In common with a lot of our customers, we are a growing SME business and as such are currently, or have previously experienced a number of the same issues. These are as many and as varied, as is working for yourself, but in this series of posts, we will look at 5 things that we think are key to building a growing business.
1 .Single Customer Over Dependancy
2. Money and Accounts Management
4. Founder Dependency
5. Balancing Quality with Growth
This time we will be focusing on the risks involved in trying to build your business on too few customers. So, for example, if a single one of your customers is worth more than half your income you have become more of a main or trusted contractor rather than a business owner.
This over reliance is difficult to break, especially when the customer in question pays well and on time, after all how many small businesses would love to have a client like this? This is where the problems lie. You are basically taking on the risk from the larger company for something they either do not feel is worth investing their own staff or equipment in, or only see it as a short to mid term requirement. You could be lucky and your customer has a consistent need for your products or services, but generally this work will just dry up as things change in your customer’s business and with it goes your cash flow.
What is needed is a balance of customers. You may have heard of the 80/20 rule where 80% of your income comes from 20 percent of your customer base. But in addition to this ‘ideal’ blend of customers, we have always felt that you should also have a variation of requirements you are quoting for, with some for low value projects and others larger. The reason for the mix of values comes down to how perceived cost increases the length of time for the sales decision. Generally speaking the higher the cost to the company the product or service is, the longer and more complicated the decision making process becomes and the more interactions are needed. So what you need are the lower value, quick decisions, coming in to fill the troughs inbetween the peaks of the long decision lead time, high value ones.
In order to achieve this balance of companies and enquiries, you will need to employ a mixture of traditional sales techniques which includes, dare we say it, telephoning companies, video meetings for the short term, developing leads and networking. As well as an online marketing strategy including website and social media. All of this is an entire set of blogs on its own.
The problems faced by small businesses are considerable, and one of the worst things a would-be owner can do is to go into business without considering the challenges ahead. The hard part is making it work. This means overcoming the 50/50 odds of failure in your first year, and 95 percent odds of failure by year five. It means getting to a point where you have staff doing your job better than you, or enough money to retire, or you have changed the world through what you do. That makes working for yourself worthwhile.
Creatively Yours Ltd helps businesses like yours succeed online through website design, website development, and our Helponomics system that offers support and training as you need it and highlights areas that could increase your sales.