It’s happened…you’ve lost the customer that provides 40%+ of your annual revenue. Many business owners have been in exactly that situation, and I expect to see at least one of my clients facing this every year. When it happens it’s only natural to fear the worst – “This will mean the end of my business?”; “I’m going to have to let all my staff go”; “I’m not going to be able to take enough money out of the business to live on”.
But in my experience it’s not really the end, it’s the beginning of a new chapter in your business that will eventually make it better and stronger. So if you’re currently facing this sort of situation, or fear that you might be at some point soon – I’d encourage you to read on.
Step 1 – Sit down, breathe. Once you get over the shock and possibly the anger, it’s time to sit back and calmly assess the situation. Your accountant can help you to see just how long your finances will sustain the business – and it’s nearly always longer than you think.
Step 2 – Take stock of the situation you were in. Ask yourself the following questions (I think you’ll be surprised by the answers).
- How much of your time has been taken up by this customer?
Often you will find that they actually occupy well in excess of the percentage of income that they bring in. You find yourself going out of your way to spend that ‘little bit of extra time’ to keep them happy.
- Did you charge for ‘the little extras’ that you gave to them? Probably not!
- Have they been taking advantage of the fact that they are your biggest customer by making the time between payments longer and longer? If this is the case, have they really appreciated what you’ve done for them in any case?
- Have you been charging them at a ‘special rate’? The answer is ‘almost certainly’.
Step 3 – Work ‘on your business’ rather than ‘in your business’; with that big client gone you’ll probably have a bit more time to do it. Some areas to consider might be:
- Pricing: are you charging enough for the products/services you provide? Too many small businesses undervalue what they do.
- Products: are there other products/services that I can offer to my existing and new potential customers that will be more profitable?
- Promotion – spend some money on marketing! It might sound odd that an accountant is suggesting you spend more money at a time like this – but trust me it’s important to your recovery. Don’t think of it as a cost but an investment in your future income.
- Firm up your other customer relationships – maybe ask them for feedback to help you improve your products and services. With happy customers you can also ask for referrals; if they are happy with what you are doing for them they should be more than happy to provide a recommendation for you.
Step 4 – Move on! Rather than sitting back and moaning about how your ex-customer has ‘ruined the business’ change your outlook and be grateful for the opportunity (and more importantly the time) to make your business better and more profitable.