Losing your biggest client can be a devastating blow to both your business and personal finances. Every entrepreneur faces the challenge of diversifying their revenue streams, and it can be magnified when you're a company of just one person or a handful of people. But when you have 50 percent or more of your total revenue sourced from just one client, it can result in an untenable downturn if that client goes out of business or you end up losing them for any other reason.
If this has happened to you, you're definitely not the first small business owner to face this challenge. Here's what you can do to both prepare for this event and get the wheels in motion once payments from the biggest client have ceased.
1. You're not going into panic mode – you're just entering the "war room" right now.Remember: You're not steering the Titanic. You're steering a much smaller ship that could actually avert the iceberg if all hands are on deck and you give it your all. This holds true whether you're a solopreneur or a Fortune 500 company with a dedicated business development team.
You may have to put in more hours than you'd typically like to. But when you're in “war room” mode, every single call, email, follow-up, past due account, and so on matters more than ever. It doesn't have to be this way forever, just until the crisis is averted and revenue has stabilized once more.
2. Don't burn bridges with the client.Even if you are affronted that the client decided to stop working with you, and it wasn't for financial reasons like losing their funding or facing a downturn of their own, remain diplomatic. Losing a contract is not the end of the world, and it does not necessarily mean the client will never work with you again. They could resume their contract with you once their own finances stabilize, management changes, or other operational shifts take place. Conversely, the same people you were in touch with at this particular client can end up starting their own businesses or moving on to other companies that would be happy to work with you and maybe even double the revenue that you just lost.
3. Go out of your way for the remaining clients in your roster.The golden rule of sales is that it's always easier to sell to an existing customer than to acquire a new one. Depending on the size of your team and how many hours you're putting in while in “war room” mode, you could have resources dedicated to finding new customers as well as working with existing ones.
If your team is smaller and more apt to be stretched thin, definitely emphasize the paying customers you already have followed by qualified leads. What services or packages could they be in need of now or don't already receive from you? This tactic not only cuts down on the additional risks and costs of marketing to new clients but can also be a positive development in addressing your inbound sales and marketing strategies.
4. Prevent this from happening again by increasing your diversification and decentralization efforts.If a single client comprises such a significant portion of your revenue, it can cause major cash flow issues if the client decides to stop working with you or is late with payments.
When you're working on rebuilding the lost revenue, don't focus on getting one more client that can comprise that same majority of your income all over again. Instead of getting another client that makes up 40 percent of your total revenue, focus on getting five new clients that bring in 8 percent of your total revenue. Stronger diversification means that your income is decentralized, so your operations won't get torpedoed in the event that the client stops working with you or goes out of business.
5. Use it as a learning experience.Ultimately, the biggest lesson is to do your best to avoid client saturation so that you are not dependent on one client to provide all or most of your revenue. However, it can also teach you which team members are the most resilient in a crisis. Taking a major revenue hit can show you which resources are truly available to you and how you can better assess those resources as well as your sales funnel and other critical aspects of business development. Use this experience as an opportunity to learn more about your business, customers, industry and markets as a whole, so you can find new ways to improve your inbound and outbound marketing efforts.
If your largest account suddenly drops and you don't ameliorate it right away because you're in panic mode, it can result in total financial ruin for your employees, teammates and family. However, losing your biggest client doesn't have to mean the end of the world. When you take proper steps to avert the crisis, then address your sales cycle and revenue composition, you can prevent this type of emergency from happening again.
Martinez & Shanken, PLLC writes for CountingWorks, an accounting news and advice website. Reach the firm at [email protected].
About Martinez & Shanken, PLLC
Martinez & Shanken, PLLC is a Certified Public Accountant (CPA) firm based in Gilbert, Arizona. We provide a full range of accounting, bookkeeping, consulting, outsourcing and business services. Partners Deborah Martinez and Earl Shanken work to ensure your business accounting is done with integrity and to your satisfaction.
