So what’s a whale? In this case it’s not a big fish. The whale I’m referring to here is a very large customer. It’s the client that spends more with you than anyone else. Overnight it can take your business to the next level. But if you are not careful, it can also put you out of business.

Pursuing large clients is what most of us strive to do. It’s even better if the company is well known. It gives us instant credibility with prospects and within our industry.

New challenges

But let’s not kid ourselves. Landing a whale is a lot of hard work. As they say, getting the order is the easy part. Ramping up your business to manage their demands can strain the whole organization. HR, finances, and the needs of existing clients can all be impacted.

A whale tail

Even once the large client is up and running, you have a brand new challenge. That is to deemphasize its importance to your business. It’s not uncommon that a newly acquired customer can account for 30% or more of your business. But having any client that represents more than 15% of your business is a flashing red light.

The 15% rule

Somewhere along my entrepreneurial journey, I had read that “no client should represent more than 15% of your business!” I have no idea where I had read this, but once I understood why, I embraced it.

Why the 15% rule? The 15% rule is designed for your protection. As a client moves above 15% of your revenues, their importance to your business grows exponentially. This is because, large, and very large clients end up representing a disproportionate amount of your revenue, your expenses, and your focus. This shouldn’t come as a surprise and is to be expected. But as the saying goes, “don’t put all your eggs in one basket”, because if you do, you better keep an eye on that basket.

When you consider that for most of us, onboarding a large client requires some form of investment. Depending on your industry, it could range from hiring a few people to committing to more physical space, vehicles and equipment that could run into the thousands of dollars. As a result, the financial pressure and risk rise significantly.

The math

So let’s look at this in a pragmatic way. A healthy net profit for many small businesses is 7%, but most barely exceed 4%. So, in a million dollar business that only represents $40,000. Not a lot of money to cover increased costs.

And if we are being honest, most of us sharpen our pencils when it comes to pitching a potential whale. Granted, if priced right, this strategy should put more dollars in our pockets, but it reduces our margins.

This then results in their percentage of expenses exceeding the percentage of revenue. For example, they may equal 20% of your revenue, but because of the discount you provided, they now account for 30% of your expenses. This is normal and so long as they are a client, things should work.

But what happens if you lose that client? Losing the revenue is one thing, but now having to cover all those expenses can become a monumental challenge. Your 4% net profit won’t come close covering an extra 30% in expenses and now your once profitable business can be facing bankruptcy.

However, before it gets that far, you would try to counter the loss by cutting expenses. But reducing staff usually comes a cost of severance pay and those fixed costs, like rent, are almost impossible to dispose of quickly without paying huge penalties. This of course is with money that you may not have.

Growing our business is what keeps things exciting and if done properly can be quite profitable. But keeping your business safe is equally important. That is why the 15% rule is so critical.

So if growing your business is your goal, then you must make growing your existing clients or finding new ones a priority to deemphasize the whale’s dominance. Granted this adds more pressure to your already busy life, but it’s too easy to relax at this point. Once you’ve brought the new whale’s revenue back in line, you can take a break.

By limiting your largest clients to 15% of revenue, it also reduces your dependence on them. Should they leave, and they most likely will at some point, you will probably only face some short term pain. But with a little hustle, you can survive and get back to building your company.

For those that are interested, I’ve created a “Be prepared checklist” that is available for download by clicking here.

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

This is a guest post by Dennis Geelen of Zero In.

Take a minute and think of a few companies that pop into your head that were once seen as leaders in their industry but, for one reason or another, eventually came crashing back down to Earth.  Maybe they have since been surpassed and are no longer a household name.  Perhaps they filed for bankruptcy.  Or maybe you are thinking of a company that was forced to close its doors and shut down for good.

Dennis Geelen

Why be Customer Centric?

When I ask people to go through this exercise, many typical companies pop into their head.  Blockbuster, Kodak, and Sears being among the most notorious that come to mind.

But the truth is, most businesses are not set up for long-term success.  Any company that is currently a leader in their industry could potentially be a footnote in history 5 to 10 years from now.

In fact, the stats are staggering.  25% of all new businesses do not make it past the first 2 years.  50% don’t make it past the 5-year mark and only a quarter of businesses end up being sustainable past 15 years.

That is insane!  The obvious question here is ‘why’?

To answer that question, we need to look at some trends that so many companies (large and small) tend to fall victim to.  Whether they got off on the wrong foot from the beginning or whether these trends slowly creep into the business over time, they are both common to so many businesses and ultimately cause their demise.

  1. They are, or they become, too inward focussed
  2. They are, or they become, too set in their ways

Let’s examine each of these issues and I am sure you will be able to see these trends in so many businesses (maybe even your own!).

First, there is the issue of being too inward focussed.  By this I mean that they have a tendency to spend the majority of their time thinking, talking, analyzing, and strategizing about their products, their services, or their financials. 

Now don’t get me wrong, these are all important things to consider and manage in a company.  However, a major focus (probably the biggest) should be outward.  Your customers.  Who are they?  Why do they purchase your product or service?  What value are you adding?  Why do some choose your competitors products or services?

Being a customer centric company, top to bottom, from your purpose, to your sales, to your marketing, to operations helps protect you from fixating inward too much and losing touch with why you are in business in the first place.

Second, there is the issue of a business being too set in their ways.  By this I mean that a business can become too rigid over time.  This happens when a company has found processes, methodologies, or business models that they believe very strongly in (and likely for good reason).  However, unless you have been living under a rock the past 20 years you understand that things change, and sometimes fast!  If you find you or your team members saying ‘this is the way we do things around here’ your business may be at risk of falling into this trap.  You might be too rigid.

A more subtle way that this can happen is that your business becomes too complacent.  In this case, the phrase you may hear amongst your team members is “if it isn’t broken, why fix it?”  Now I am not saying that businesses should invoke change just for the sake of change, but you easily run the risk of getting into a complacent comfort zone and be ill prepared to be nimble and flexible and open to change when you have to be.  Whether your business is too rigid or too complacent, watch out!

Set yourself up!

The antidote to this issue is to foster a culture of innovation.  Businesses need to be intentional about always finding new and better ways to deliver value to their customers.  They can do this by implementing principles and practices so that their employees are encouraged to come up with new ideas (in a structured environment) and then pilot them and see how they resonate.

When disruptors come along (competitors, economic downturns, changes in consumer habits, pandemics, and so on) businesses need to have a culture of innovation in place so that they can be flexible and pivot quickly as needed

So how do you protect your business from becoming the next statistic and falling prey to these 2 mistakes?  Be intentional about turning your company into one that is customer centric and innovative.  Set yourself up for long-term success.

You may also enjoy Innovation Starts at Home 

THE ZERO IN FORMULA, Dennis Geelen’s latest book, challenges business owners, CEOs, and leaders to think differently about their company.

In THE ZERO IN FORMULA Geelen walks you through the recipe. You will learn what it means to be customer centric, with strategies and tools you can apply to your business. You will understand what it means to be truly innovative, with principles and practices you can implement. You will be guided through the recipe step-by-step to build your successful foundation. You will learn from stories and examples of other businesses and their successes and failures. Whether your business is just starting out and looking for a blueprint to follow over time, or your organization is an existing business and you realize you need to make some corrections and get back on a better course, this book is your guide.

https://www.zero-in.ca

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.