Growth opportunities are few and far between, and virtually always include some risk for the smaller business. Landing a “prize fish” or a very large client can alter your firm and set it up for future success with the appropriate planning. However these large clients can bring both growth and pains if not handled and understood properly.
The advantages of catching the “big one”
The following are some of the advantages of landing a big client for your business so stop your celebrating and take some notes:
- Increased revenue – larger clients typically have larger budgets and are better at forecasting work, so they can confidently place large orders.
- Increased resources – larger clients may need extended services you don’t currently offer so you can invest in new tools or services for that client and future projects
- Regular cash flow — contracts are often longer in duration, resulting in more predictable cash flow.
- Growth opportunities – with more certainty about revenue, you can concentrate on your expansion.
- Gaining more credibility — gaining a major, well-known client can help you build your own brand.
- Opportunities for networking – you may be able to sell to other divisions, suppliers, or new relationships.
This is all well and good. However, there are some inherent dangers lying out there in the water.
- Dependency – losing a large client can result in a significant drop in revenue. When a large client terminates a relationship, it can even sometimes lead to the insolvency of a smaller company.
- Losing focus on smaller clients – Pulling a large client can make companies ignore smaller clients which can lead to lost opportunity or a very narrow client portfolio.
- Larger finances come with increased expectations, which are both demanding and slow. There could be multiple layers of approval and process, slowing you down and diverting your attention away from other clients.
- One-sided price negotiations — when dealing with larger clients, you often have less negotiating leverage over price and payment arrangements.
- Slow payers — larger clients may take a long time to pay their invoices, causing cash flow problems for your company.
- Costs of scaling up — You may need to scale up your business in order to deliver to your big client, which might put a strain on cash flow.
Regardless of which clients you target, running a business comes with risks. Therefore, you are advised to acquire the appropriate protection in order to protect yourself in the event that someone files a claim against you. Research your liability insurance options today.
When strategically creating a target portfolio, you should aim for balance. Having one or two big fish can be fantastic; however, your smaller clients can all make a positive difference to your bottom line. What’s more, those small clients may themselves grow into the catch of the year. Your goal is to be ready on the embankment to help support their needs.
