Dependent on One Client for Most of Your Business?

Dependent on One Client for Most of Your Business?

Business Development

Ajoy Vakil

Ajoy Vakil

7 Aug 2015, 19:19 — 5 min read

You have to honestly answer this question to yourself – and based on my consultancy experience with MNCs and subsequently SMEs, I feel that chances are that your business is highly dependent on that one major client.


Presently this may seem to be a comfortable situation because:

 

  • You share an excellent rapport/relationship with the client
  • Your client is dependent on you to a great extent
  • You are the only reliable vendor to that industry


However, there are many dangers (see case study in later part) with this comfortable situation.

  • It prevents your growth and expansion
  • It can cause havoc to your cash flow situation because the client payments have got delayed for genuine reasons
  • It can probably come in the way of your getting funding at a later stage

The biggest danger of all, and this is an unforeseen one very often, is when the client’s business/business model is threatened by

  • A competitor
  • Their client changing vendor
  • Their client getting acquired by another company etc.

Sometimes an industry gets totally surprised by a substitute product – in most cases you don’t see it coming.


The solution to all these?


  • Analyse your situation
  • Become acutely aware of the danger you could be in, if more than 65% of your business is dependent on one large client
  • Draw up a list of prospects
  • Shortlist and tap clients who don’t seem to be a threat to the relationship you enjoy with your existing client
  • Start a newsletter, to be top of mind within the industry (This is non-threatening as you are not approaching a competitor but are just keeping the fraternity informed)
  • Look for a related industry/niche that does not in any way affect your existing relationship (I am stressing on the existing relationship under the assumption that it is sensitive).

By the way, if the existing relationship is great, but sensitive, you need to be all the more careful – the greater the sensitiveness, the greater the danger.


There are many more reasons – but we will cover that in subsequent posts.


Case Study


I want to quote the example of a client of mine. They are in the sheet metal fabrication business – and dependent largely – sorry – completely on an industry giant. This relationship is 2 generations old. (But remember, a new generation comes in, with new ideas and new relationships too. Suddenly, the purchase manager you cultivated over the years decides to quit, is thrown out or moves to another company.)


In this case, the client company (the client's client) decided to change its line of business, gradually. The signals were clear – but our friend did not notice them. He was too busy serving the orders and pandering to the contact he had developed in this company. Luckily, he got to know about this possible shift – and started looking around for new deals. But they were slow to come, because he wasn't doing it right. (Years of dependence on one client reduces your marketing alertness). It was only when he got a shipping industry order – which was small, but completely non-threatening to the existing client, that both sides woke up – this gentleman woke up realising that all these years he could have developed similar clients and probably created another big client for himself). The client woke up realising that they were probably taking the relationship for granted and that this supplier was indeed good and could be developed to help with the other line of business they were getting into.


Nevertheless, I would always advise your business to have 3 legs to stand on – even if the other two legs are shorter.


Think about it! More in my next post.

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