is your business too dependent on one big client?

Don't put all your eggs in one basket" may be a cliché, but it's also a smart strategy to adopt as you build a clientele for your small business. Rather than depend on one or two big clients for all your revenues, diversify. Developing a broad client base ensures you won't be forced out of business should one of your big-paying customers suddenly pull his or her account.

Chatsworth, California, telecommunications service provider Mark McKibben knows what it's like to have a client--his only client--pull the plug. Fortunately, McKibben was temporarily protected by a two-year contract with his client, which gave him time to line up new business and keep McKibben Communications afloat.

But McKibben learned a lesson from that scare: Today, he has 80 clients, large and small. In 14 years, he's grown McKibben Communications into a $3 million, 25-employee firm that provides high-tech communications services. "One of our biggest problems now is keeping up with growth," says McKibben, whose company's sales goal for 1998 is $8 million.

Falling into the trap of relying on a few clients, McKibben admits, is easy for a start-up entrepreneur to do. "It's a Catch-22 situation. You're pedaling so fast, you don't have time to think about getting more business, how to find new clients and where to look," he says. That can be a fatal error: "You might end up with too much time on your hands because you don't have enough business."

When McKibben's client dropped the bomb on him, he immediately launched a broad-based marketing campaign to attract new clients. He began regularly prospecting for leads, asking friends and business associates for referrals, and attending trade shows to keep up on new telecommunication technologies. He generated free publicity for himself and his company by writing articles for trade publications. He networked and developed new contacts by serving as president of the local chapter of an industry trade association. He still uses many of these strategies today.

One of the most important steps McKibben took was to give his company a bold, new image so it would stand out among its competition, which included many larger telecommunication firms. "We designed a new logo, chose new corporate colors and put together a slick brochure listing our services and references," he says. "We were still small, but people knew we were going places. It's all about creating the right perception."

Besides a well-planned marketing campaign, here are four other steps you can take to multiply your sources of business revenues:

1. Think small, not big.If one of McKibben's 80 clients cancels its contract, the loss in revenue won't have a significant impact on his bottom line. That's because he's spread his risk around. You might do the same by having a dozen or more smaller clients rather than five or six of the biggest clients in your industry.

2. Re-evaluate the clients you have.Some clients are costly because they demand too much of your time, energy and financial resources. If a client requires, say, 40 percent of your time but contributes only 20 percent of your business's revenues, you're losing money. Or if a big-paying client changes his mind three or four times before a project is completed, he's depriving you of the time to develop new (and hopefully more cooperative) clients.

If you decide clients like these aren't worth keeping, give them up. Stop seeking additional business from them. Or, when a troublesome client calls, tell him you can handle the project only after you've completed your current workload, which could be several weeks or months from now.

If you can't afford to let go of a hard-to-please client just yet, take steps to make your working relationship more profitable. Renegotiate your fees or streamline the services you offer so you have more time to seek better customers elsewhere.

3. Encourage loyalty. For customers you want to retain, offer them service that keeps them coming back for more. That means plenty of customer TLC: a handwritten thank-you note for a big order, a telephone call to make sure the client is happy with your service, and a quick response to a customer's order or complaint. Starting a "buy nine, get one free" club or hosting a sale "for loyal customers only" are great ways to encourage customer loyalty.

4. Nurture referrals. Referrals are probably the most lucrative way to develop a solid client base for your small business. Referred customers require less selling time and are generally more loyal than other customers. And they come ready to buy from you, because, in a way, they've already been sold on your services.

The best way to generate referrals is to give your present customers reasons to brag about your business to their friends and business associates. Those reasons could be a product guarantee, service warranty, liberal replacement policy, friendly service and personalized attention.


Carla Goodman is a freelance writer in Sacramento, California.

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