Are all your MSP eggs in one basket?

Richard Tubb

For most IT Solution Providers and Managed Service Providers, while you’d like to think that you treat all clients equally well, the reality is that there are one or more of your clients that you usually think of as V.I.P’s.

These clients are typically given more of your time, attention or resources, either because they are a prestigious client for you to be associated with or, more commonly, that as a single client they account for a large chunk of your revenue.

While you are typically proud of having prestigious or big clients on our books, is it really a good thing for your IT businesses or could it affect your businesses stability and longevity?

All Your Eggs in One Basket

EggsThe challenge with this scenario is that while you’ve become comfortable with being handed business by your biggest client, your client has also become accustomed to handing you work and expecting it to get done, no questions asked. If, for whatever reason, the work you do for them doesn’t meet their approval – perhaps you push back on unrealistic timescales or insist on more realistic budgets – then the relationship can sour quickly, the client being unused to having their expectations challenged.

You’re also left in the very vulnerable and anxious situation of considering whether you should say anything but “Yes!” to every one of the clients demands and risk upsetting them, for fear of losing the large amount of business they are putting your way.

You’ll be familiar with this scenario if you have any one client who brings in more than 20% of your current revenue. It’s very concerning to think of losing a 20% chunk of your revenue through the loss of a single client – and this will lead you to make some less than rational decisions.

For some IT businesses, they have single clients who bring in 80% or more of their total revenue. In this situation, it’s almost as though your business is working solely for that client! Beware, this situation will put unreasonable pressures on your relationship with that client.

If any of the above strikes a chord and you have a single client who accounts for 20% or more of your business, Market to other clients

Creating a Marketing Plan

Marketing-planCreate and execute a marketing plan to find more clients. You may not feel the need to reduce the amount of work you directly do for your largest client, but reducing the percentage of revenue they contribute by growing revenues overall by adding new client works is a step that will help bring you peace of mind.

It’s easy to put off Marketing in favour of doing more and more work for your existing big client. But if you do this, your situation will never change – your big client will continue to provide the bulk of your revenue and you’ll continue to feel the worry and anxiousness associated with having all your eggs in one basket. If the work from that big client dries up, then what?

Executing on a marketing plan doesn’t need to be all consuming. You can still complete work for your big client while taking baby steps, marketing and meeting with new clients.

Over time these baby steps pay off. Adding the odd new client, even if they are much smaller than your big client, won’t change your business overnight – but add enough of them and the percentage of revenue your big client gives you starts to drop. As this percentage of overall revenue drops, so does your stress levels. You’d never want to lose that big client, but if for some reason you did, it wouldn’t mean the end of your business.

Conclusion

Having a single client who contributes 20% or more of your overall revenue may seem like a good situation, but it inherently comes with it’s dangers.

Look to spread your revenue across multiple clients – increasing your marketing efforts to find new clients if necessary – and reduce the risk, anxiousness and worry - that comes with relying on a single client for the bulk of your revenue.