Have One or Two Big Customers? Beware!
Beware of thinking it is very profitable to have one big customer that you get to know extremely well, is easy to do business with, gives you most of its work, and is like family.
Last week, I decided to call a printer I started speaking with back in 2007. This company was in Huntington Beach, CA. That’s right, WAS. The printer was in business at least until September 2010, which was the last time we connected.
Back in 2007, I met the owner after speaking at a conference. He mentioned liking the idea of surveying customers, but the shop really only had one big customer that represented about 80 percent of its business. My first reaction was, “You’re nuts! Isn’t that scary?”
“Yes, to some degree,” he admitted, with a smile. Speaking at that time, the owner further noted, his business is very profitable and the customer is like family, the shop gets all its business, he knows the executives, and they are easy to work with. He just wished all the other smaller customers were that way. He said the business was easy to manage this way.
Fast forward to September 2010. I noticed he signed up to attend a webinar I was giving, but he never made it. I thought maybe he was busy, but for the past six months I’d been wondering how he had done over the course of the past three years. Did he still have that one big customer? Had he diversified, found other customers? Was he doing well after this horrible recession?
On April 28, 2011, I decided to pick up the phone to see how he was doing. When I called, I got the “this phone number is no longer in service” message. At first I thought maybe I dialed it wrong, so I dialed the number again. Same result.
I went to the company’s Website address and got the “no website found” message. Then I tried Google and got a Google map with the little flag sitting there with his business name nicely indexed with the exact phone number I just tried twice. A business is dead, but still registers as a viable business on the Web. Feels kinda creepy. No one is home or alive for that matter.
My last thought was that maybe another printer bought the company, but I doubt it because that printer would be smart enough to redirect the phone number and Website. Also, no one in their right mind would buy a printer that only had one big customer that likely went south in the recession or had something else bad happen to it.
The company is gone. Another printer bites the dust. I heard a statistic yesterday on a printing webinar that projected another 1,000 to 1,800 printers will go out of business this year.
No management team can afford to sit still, get complacent, milk the cash cow, and get comfortable. It is a tough world out there. Beware of someone moving faster than you in your industry. Refine and reinvent.
I hope this example helps those printers out there banking on only a few large customers to make revenue targets to change their thinking, and instead think about how they can diversify their businesses to have a healthier foundation. It doesn’t happen overnight, but with discipline and perseverance, you can build a balanced base of business to remain healthy over time.