Discussion Good/bad of depending on just a few large clients.

[Saturn]

I'm ending the year with just a couple clients making up a very large percentage of my overall sales/work for the year and I'd love to hear from other smaller shops that have either leaned into this, or been burned.

Assume it's a longtime good relationship with another small business (no chance of "Bob" retiring and the new guy choosing a new vendor) and the future outlook appears sustainable on both sides.

I imagine there's a ton of little shops that get most of their work through just a handful of contracts, so I'm generally more interested in success stories where both companies expand and grow in step, since obviously there's the "don't put all your eggs in one basket" side as well, which already keeps me up at night...

 

[WildWestDesigns]

In general, I would suggest not having so large of a % of work coming from a small pool of clients. Relationships change for a multitude of reasons and sometimes at the drop of a hat. When that happens, just SOL.

Even if you had a contract for x amount of work over y amount of time, contracts are broken on a daily basis, it just depends on if the cost of breaking the contract is less then honoring the contract. I wouldn't assume that they are always going to be there. We all have changed vendors here and there I'm sure. Maybe have gone back to them years later, but I would error on the side of caution and think things are more subject to change then not. This would also help keep from being complacent and not always checking up on clients and see if they need things etc. I'm a firm believer in always re-evaluating relationships with my vendors on quite a few fronts, so I would imagine that my customers may do so as well. Even ones that I have had for a couple of decades. I reward longevity of a relationship, but I don't always assume that it's going to be there. Not for a malicious reason in of itself, just that better plan for the worst and hope for the best in my mind.

Then, of course, what happens during a year like we had? Even if the relationship hadn't changed, the dynamics of their business could have hit them in such a way due to how things were handled externally that they are no longer able to either do business in that area or do business period. That happens to just one of your customers that you really depend on, what about your bottom line? And something like that is really hard to plan for if just assuming everything is just going to coast like normal.

 

[Notarealsignguy]

We have always relied on a few heavy hitters to make up the bulk of our revenue for as long as I have been around. Just stay on top of your game to keep them and also to be ready to fill in voids. It seems that every time one takes off or slows down there's another one ready to replace them. It's pretty tough to avoid getting yourself in deep with a handful of people, it's just the nature of being in a B2B business. I wouldn't go investing in a bunch of infrastructure to appease 1 client, that's where you can get in trouble. It has to fit right.
When I was in sales I was more of an elephant hunter and that has carried over in my business. Why play the $1 scratchoffs when you can go for the powerball? It is much easier and profitable dealing with a handful of people vs a million small transactions.

 

[Saturn]

Appreciate both the comments. Thanks guys.

 

[CanuckSigns]

About 60% of our sales come from 10 clients. Its not intentional just how it has worked out.

I used to freak out when I hadn't heard from one of our big clients for a while, now I know the best way to get them to place an order is to send them an email telling them im going on vacation next week.

I wouldn't want to have 60% of our sales come from 1 client, thats a recipe for disaster, I know a few shops in this boat and they are always pulling overtime to meet deadlines cause they are terrified their golden goose will find someone else

 

[Texas_Signmaker]

Mine could be called a success story..but may not be all the successful if I loose my few heavy hitters.

 

[visual800]

I never count or depend on anything

 

[TopFliteGraphics]

I have always heard that most (non retail oriented) businesses end up following the 80/20 rule. 80% of you business will come from 20% of your customers. That is pretty much on par with my small company. I primarily deal with home builders and my top 7 clients make up 80% of my business. My biggest client had a fantastic year and ended up being about 1/3 of my overall business. I am not really worried about that since I have had a relationship with them since 1998. As a mater of fact, they are actively trying to help me get work from another division of theirs.

The best part about working with larger clients is you rarely have to worried about getting paid. I have been stiffed in the past by walk-ins that never return but not once in 20+ years of dealing with big businesses had I had an invoice that went unpaid, even when I produced signs that they did not end up using.

 

[signheremd]

I think the best philosophy is to treat every customer as important. Most large customers try you with a small job. They may find you because their cousin or neighbor used you to do a birthday banner. When a new customer contacts you, you can never be sure that that will not lead to a large account. As far as choosing customers, choose all of them for which you have the expertise to do the work - hire folks to help if you need to. Contact your customer base periodically, build a relationship, once a quarter is not intrusive, in most cases once a month is not as well. Target your ad campaigns toward the type of work you wish to build or toward the season that such work typically follows. Appreciate every customer - not for their personality, this is business, appreciate them for making your continued success possible.

 

[unclebun]

I think it's common to have several customers who do more business than all the others. In most businesses like ours, we don't actually create that situation on purpose. After all, how many of us have salespeople who are specifically targeting certain businesses? It's normal for your big customers to come and go. The fortunes of their businesses change, their business changes. We've seen some who feel they "outgrew" us when they were acquired by a huge investor who preferred to use vendors he had used in another market, and brings them in to do their work now. Others have taken their tradeshow business in-house by hiring a designer and availing themselves of the "trade-only" wholesalers we all use. At the same time, we see new businesses start and become our big customers, or businesses which are acquired and decide to use us instead of whoever the business used before.

The key is not to purposely limit yourself to only one or two customers and close off all the others.

 

[Texas_Signmaker]

uncle ben said it well.

I've had a few large clients. Two years ago one filed for bankruptcy and all the work dried up. That following summer an even bigger client came on board. They represent about 40% of my business, but I was doing fine before them and if they go I'll be doing fine... it's just what happens.