Regular customers are the sign of a successful business and something to be proud of. Many businesses build relationships with clients that last years or even decades. But can you become over reliant on current customers? Yes you can. As your relationship with a repeat customer grows, and the value of their orders increases, this has an inevitable impact on your business. Most successful SMEs fall into this pattern after a few years, with a large proportion of business being concentrated in a handful of large contracts. This can enable SMEs to streamline their operation and cut back on marketing costs. However the strategy has some risks:
- Firstly, there is only so much business an individual client will be able to give you. Once the value ceiling is reached there may not be room for expansion.
- Secondly, the value of individual clients will fluctuate over time, as their business grows and contracts. If you are dependent on this client for their successes – which you have absolutely no control over – it will have a direct impact on your business.
- Thirdly, if the client goes out of business, changes their business model or you lose the account for any other reason, it will have a huge impact on your business, from which it may be difficult to recover.
- Fourthly, your business only has finite resources. If a large portion of your resources, assets and working hours are invested in a large contract, it squeezes out room to service other, smaller customers. This may impact your ability to service your other customers, leading to your overall customer base contracting. You may also be unable to actively market for new customers, due to a lack of internal resources to fulfil the contracts.
It isn’t just small businesses that are vulnerable to overdependence on large contracts. However, contractors, SMEs and small enterprises are likely to suffer disproportionately if a large client collapses or decides to consolidate its suppliers. A famous example of this is the collapse of British construction giant Carillion in 2018, which plunged over 19,000 contractors into financial difficulty. At its peak, Carillion employed an army of small businesses and contractors – for many of which, Carillion was their primary client.
What Steps Can You Take To Avoid Your Business Falling Into This Trap?
We are not advocating a business model that encourages small or one-off orders at the expense of larger customers. Far from it. There is absolutely nothing wrong with having large customers – this is a good thing – so long as they are part of a broad and resilient customer base, and they don’t affect your ability to expand.
However, there are proven ways in which business planning and modern marketing can reduce your overreliance on big contracts, allowing your business to increase its market share and become more stable and more profitable.
If you have recently lost a large contract:
As tempting as it may be, don’t seek to plug the gap with a new client of the equivalent size, as this just sets the stage for you to be in the same position in a few years time. Instead, treat this as an opportunity to streamline your business and diversify your customer base. You’ll want to initiate some fairly quick win marketing techniques to fill the gap while longer term strategies take time to work.
- Focus on easy changes to your website to boost your online visibility. Refresh your content, optimise the site for mobile visitors, improve your on page SEO, and entice leads using some gated content.
- Create a special offer and advertise it through an email campaign to your marketing database.
- Consider using pop-up windows to encourage immediate action on the part of your website visitors
- Revisit your buyer personas to optimise your targeting. What are the most lucrative markets you can target your services to? Are they still the same as when you last did marketing?
- Set up a targeted ad campaign on Google ads or Facebook, linked to a clear offer or incentive.
If you have a stable customer base but wish to expand your business:
The best time to overcome reliance on large contracts is before those contracts are in jeopardy. This gives you the breathing space to implement more long-term marketing strategies:
- Search engine optimisation: There are a range of on page and off page techniques you can apply to build your search position on Google for important keywords. This can take 9 to 12 months before you see results, and it is worth considering working with an agency to develop a consistent and cost-effective approach.
- Social media marketing: Build an organic profile on one or more social media platforms relevant to your target buyer personas. Again, this can take a while to build authority, but is an important source of leads long-term.
- Influencer marketing: Market your brand through association with a leading authority, or influencer in your sector. This may be a YouTube personality, a well-known entrepreneur/investor, or a respected consultant/leader in your field. Care should be taken to build the right relationships, but these can yield impressive dividends over the long term.
- Content marketing: Content marketing is an excellent long-term strategy for building back links, increasing brand reach and building the authority of your business. Leads will increasingly view you as a source of high-quality solutions and turn to you directly. Content marketing will strengthen your other efforts, including SCO, social media and PPC.
A broad customer base makes for a more resilient and less uncertain business, giving you a firm base from which to make investment decisions. Let us help you put in place proven strategies for developing your market and growing your business. Call 01332 343281 today.
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