Manage your single customer risk

by Ashvini on July 5, 2012

in Entrepreneurship

For many entrepreneurs, working especially with a business rather than a consumer( serving other businesses), being dependent on a single customer is often a big risk.

Starting a business has always been a risky proposition and customer’s fickleness often adds to that uncertainty. If you are an owner of such a business, you know how much a loss of prime customer can impact your overall bottom line. Large customers may change business policies from time to time and drop a few vendors. On the other side, these vendors face tremendous difficulties because of this.

Though it is important to devote your best resource to important customer(s), depending solely on them raises following risks

  1. Loss of revenue
  2. High cost of unproductive employees
  3. Bankruptcy in extreme cases.

Like all risks it has to be managed and here a few tips to do that.

#Make sure that you are not stuck to narrow range of business

There is a fine line between too much specialization and making yourself redundant. Keep your business flexible and train your employees on new skills to offset the risk.

#Start talking about money as soon as possible

If you are working for a loss initially because you want show your customer proof of your capability, please remember it cannot last long. Get back on negotiating table about payments as soon as possible.

#Manage your in-house cost

You cannot obviously reduce salaries of employees much and the other mandatory costs such as electricity bills are here to stay. Keeping a check on unnecessary cost is thus essential to survival

#Continuously provide value to your customer

Provide higher standard of work, additional value, great documentation etc. Big businesses often drop one project to start another. If you have been doing great work , you will obviously figure in their minds.

#Invest your earnings

Plough your earnings back into business for example to find new business, develop new skills or better marketing

#Keep an eye on your cash flow

Determine how long you could go on, if you lose your main customer. Take steps to improve the cash flow.

#Do not hesitate to ask for references

Using these references makes it easier for you to get “toe in the door” to other customer projects. Also collect all the communication from customer where it indicated any kind of cost savings, value addition or any improvement that happened because of your employees participation.

#Most important: Empower your employees

Allow them to take important decisions and manage customers. They are the ones who have the highest impact on customer.

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