Are Bigger Customers Always Better For Your Business?

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Have you ever had that conversation with yourself about chasing bigger customers?

About how much easier business would be if you could make the same amount of money (or more) but work with a lot less clients?

Because let’s be honest, who doesn’t love that idea?

It’s quite possible that working with bigger customers will actually become a necessity for you at some point if you’re going to scale your business. Because working with lots of small customers could mean that you reach your physical capacity a long time before you reach your income targets!

In my experience though, it’s a lot harder than it seems to make the shift to working with larger customers and it often involves a whole raft of unexpected pitfalls that could actually threaten your business.

So I thought I would share the key things I talk through with my own clients when they’re in the thick of this dilemma and hopefully they will help you too.

Decision making

When you’re talking directly with a small business owner they’re generally in a position to make decisions quickly. They don’t need to run your proposal past their Board or Management Team for approval or budget sign-off. They’re likely to need 1 meeting or a decent conversation with you, maybe 2, and then they’ll make a decision. The deal is either done or not done but you very quickly know exactly where you stand.

Whereas the bigger the business you’re taking to, the slower their decision making is likely to be. It’s good old fashioned decision making by committee! The person you’re talking to will probably have to put forward your ideas or proposal to their management team or Board to gain approval.

Which means that often you don’t even get the opportunity to properly present your ideas to the people making the decision. It’s out of your hands. You’re relying on somebody else who’s only met you briefly to do the presenting for you and there’s no way they’ll represent you as well as you would yourself.

The knock on effect of all of that is that you can’t build the kind of solid personal connection with some of the decision makers that you would really like to, so it becomes much tougher to win their business because their decision is likely to be very facts and figures based. Price will probably be a big factor.

And when the people making the decisions haven’t met you personally, you’re also likely to find that they”ll come back to you to ask for more information – can you send us some case studies, can we have some more figures or forecasts, could you come in again and meet Bob from Finance, oh and then could you come back and meet Barbara from Marketing. The whole process can be hugely time consuming.

What all this means is that the bigger the customer you’re targeting, the slower their decision is likely to be and the more hoops they’ll want you to jump through. It’s very easy to find that a handful of hot prospects can eat up half your week but not be paying you anything. And that’s definitely not good for business!

Style of partnership

When you’re working directly with a small business owner or a small team you can quickly build strong, meaningful partnerships, hopefully based on mutual respect and the knowledge that you’re both striving for similar things. You can essentially become part of their extended team. You’re also likely to get speedy responses or relatively fast feedback when you need something from them.

It’s not always the case, but often when you work with larger businesses they’re more likely to view you as a supplier than as a partner and to keep you at arms length, Which can feel as though they don’t really respect or value you in the way you think you  deserve, and the way you want to work with your customers.

The balance of power often sits firmly with them. Getting feedback or the go ahead for the next step in a project can be excruciatingly slow while they each point to somebody else as the person who needs to take action, but nobody actually does!

You may also find that their team changes quite a lot. So just when you’d finally got things going brilliantly with Beryl in Bookkeeping she’s disappeared and been replaced by Brendan. And frankly, Brendan is an arse!

Of course, these are all generalisations. There are big businesses out there who really value strong partnerships and who treat their suppliers incredibly well. They just might not be that easy to find!

Higher fees and better profit margins

There is definitely value in looking for bigger, higher paying customers to increase the turnover in your business. There are often significant increases in the average cost per hour for you to deliver a large piece of work, compared to delivering several similar smaller pieces of work.

On this point big businesses usually come out clearly ahead.

BUT, as I’ve already talked about, watch out for the amount of time involved in bringing these customers on board, because all that reduces how profitable each of those projects is. Beware also the speed for turnaround for corporate contracts. Getting feedback and sign-off things can be painfully slow and a project that you expected to take three weeks could easily drag on for three months if it drops down their list of priorities.

Cashflow impact

Logic says that bigger businesses should have much less of an issue in finding the funds to pay your invoice. You’re probably seriously small fry to them. Sorry! But ironically what that can also mean is that paying it becomes quite trivial to them. You can easily find yourself lost in the midst of their financial processing.

Chasing for late payment from a large business can be a real challenge because the people you’ve built a relationship with probably having little or nothing to do with the finance department who are the only people authorised to pay it. But those people don’t know you and they’re unlikely to have any idea of the trials and tribulations of building a business and how precarious cashflow often is.

It’s very common for an invoice to be paid late and for you then to be told that it’ll be included in their next payment run which may not be for another couple of weeks and then you’re stuck. And if that invoice was a significant chunk of your total work for that month it can have a massive negative impact on your cashflow, and of course on your stress levels!

A lot of large businesses will simply fit you into their process at this point with little regard to your payment terms; whereas a smaller business understands how important every invoice is, so is more likely to apologise and pay straight away.

So bigger customers also create a bigger risk when it comes to your cashflow.

The solution

I know that it probably sounds as though I’m heavily against targeting bigger clients. I do feel like I’ve given them a bit of a beating here!

But actually, I think that seeking larger clients is a great strategy for growth. I just wanted to give some perspective though, because it’s rarely as simple, as quick or as scintillating as the picture we often paint. It brings its own challenges and it definitely brings its own level of risk.

So my advice would always be to work on a gradual shift towards bigger customers so that you don’t suddenly cut off the steady work from smaller customers that can sustain your business and bring consistency to your cashflow.

Limit yourself to working on a couple of big prospects at a time so that you don’t find you’re losing half your week chasing work and not doing anything you can actually charge for.

That will also allow you to market very specifically to each type of potential client. You might talk directly to your smaller clients through social media, and then focus on larger businesses when you’re out face to face networking.

 

Hopefully this has given you some food for thought if seeking bigger customers is part of your own growth plan. If it’s something you’re wracking your brains about at the moment and struggling to gain clarity on, then get in touch and let’s see if I can help you.

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