BIG CLIENTS

I was talking with a client today and we were talking about the relationship between big clients, important clients and controlling clients. Let’s look at two examples. In the first case, you’ve got 5 clients and you’re billing $2,000/week in total. Let’s also say that you’ve got one client that you consistently bill $1,200/week. In the second case, you’ve got 5 clients and you’re billing $2,000/week in total, but in this case, each client pays you $400/week. I’m keeping the numbers small because it’s much better to learn our lessons when the risk is small than when it’s life threatening. So, page two. Your biggest client goes away. (Files bankruptcy, changes vendors, whatever….doesn’t matter. You’re out!) In the first case you just lost 60% of your business. You have an emergency. You might be out of business. In the second case, you lose 20% of your business. You’ll need to replace it. You might have to tighten your belt. It won’t be fun, but you’ll probably be able to stay in business. In the first case, your big client is very important to you. He’s keeping you in business. As he goes, so goes your business. He’s absolutely in control. In the first case, if your biggest client says that they need you to cut your pricing by 20%, you can refuse and potentially lose 60% of your business, or you can agree and lose 12%. In the second case you could refuse and potentially lose 20% or agree and lose 4%. I hate doing the numbers, but it’s pretty easy to see that although average clients might play games, you’ll have more control than when the giant throws their weight around.

I’ve heard it suggested that no one client should represent more than 20% of your business. I’ve also heard the more conservative recommendation that no client should be more than 5% of your total business. Whichever figure you believe, the result is the same. You’ll be more secure and in control than if you have a giant client.

So, what do you do when you have the opportunity to work with a giant? Refuse? Take a chance? Post your comments and I’ll give my suggestion later.

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42 thoughts on “BIG CLIENTS

  1. Interesting issue Rick. I think the biggest problem (and I’ll admit I’ve had this in the past) is that once you land the giant, you get lazy and stop networking and filling the pipeline. If the giant is so big that you don’t have time to do that, then you need to bring a partner into the account to help so that you can continue filling the pipeline.I’ve designed my business around the ability to only have to bill 3 days a week, leaving the other two days for internal development, networking and sales. As part of my networking, I am always looking for potential partners who could help me with these large accounts so that I can balance the workload and keep filling the pipeline.I’ll admit that it’s not easy, and it is very tempting to just keep the giant account for yourself and sit back and relax, but having done that before and then had the budget disappear, I won’t let it happen again.My 2 cents.Doug

  2. Great advice, Doug. One method of acheiving growth is to partner with people you trust until there’s enough work to justify additional employee(s). A true Rainmaker attitude!Rick

  3. I’m kinda surprised that we only had one comment here. This is a tough problem that requires a business owner to be tough. Here’s what I did. I, like you established a revenue goal for the year. I like you knew (or guessed) what the average revenue per client would be. I like you did the math and calculated how many new clients I would need to get in order to meet my revenue goal. Once I know how many clients I need, I then have to figure out (for the year) how many presentations, proposals, meetings, calls, networking events, trade shows, expos, and other activities I will need to do in order to get the number of clients that I need. Then, calculate the number of billable hours that you’ll have and the number of hours for administrative work. Divide the number of hours for each activity by the number of weeks that you will work. Now, here’s the tough part along with my recommendation. You’re going along doing the activity and getting the expected results when you land a giant customer. YOU DO NOT CHANGE YOUR PLAN! If your plan calls for 40 calls, 5 meetings, 3 proposals, etc. You do them. If you have a show, expo, or other event on your schedule, recognize that if you miss them, they’re gone and you cannot get them back. Nothing changes. Additionally, your existing clients expect you to deliver as promised. You cannot change that. So, do you take the giant. Sure, they get the number of billable hours that are left unassigned in your schedule. If they need more, work later or earlier or bring in a partner (Thank you, Doug.), but do not change the rest of your plan. Worst case is that you’re going to get a bunch of little clients and hit your averages. Best case is that you get a bunch of giants, bring in a bunch of partners and become the RainMaker.You’re a business owner not an employee.

