Many of the fastest growing IT Solution Providers I’ve worked with have fallen into the trap of having a single client account for a large part of their revenue. It’s easily done. Your client is growing at a rapid rate and, as their reliable IT provider, they farm the work out to you. You’re grateful for the additional revenue. It never occurs to you to say “no” to the work – and indeed, why would you consider looking a gift horse in the mouth?
But there is a conventional wisdom that says that you should never let any one client contribute more than 20% of your overall revenues. In an earlier blog post I asked “Are all your MSP Eggs in One Basket?” and you should be concerned if they are.
It’s easy to understand why you should be concerned with more than 20% of your income coming from a single big client. From your perspective, there is the ever present background worry that if you take a wrong step in the relationship with the client that they can easily take away a huge chunk of your business revenue in a single swoop. This can cause sleepless nights and anxiousness for you and your team.
Given these worries, while there is no sense in panicking, you should start taking steps which will prepare you to deal with any issues that occur with that client.
It’s easy to be at the other end of a telephone or email for your largest clients, picking up work as they hand it across. Don’t be tempted to assume anything about the relationship from emails or telephone calls – meet with your client regularly, become familiar with how decisions are made within their business, stay aware of new decision makers who are brought on-board who may become involved in the work you do with the client. In short, keep your ear to the ground and stay prepared for any changes in the relationship.
If you’re meeting with your big client regularly, then as well as listening to what is happening in their business, you can share what is happening in yours.
Use the opportunity to set expectations over workloads. There’s an old saying “Lack of planning on your part doesn’t constitute an emergency on mine.”
Let them know that while you value the amount of work they put your way, that this doesn’t mean you’ll be willing to accept unrealistic or overly demanding schedules for projects. There’s no need to be aggressive about stating these facts, but during your regular meetings, when a new project is brought up, let the client know the timeline of steps they’ll need to take to make sure that you can deliver the work for them.
There are always tendencies for big businesses to bully their suppliers – making payments late and dealing with administration enquiries from you with a less than urgent nature – yet all the time expecting your business to deliver work on time and without questions.
If you treat a client as a V.I.P. then ensure that you are treated as a V.I.P. in return – with payments made on time, every time. For most businesses, a quiet word with the CEO or MD can ensure the clients finance team treats you with all due respect and doesn’t lump you in with all the other suppliers. If payment turnaround does start to slip – takes steps to address this immediately.
Many IT Solution Providers find themselves in a situation where a single big client contributes 20% or more of their revenue. This situation can cause a level of unease and anxiousness about having all your eggs in one basket – concerns that if your big client ceases sending the work your way, you’ll experience a dramatic (and perhaps catastrophic) drop in income.
If you’re in this situation, you shouldn’t panic – but you should take steps to begin managing the client more effectively. Meet with the client regularly to understand what is happening in their business. Set expectations with your client upfront, so they aren’t making unreasonable demands of you, and above all, ensure timely payments from your big client. Combined, these three strategies should help you feel more in control of the situation and sleep a little easier of a night not worrying about losing your main source of revenue.