The Risks Of Relying On One Big Client

What happens when you win a big client that makes up a significant proportion of your monthly revenue and consequently it will demand a lot of your time? Well, excitement can quickly turn to long hours and that in turn can detract your attention away from your other paying clients. So what are the pros and the cons and the risks of winning a large client? That's what we're going to be covering in today's episode of the Agency Accelerator podcast. Accelerate your agency's profitable growth with tools, tips and value added interviews with your host agency owner and coach, Rob DaCosta. We had some interesting conversations in the self running agency Group Call recently where we were discussing the pros, the cons and the risks of winning a big client that ends up accounting for a large percentage of your revenue. I'm sure you can relate to this because it's probably happened to you too. So I thought I'd record a podcast episode to share some of the thoughts that we shared in the group with you today. It's super exciting when you win that really big client and that excitement quickly turns to whoa, now we've got to service them. How are we going to cope? And this can lead you to hiring new team members, juggling things around, and of course making sure that you deliver what you've promised this new client. But one thing to be mindful of is if you win a big client that might be two to three times the size of your next biggest client, then there's a tendency in the agency to give that new client carte blanche access to you and your team. After all, you want to do a great job and you are super happy that they selected you over perhaps bigger agencies. But if you're not careful, this can really quickly lead to over servicing, working long hours and and getting lots of stress in the agency, all to keep this new client happy. So even if their fear equates to a lot more of your team's time, we still need to be really mindful about putting clear boundaries in place and making sure that we don't end up over servicing that particular new big client. You also need to make sure that your team understands this and that means that there's a clear scope of work that they're working to that you've broken that down into time allocation. Everybody's self managing their time and obviously everyone in the team knows what they need to focus on, but also that they don't take other clients for granted as well. Now winning this big client might be one step on your agency's journey of Growth. So know that when you've won this big client, you've got two choices. You either use it as an opportunity to take the next step in your agency, hire more people, put more systems and processes in place, and then work super hard to win more clients of a similar size, or you recognize the risk that this large client brings because you are putting all your eggs into one basket and therefore you work super hard to spread that risk by winning more slightly smaller clients. Now, without being the bearer of bad news, history says that at some point, probably through no fault of your own, you're going to lose this client. Even if they're on a retainer for you and you're doing a great job, that's going to happen. So let me quickly tell you a story about when I ran my agency, we grew over time. As you know, we had 25 staff in the end, but maybe about three or four years into the agency we won our first super big client. And this client was probably three times the size of our next client. And then very quickly we won our second big client. As I've already said, we worked super hard to do a great job for them. We were kind of punching above our weight in terms of the size of agency that we were versus the size of agencies they'd been used to working with in the past. So that made us want to work even harder to prove that they'd made the right choice. And we kept these clients for quite a long time. But within about a space of six months between the two, each of our clients got bought out. One of them got bought by IBM and the other one got bought by Adobe. And guess what? We really had the rug pulled from our feet because we didn't really get a chance to re pitch because obviously IBM and Adobe had their preferred agencies and they just wanted to roll all of their marketing services into their preferred agencies. And therefore we didn't even get a look in and our client contacts were really sorry but that we were let go. So within a space we kept these clients for maybe five or six years, but then within a space of six months we lost both of them. Now, fortunately, during that time we had put some of the advice I'm giving you today into practice and we'd started mitigating our risk and we' increasing the average order value of most of our clients. So whilst they weren't as high as the two clients we lost, they were much closer. Which meant that when we lost these two clients, it wasn't the end of the world and we didn't have to make some bad decisions, which I'll talk about in a moment. So my advice to anybody that is thinking about putting all their client eggs into one basket because they've won this really big client is you need to spread your risk one way or another. And I would say to you yourself, what would be the impact to my agency or my business if I lost this one big client? And often the answer is fairly significant. So start focusing on spreading your risks so that if you do lose your large client, it won't be catastrophic and you won't have to make some really difficult decisions as you lurch into that space of famine, such as being desperate to win some business to replace that revenue, which often means discounting. Or it could well mean taking on the wrong kind of client. Or even worse than that, it could be letting staff go. You need to anticipate all of this and plan for it. So as I said, the question to ask yourself is what would be the impact on my agency if I lost this client? And then start planning as though that's going to happen. So that means making sure that all your time isn't being sucked up into this new client and you actually still have time to focus on business development to win more clients. Obviously you need to make sure that you are putting the right structures and infrastructure in place to support this new client and giving yourself capacity to support more similar clients or making sure you're winning more smaller clients. As I said, this was a conversation in our group coaching call this week that someone asked and a lot of people could relate to that particular challenge. The member of the group has just won this large client and they're already thinking about this. They're already worried about the impact on their agency, both from a positive sense in terms of growth, but also a risk as well. So I just wanted to share with you my thoughts on that today. Something else to bear in mind is that larger clients can often be worse payers and can have a significant impact on your revenue and your cash flow. So make sure that you are getting really clear around payment terms and if their payment terms are not favorable to you, then you want to really think carefully about whether you want to take them on. In fact, one strategy might well be in your agency to deliberately not win a big client because of the risk it puts and the strain it will put on your agency. Of course, another risk is that you get so consumed into servicing this client that you have no bandwidth in your own time or your agency's time to focus on business development and it really can cause you to lurch from feast of famine because as I said, if you lose that client, you just don't have anything in the wings to replace it. So this is something else that you want to think about. And when you're working on your vision and your plan for your agency, think about the size of clients that you want to win. What should the average order value be and how does that increase over time? And yes, winning a big client may well catapult and speed up the delivery of your plan, but you also need to be cognizant of the risk that it presents as well, and not just get flattered by having your ego stroke that someone wants to pay you that much money, but actually say, does this fit in the strategy of our growth? And what is the risk to the agency? And of course, what's the fit for them as a client? And do we think we can do a great job? Just remember that having the lion's share of your business tied to another company also means your fortunes are tied to theirs. If their business flounders, so might yours. If they change tact or they decide to move supplier you, you could find yourself out in the cold through no fault of your own without sufficient alternative sources of revenue. And that is a really risky place to be. Okay, a short and sweet episode today, but I just wanted to share my thoughts with you because as I said, I've been in this place before of winning a large client and being very excited by it, and I'm sure you have as well. But you need to look beyond that and you also need to be thinking how this aligns with our vision and be planning accordingly and planning for what happens when you lose that client at some point in the future. If you do that, then you will be able to win these clients. You'll be able to service them really well, but you'll also have the time to focus on backfilling with more clients in the future so that you are not just relying on one client and putting all your eggs in one client basket. So, food for thought. I'd love to hear about your experiences of this, so please do feel free to send me an email. My email address is in the Show Notes, but other than that, I hope this was thought provoking. Have a fantastic weekend and I'll see you next week for the next episode of the Agency Accelerator Podcast. Sam.