Is your biggest customer your biggest problem?
Recently I stumbled across a statistic on Twitter:
“78% of business owners say their main customer contributes 30%+ of total revenue”
— Glen King PR (@glenkingpr) June 9, 2017
This really surprised me. Thirty percent seems like an awfully high number. The risks to our businesses in this scenario are obvious; primarily, if the customer abandons your products or services it’s a big hit to our turnover. Will we survive?
But there are an abundance of less obvious risks… For example, pandering to a single customer out of fear of losing them can result in creating un-scalable bespoke services; We build our systems around keeping this mega-client happy at the expense of building something that can be sold again and again to others. It holds back general innovation in favour of customer specific customisation.
If you ever want to sell your business, I’ve always been taught that no single customer should account for more than 5-10% of turnover. I found this rule in the awesome book “Built to sell” by John Warrillow. If you are interested in learning more about selling your business one day, or even just automating some of its operations, I can’t recommend it enough.
At Web Wise, we’re very diversified. We offer low cost services that appeal to a wide range of customers. Our most valuable customer is actually another agency that refers us a lot of work. They’re responsible for just 9.21 % of our turnover which I’m very proud of.
What’s your magic number?
– Dan Wiseman, Founder