We all know that our big clients usually bring us the biggest projects. And big projects are often the ones that bring in the most money. But going after those jobs can be the most time intensive and costly, even if you don’t win the job.
Revenue isn’t the only variable at play here either. Maybe the client is small but well-known within its industry. Perhaps it isn’t bringing in a lot of revenue, but it’s sending lots of referrals. A client like this can be a bigger catch than a high-revenue one.
Big clients aren’t always the best clients
Serving large clients is fine and they can provide some great learning experiences upon which to grow your business. But each client should represent a proportionate percentage of revenue. When you start to depend on a couple of major clients you place your business at risk.
Big clients are sometimes difficult to please and have a lower margin, plus they’ll be weighing you up against your competitors. It’s tricky to know the best way to scale your business.
A book called ‘Take Your Shot’ by Robin Waite, bestselling author for online business start-ups, is great for helping you think through those light-bulb moments to push the boundaries on business growth, removing any obstacles.
Setting money aside
Forgetting about money for the moment. There are other benefits to be had from diversifying and standardising.
Standards need to change to adapt to some client’s needs, quite often the case with larger clients, again the resources involved in adapting are a massive consideration. It is far easier to diversify when looking to achieve scale.
Similar sized clients, no matter what the industry can have similar needs. Achieving efficiencies with one client can therefore be applied across the whole client base.
Pixie Dust AKA Customer Lifetime Value (CLV)
In Chapter 10 of the book ‘Take Your Shot’ it talks about Pixie Dust AKA Customer Lifetime Value (CLV), basically this helps you to see the bigger picture around one-off big project’s for say £10k, compared to a number of smaller projects that start at £1k each.
Sometimes clients want more than one big project from you, so thinking about your primary offering, then, looking at what other key requirements a client may have around this initial project or further down the line is key.
One-off or many?
Yes, you could build one major website for big money and never see that client again once the project is complete. Or, you could build 10 new websites, provide monthly maintenance and performance enhancements, troubleshooting etc to keep the website working as well as it possibly can, like a finely tuned and well-maintained car. You could also review websites to suggest bespoke functionality which contributes towards the creation of competitive advantage.
People buy from people
Consistently servicing those smaller projects worth an initial £1k each can have additional benefits for all parties. It’s easier for smaller clients to pay for the natural add-ons that come over time as its less of a risk when they have already worked with you. The trust is already there.
Extending services with initial, smaller projects, provides the opportunity to consistently sell, achieving economies of scale through proven services that are easily repeatable, time after time. An example here would be a monthly website maintenance package to ensure a website is kept updated and performing at its best.
The bigger picture
It’s about seeing the bigger picture. Those small clients that you get more of have a long-term value because they will want more than just one thing from you. They are a customer for life, not a one-off big money maker.
It’s so much easier when you can continue to work with people that you have built up trust with, that you can satisfy their ongoing requirements.
Nailing the product/service, pricing and value proposition is the first step to stablishing the start of that customer journey, the start of that customers lifetime.
“Creating a long-term Customer Lifetime Value is simple, obvious and yet sometimes so easy to miss,” said Robin Waite. Look at the initial project figure to understand what the future value could be, remembering not to just chase the big projects.
So many business mentors talk 5 and 6 figure sums which is all well and good, but it’s the continued work with clients that has the most long-term value. The amount of work that goes into getting a new client far outreaches that of managing an ongoing client well.
As per the example in ‘Take Your Shot’, look at these figures:
- 1 x £10,000 project
- 10 x £1,000 individual projects
Now the two numbers are equal, but the amount of work that goes into the single £10k project, isn’t that much more than the 10 smaller individual projects, yet you could add on a £50 monthly maintenance and hosting package. So, lets look at the figures again taking this into account:
- 1 x £10,000 project plus £50 per month = £10,600 per year
- 10 x £1,000 individual projects plus £50 per month each = £16,000 per year
Those ongoing clients may stay with you for a few years or more. By the end of year one, those ten smaller projects are worth 50% more than the single five-figure project. By the end of year three, those smaller contracts are worth a whopping 275% more than the single figure project.
Are business owners focusing heavily on the initial sale and completely forgetting about creating loyalty with their customers?
It’s the loyal customers that stick with you and come back time and time again. It’s these customers that are your best source of marketing, that may need ongoing support packages. They will refer you without even thinking about it, providing you deliver whatever you promise.
The biggest fish isn’t always the best catch
It’s not always clear cut and we don’t want to suggest that clients should go after the smaller jobs, it’s just an alternative take and worth some thought as bigger isn’t always better.
To summarise we’ve weighed up the pros and cons here:
- it’s easier to sell cheaper products and services as less risk comes with this
- the initial investment in resource, money, emotion and time can be far more with bigger jobs and may hold little or no long-term value
- it costs more to win new clients and the bigger jobs, payment terms are generally over longer periods too
- there’s more work out there with the smaller jobs but they do tend to have a limited budget, so sticking to the agreed costs and brief are key in managing expectations on both sides. We all have experience of those clients with unrealistic expectations!
- the smaller jobs provide the opportunity for add-on sales, recurring revenue and repeat business, plus these clients will refer you if you are worth your weight
- smaller businesses can be less bureaucratic, so recommendations are trusted, decisions are made quickly, and everything happens at a faster pace
- By diversifying with smaller companies, you don’t have to worry about the loss of a single client dramatically affecting our revenue
What can you do from now on?
- Look at the bottom line
Ask yourself whether the client brings enough profit to allow you to grow the rest of your client base. Perhaps the client will take out a monthly plan or provide referrals.
- Plan for the future
Think about how you’d recover from the loss of a client and start preparing early. If a big client has just signed a three-year contract, consider the possibility that the client won’t extend or renew. Relationships and good communications are key a for long-lasting business partnerships. Also, businesses with a diversified client base are typically worth more than businesses dependent on one or two major clients.
- Own your mistakes
No matter how successful your business is, there will come a time when you make a mistake. Diversifying your clients and making sure your revenue isn’t coming from one source means you’ll be able to handle any setbacks.
And, always communicate to your contacts that you understand what it will cost them and that it matters to you, because you care about their success. Because if you’re working on any part of their marketing, their success is your success.