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