Huge Customers and Business Risk: Do and Do Not
“Do, or do not…there is no ‘try.’ ” – Jedi Master Yoda
Huge customers are great when you have them, but what happens if and when you lose them? It can be a disaster, and even put your firm at risk. We see this more and more in today’s market. The most successful and growing firms often have one or more very large customers that grow to dominate their sales and influence how they do business.
Here’s of short list of critical dos and do nots:
- Do not allow one customer to dominate your sales growth to the point where your business is at risk if you lose them.
- Do build other new customers to diversify your sales mix.
- Do not allow a sales person to be the only one to own the relationship.
- Do allow a CSR to own at least part of the relationship.
- Do build your own relationship with key contacts, like the owner or CEO.
- Do not increase staffing costs without a plan (and the courage) to downsize.
- Do have employment agreements, including non-compete agreements, with all employees that have customer relationships. You can have more enforcement leverage than you may think, even in states that make it hard to enforce non-competes.
- Do not make huge technology or equipment investments for only one customer.
- Do consider a formal purchasing agreement that protects both parties if the relationship should end.
In larger firms that specialize in fulfillment, they most often have contractual agreements. These agreements can protect both firms from damage resulting from ending the relationship. For example, if you make a big investment for one customer, they agree to take over that investment if they leave before the term of the agreement expires. If you have the opportunity to gain a “lion” customer, you may want to research this topic, and consider developing a more formal contractual agreement to protect both you and your customer.