Beware the Golden Goose…
Do you have a Benefactor Client? Someone who: Probably has a strong presence in your industry; they are easy to manage; you have a good relationship with them; and the custom they give you is longstanding, reliable and lucrative.
Maybe the ongoing work is a bit of a given. Maybe you don’t have to work too hard to keep them happy, or to keep the income flowing. Maybe you’ve already come to see them as a bit of a ‘Golden Goose’ to your business?
Don’t get me wrong, there are many advantages to having a Benefactor Client:
- They can help grow your reputation: A Benefactor could harness the power of their reputation, to help you obtain bigger customers and persuade other industry leaders to endorse you.
- They can provide a steady income stream: A retainer or contract for ongoing work with a Benefactor Client could provide your business with a certain level of predictable revenue and help alleviate financial pressures.
- They can increase your recognition as an expert: A Benefactor could help expand your knowledge in a particular area or expertise, helping you to position your business as an authority in your niche.
- They can provide extra networking opportunities: An invitation from your client could open doors that would otherwise have remained closed or required considerable work.
Sounds great, doesn’t it? However, these highly desirable benefits and opportunities come at a price, and a flipside that can pose a significant risk to your business:
- They can cause instability: Business from your client could be consistent, but the work may not be. You will need to consider how to resource your business efficiently and deal with the highs and lows that may come from your Benefactor Client’s own seasonality. Your client’s financial situation may also affect you. You will need to consider how you could protect your business if your Benefactor encounters cash flow problems or a change of direction or ownership. After all, you may be the last to find out.
- They can unduly influence your mindset and goals: There is a danger, that to keep your client happy you build your business around them, ignoring your own business goals. This could leave you with little time or inclination to work on your business model or CPD.
- They can trigger complacency: You may become a little too comfortable and end up taking the relationship with your client for granted. You may be tempted to overlook the need for formal business agreements. Or, vice versa. Your client may use the strong relationship they have with your business to renegotiate prices or terms, or they could become slack with payments.
- They can reduce your external market visibility: You may be tempted to ease up on or ignore marketing, reducing the visibility of your business in your industry. Your other connections may grow cold, and you could overlook new opportunities. This could further lead to erosion of marketing skills and an overreliance on outdated techniques.
- They can hinder access to finance: Banks tend to get nervous if your business is over-reliant on a single client. This would affect your ability to obtain funding and in turn, reduce your capacity and options for growth, expansion and for acquiring new clients.
- They can inhibit innovation: If your time and resources are dedicated to one client, it could prevent you from developing or diversifying into other areas or new products. It may also affect your ability to service additional clients, or end up consuming resources from existing ones.
With some regularity, I come across a business in the grip of turmoil, where they have lost their comfortable Benefactor Client and suddenly found themselves needing to make up a substantial shortfall in income and brush up on all the skills and activities they have neglected.
While there is no need to kill the goose (drop an existing Benefactor) or avoid acquiring one, some smart planning is required to make the most of the opportunities, without over-exposing yourself to the risks. These four tips are a good start:
- Avoid Exposure. Consciously pursue a varied client base of large and small customers and continue to network and forge new connections, so as to avoid any single client accounting for an overbearing proportion of your annual sales.
- But Don’t Go To The Other Extreme. In the same way that relying on a single Benefactor Client can create excessive exposure, spreading yourself thinly across a volume of small clients can damage your ability to deliver and maintain quality. Instead, start small and build up your client portfolio gradually, keeping an eye on service, quality and retention. This will allow your business time to adjust and grow safely.
- Develop Contingencies. Create an actionable contingency plan you can put in place quickly should things turn sour with your client. Stress-test your business to identify weaknesses and exposures, and consider how you could adapt current products or services to serve a different market.
- Make Yourself Indispensable. Position your company, product or service as indispensable to cement its future in your industry or niche. Be prepared to adapt your offering in response to change to ensure it is always needed and valued, rather than nice to have and/or taken for granted.
Benefactor Clients are an excellent way to give your business a boost or give it some stability in a rocky period. But, you should always keep your business moving forwards. Don’t let yourself become reliant on your Golden Goose, you just never know when it might be poached by a wily fox or meet some other misfortune.