Talk about a high-class problem. You have delivered a specialized solution in a niche market while doing all the right things. What happens? You land an elephant for a customer who has an insatiable appetite for your product or service. By comparison, your other customers look like mice. You hate to admit it, but this customer has incredible influence over your day-to-day decisions, as well as your long term plans for the firm. Secretly, you live in fear that you might lose this giant customer overnight and find yourself out of business.

This is hard one for a small firm. I have seen many small firms prisoner to the revenue stream from one key customer. The reliance on a huge customer can impact the small firm’s cash flow and control its day-to-day decisions, if not its destiny. If the big customer does not pay its bills on time, the firm can struggle to make payroll. When the big customer becomes too dominant, it can direct the day-to-day scheduling of activity, which might sacrifice the needs of other customers. At some point, the small business seemingly has no control over its destiny since the big customer is calling all the shots.

A general rule of thumb is that no one customer should account for more than 25 % of your sales. If a large customer abruptly drops you, you can still right-size your operation until you can find other sources of revenue. Even 25% makes me shudder, but in most cases, you can still adjust to the loss of this dominant customer. It will hurt, but the firm could still survive, presuming that you moved quickly enough.

John Bradley Jackson
© Copyright 2009 All rights reserved.

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