How Do You Reduce Dependence on One Large Customer? Three Thoughts

Situation: A company has been very successful, but one customer represents over 60% of their sales. To grow, the company needs to diversify its customer base. How do you reduce dependence on one large customer, and what are the risks involved?

Advice from the CEOs:

  • The key to getting new customers is to dedicate time and resources to the task.
    • Consider hiring a sales professional – a commission based “hunter” who has experience landing big accounts. You may pay this person a hefty commission for brining in new business, but diversifying your customer base can be worth it.
  • If there is shared ownership of technology co-developed by the company and client and the client does not wish to pursue markets beyond its strategic focus, is it feasible to negotiate rights to pursue this business?
    • The larger client will pursue their own interests, not those of the smaller vendor. Perhaps a win-win can be worked out, but it may be difficult – particularly if the client is concerned that use of the technology in other markets could have a negative impact.
    • Caution. The easiest way for the client to defend itself from a perceived threat is to sue and bury the smaller vendor through legal expenses. Regardless of who is “legally right,” deep pockets can win through attrition.
  • Consider recreating the opportunity. Create your own adjunct proprietary product with your own software or design talent and use this to expand your horizons.
    • Be aware, the large client can still sue if they believe that your proprietary product impinges on their rights.

Key Words: Revenue, Risk, Markets, Sales Person, Hunter, Commission, Technology, Shared Ownership, Legal Suit, Adjunct, Proprietary, Rights

4 thoughts on “How Do You Reduce Dependence on One Large Customer? Three Thoughts

  1. Wilson Guzman

    To break dependence of a large customer is to seriously create the enviornment that landed that customer and reproduce it again with simiilar target customers. What will happen is your infrastructure will have to be re-engineered to care for a larger number of premidonas but you will have grown and the share of customer base will be diminished.

    What will you need? a Business Development campaign . How long will it take ? Dedicate minimum 18 months. When should you take the temperature of your progress? Every 30 days for 18 consecutive periods then intensify what you are doing right and adjust where things are not going well

  2. Benjamin Kolberg

    I am very impressed with the kind of information sharing in this session of CEO’s duties>

    I think to add on the duties of CEO’s outlined, one of the CEO’s duties is to take more strategic leadership in terms of taking the organisation to the next level.

    Thanks

  3. Sandy Post author

    Thanks, Benjamin. This article has generated more comments than any other. It has truly been a rich discussion. Thanks for your input.

  4. Sandy Post author

    Good advice, Wilson. I like your thought that it is necessary to recreate the environment that landed the large customer in the first place, as well as the strategic implications of this move.Thanks for your additions to the discussion.

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