  4. Pete is one of those “technical” friends that I expected to give me grief about how “un-slick” my blog is. Even though it wasn’t slick, the post motivated him to comment, he just wouldn’t do it here. So, if you want to read his comment, you’ll have to go to his blog at http://worcester.typepad.com/pc4media/. Thanks, Pete.

  5. If I have a long thought, I’ll usually post it to my blog. Posting it to my blog and linking to your article helps you out because it sends increased eye balls to your blog. If I left a comment here, Bobo would have never answered and a lot of other people wouldn’t have considered the question or read your post. A link > comment. This is a very timely issue for me. We just started putting Rick’s “procedure” in place a few months ago. Starting with revenue goals and working backwards into activities. And we’re in mid stream of putting it into place and seeing results. We don’t have any “big” customers. Rather we had a dearth of ones that were big enough. So, we had to adjust our services and pricing and target markets. We had hoped that our service would reach mass adoption, but that didn’t happen. So, we’ve moved closer to a traditional consulting or services business model where we have increased sales activities and prices and services worth “selling”. And although the appearance of your blog sucks, and I don’t see an RSS feed, the content is great. Keep it coming!

  6. A body builder will look at my body and say, “Yuck!”. An opera singer will listen to me sing and have a similar reaction. A vegetarian will watch me savor my filet mignon and be disgusted.Bob Jiguere, my mentor, told me once that if you look hard enough at anyone, you could find something that you didn’t like about that person. Then he gave his famous smile, let his eyes twinkle, and said, “Even me!” He added that if you concentrated on the one thing that that you didn’t like, eventually that bad thing would overshadow all of the good things that you used to see in the person and you would not only stop liking them, but you would dislike the entire person. The rest of the lesson went like this. If you don’t like someone or something about a person, look hard at the person until you find something that you can like about that person. Then concentrate on that good thing until it overshadows the bad things that you used to see and continue to concentrate on that good thing until it’s the only thing that you see and you will not only stop disliking the person, but you will like and promote the total person.Bob Jiguere was a very wise man.Incidentally, on another topic, if you are having a problem getting the word out about an event, special sale, show, expo, or other promotion and you’re tired of banging your head against the wall trying to do it yourself and you need your event to be packed, you should check out http://www.whizspark.com/. Talk to Pete. It’s amazing how smart one person can be.Rick

  7. the enticement of building a large client base goes beyond bigger monthly billings because once larger clients are satisfied and secure, they are more likely to be sold on additional or premium managed services, according to Carleton. “It really is a strategic partnership rather than a client relationship with a company, “because you’re getting intertwined to core parts of their business that are really important.

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  20. Nice topic and discussion Rick. I realize that I am a few late to the party, but you are right and this is a key topic for marketing agencies. We are in the early stages of refocusing on a new target market transitioning away from project based-work to pursue retainer-based work and all the benefits that can provide an Internet marketing agency. Diversification in the customer portfolio is our objective with no more than 20% from one account as we mature. Early on, if we land a whale, we will deal with the business risk exposure by working the plan. Partnering is a great way to grow in the early phases of a business so that you can have a broad offering without having to hire everyone in-house prior to having the revenue to support. Partnering also allows you to specialize in areas of interest. Geography plays a part in client diversification to limit exposure to the economic conditions of an area. With geographic diversity, partnering is super important, enabling small agencies to service clients who might be in another state or country with local resources. I totally agree that when you have a marketing plan, you should stay the course, even if you land a whale, then review the plan on a periodic basis (monthly/quarterly) to measure progress and adjust as needed. Thanks for sharing.

  21. Rick, thanks for reading and for the thoughtful comment.

    True story: In 1990, I was referred to a company by an existing, happy client. I met with the prospect and realized that they were going to triple the size of my business. Long story, short, I saw some signs and turned down the business. They were incredulous! (Honestly, so was I. This was huge with a potentially long tail of referral business to their customers.)

    3 months later, they filed bankruptcy under Chapter 7. Total liquidation. If I got caught up in that, I would have been out of business. That was a close enough call that I learned my lesson and never forgot.

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