Many small businesses thrive serving a specialized market niche — they create a unique offering that makes them stand out from the competition, and also allows them to develop strong expertise in one area. But businesses like these can fall into a common trap: Relying too heavily on a small handful of clients, or even just a single client. If you lose that key client, suddenly you'll be facing a serious cash crunch that can cripple your business.
Diversifying client relations is a smart business practice. So how much diversity should you aim for — and how do you attract a variety of clients? Here are a few ideas to consider.
How Many Clients Do You Need?
While there are different schools of thought about the limits you should place on the revenue a single client can account for, you need to define a percentage that's comfortable for you. If one client left — if, for example, 20 percent of your business was due to vanish at the end of your contract — how would you make up that loss? How long would your sales team need to sign new contracts, for example? And do you have a cash cushion to keep going while you rebuild?
Also, review your client pool with an eye toward the industries represented there. If you're focused heavily on just one industry, for instance, you're at high risk if that sector experiences a massive downturn.
Do the math on a worst-case scenario so you can understand what challenges you might be facing. Understanding the risks can help you be prepared no matter what you do.
Best Practices for Expanding Your Client Pool
To diversify your client relations, you need to reach out to new customers, and that involves appealing to new prospects or reviving prospect relationships that have fallen by the wayside. Having an effective sales operation is the most obvious first step to take, but there are other measures that can help you find a diverse pool of new clients:
- Reevaluate and renew your marketing efforts. Update your website, get more involved with professional organizations, look up industry events you can attend or give presentations at. Where do people in your target market typically find out about new products or services? You may need to dive into social media or create a strategic partnership to boost your profile.
- Expand your offerings. No small business can be all things to all people, but it often makes sense to add new features to an existing offering, or expand into a new area. Research your target market — are their preferences moving in a new direction? Is your sales team hearing a lot of requests for a specific type of service that you don't yet offer? These can help you figure out how to remain competitive.
- Diversify your staff. "Representing a variety of nationalities and ethnic backgrounds can also make companies more relatable to a broader customer and client base and enable them to work in new global markets. A diverse client or customer base requires a diverse workforce," reports the Miami Herald. In some cases, the diversity of your staff can positively affect client relations. If your small business's employees all come from the same background, on the other hand, it can hamstring your efforts to reach out to different clients.
If your book of business isn't as diverse as you'd like, getting to a good balance probably won't happen overnight. Continue to take the small steps necessary to open up your business to new customers and industries, such as investing in marketing campaigns geared toward different demographics and regions. In doing so, you'll improve your revenue as well as your peace of mind.