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A huge customer for a new small business can be both a blessing and a curse.  The positive side is more obviousâ€"the business establishes an early recurring source of revenue. Since revenue is the lifeblood of any business, what could be wrong with that?  Nothing, if you don’t stop there.

 

Any new small business owner will tell you that there is never enough time to do everything he or she knows they need to do to grow their business.  In addition to fulfilling customer orders, there are personnel issues, the website and other marketing activities, and an unbelievable number of administrative tasks that must be done even if they don’t help to grow the business. 

 

It seems perfectly logical to focus on just that one big customer when keeping up with that customer’s orders is taking all of your time.  After all, you have too much work to do now.  Why go out and look for new customers?   Wouldn’t it be better to just take care of the business you have? The answer is ‘absolutely not.’ Don’t fall into that trap.

 

Of course you want to take care of your big customer. But you cannot stop there even for a short time.  Doing so becomes a habit and a way of life for too many small business owners. Remember, if you only have one customer, no matter how big, you don’t have a business, you have a job. Eventually it will become clear that you have no leverage and no control even over the fate of your own company.  

 

To drive this point home, imagine that your new business gets off to a great start.  You land that big customer that everyone would want and you take care of them like no other.  Your business grows, you’re hiring people, taking on more office space, profits are strong and you’re living the American dream.  Then, after three years, they still account for 80% of your business and suddenly something changes. For any of a hundred reasons, you’re notified that your number one customer will be your customer no more.

 

Within 90 days, you lay off more than half your staff, take a pay cut and are negotiating with an unsympathetic landlord to take back some of the office space.  As you sit in your office alone at night with your head in your hands, you say to yourself, ‘If only we had gone after other customers when we had the chance.’   This story and this pattern are far too common among small business owners.  It leaves previously successful small business leaders feeling betrayed, humiliated and defeated. 

 

Regardless of your success with any given customer, it is essential that you build a broad base of customers as if your business depends on itâ€"because it does.   To ensure that your team gets behind this goal include “number of new customers” as a metric in your incentive compensation or bonus plans.  As the business owner, delegate less important tasks and stay involved in both the ‘big’ customer account and the effort to bring in new customers.

 

Building a small business on a diversified base of customers is a winning long term strategy.  In doing so, you’ll even out the ups and downs in revenue and profitability. This will serve you well if you ever seek a small business loan or line of credit.  You’ll be creating a business with a higher valuation and one that delivers stability and peace of mind to its employees and owners.  Make sure your small business plan includes a commitment to building a broad base of customers.

 

 


This Entrepreneurship article was written by Jim DeLapa on 1/22/2010

Jim is a recognized business leader whose career spans more than 20 years of entrepreneurship and includes founding companies, investing in start-ups, raising both angel and venture capital rounds, board leadership, hands-on management and successfully negotiating the sale of five companies where he played an active role, two of them to publicly traded firms. Jim is an expert in business start ups and writing business plans and could be a great resource for your readers looking to own or start up their own business.