What does it look like when your business is overly-dependent on one type of customer?

Trouble waiting to happen.

The total opposite of having an asset!

There are 3 types of over-dependence on customers:

The size of the customer, too big or too small.

The method of acquiring the customer

The wrong type of customer

Let’s look at Issue #1: Over-dependence on one sized- customer.

The rest is covered extensively in Assetability Ebook. Get your copy here.

Many businesses make this mistake of being overly dependent on either a few large clients (let’s call them elephants), or many small ones (aka rabbits).

What’s the appeal of the elephants?

Fewer sales to close, fewer clients to manage. A dream. Right?

Well, sometimes.

But what happens if one of those big clients merges with another company and takes their business elsewhere?

What happens if that relationship gets muddled and they call it quits?

You’re left scrambling to break even. You might even take on a new customer with values that don’t reflect your own in desperation. It’s just downhill from there.

Think of it like going to a casino and putting all of your chips on Red #27. Makes for an interesting play, but not a safe one.

Not only that, but you often end up being a slave to these large clients without even realizing it. In order to satisfy and keep them, you’ll do whatever it takes. It’s like feeding a starving elephant.

Whether it’s endless reporting, new positions needed, or more programs, before you know it you’ve become a bit of an agency. You can’t do one thing well because you’re spread so thin trying to satisfy the never-ending needs of the elephants.

I was recently speaking to a guy who literally lost tens of millions in sales and subsequently had to painfully cut tens of millions in expenses because regulations changed and he lost a major client. Ouch.

To make matters worse, relying on a few large clients hurts your “sellability.” When a potential buyer is looking at your company, he wants to make sure your company is sustainable. Sales built on just a few relationships are simply not.

Whether selling is on your mind now or not, don’t fall into the trap of being overly dependent on elephants. Build your business now to last.

And what about rabbits?

Well, compared to elephants, these sound much safer. They can come and go without it impacting you or your bottom line. Right?

Actually, there’s a real danger of attracting only rabbits: the rabbit hole, the never-ending price wars that you engage in to retain smaller customers in a competitive market. 

Not only do you risk playing the price war, but you need to pump in so much volume to make a decent profit, that you can easily spend so much on acquisition that your bottom line isn’t too impressive when all is said and done.

Works for Walmart, but not the rest of us.

So…

How do you reduce your company’s dependence on one size of a customer so your business is a profitable and sellable asset?

This will not be an earth-shattering revelation I’m sharing with you. And that’s ok. Sometimes we just need gentle reminders of what we already know.

It’s one word: diversification.

When your customer base has a handful of elephants, a few antelopes and a bunch of rabbits, you my friend, have an asset.

To learn more about diversification and how to build your company into a sustainable asset, download your free executive summary here.

Taking you from where you are to where you want to be,

Jon