As a small business owner in a B2B industry, it's easy to wake up one morning and discover that 30 percent or 50 percent of your business comes from the same big customer. Often, this happens so gradually that you don't even realize it. Relying too heavily on one customer, however, puts your business at risk. What if the contact you work with at that company gets laid off or takes a new job? What if the company cuts its budget or changes its business model? What if the company starts paying invoices more slowly or not at all? Or what if they want to renegotiate to much less favorable terms?
Any of these situations could leave your business high and dry. Here are some tips to diversify your customer base — and protect your business.
- Start by expanding your circle of contacts within the customer company. Never rely on just one or two contacts. Use LinkedIn to find mutual acquaintances and reach out to other decision-makers at your client company. Have your salespeople do the same. The goal is to develop a strong network of contacts within each client company so that when one contact changes jobs, it doesn't put your relationship at risk.
- Expand into different departments of the customer company. If you're working with a really huge client, try targeting different divisions or subsidiaries (which are essentially different businesses). This can reduce your risk while allowing you to benefit from your existing connection with that company.
- Leverage your relationship with the big customer to target related businesses. Depending on the nature of your contract and relationship with your big customer, you may not want to target their direct competitors. However, your relationship with them can sometimes give you an "in" with businesses in similar or related industries.
- Partner with complementary businesses. Forming an alliance with a non-competing business can expose you to more diverse clients. For instance, if your company sells office furniture to corporate clients, consider partnering with an interior designer or space planner who works with the same customer base.
- Expand your networking efforts. Move beyond your current business networking groups, trade shows and industry conferences. Break out by attending events your new target customers attend. Offer to speak on a panel or lead a seminar to get yourself out in front of these prospects.
- Brainstorm how your business could serve a different customer base. For example, if you currently market to Fortune 500 corporations, could you also market to midsized companies? Look for a target market that’s different enough to offer new prospects, but similar enough that you can easily market to them.
- Increase your activity on social media. You and your salespeople can attract new prospects by boosting your presence on social media. For example, on LinkedIn, you can provide something of value by sharing content that's relevant to your customer base, answering questions, starting discussions or commenting on others' achievements.
Ideally, no more than 10 percent of your business should come from one client at any given time. Once you do manage to diversify your client base, make sure it stays that way by monitoring your cash flow statement. Your cash flow statement not only shows the amount of money coming into and going out of your business, it also shows where it comes from and where it goes. By regularly reviewing your statement, you will know when one big client starts to dominate your income, and you can take steps to diversify before things get out of hand again.