The default assumption is usually "the bigger the client, the better". I've lost count as to how many times I've heard a business owner proudly regale me on how they won over a big client, as if they were a fisherman landing a huge fish. It's understandable. I think the main reason is the pride in realising that a huge corporation has picked you out amongst the many and have trusted your talents. It IS something to be proud of.
However, pride doesn't pay the bills! Having a big name client gives you bragging rights to a certain extent, but the bottonm line is your profit margin. Let's look at the hidden disadvantages of landing a "big client", and why it might just be wise to attract many smaller clients in the longer run.
Disadvantages of Having a Big ClientCounterparty risk if you put many or all of your eggs in one basket
How many times have we heard when a big company goes under, so do a lot of small companies that relied on that big company to feed them with work? It happens all too often. The idea of a big client giving you work month in month out is very attractive. You might even start to think...maybe we can cut back on our marketing. It can be come very comfortable.
And then the rug is pulled from under you.
The client is in trouble and can't pay you, and isn't ordering any more of your product. You lose that client and you can't pay your staff. Your cash flow doesn't allow you enough time to make up the shortfall with new clients and you go under.
Big clients often pay late
It's a stereotype, but it's largely true. Nobody's responsible in a big company. Only departments are responsible, and that means each individual can feel a lot less responsible for the welfare of the smaller companies they owe money too.Staff churn - a hidden risk
Personalities matter. You could have won the contract because you got on well with the previous procurement manager (who's now been replaced). His replacement is very different, and you find yourself having to pitch your product all over again to this new person. In the end, you don't get along and he doesn't renew the contract.
Advantages of Having Many Smaller Clients
You decentralise your source of income
Being paid X amount by many clients is far better than being paid that same X by one client. Sure, some clients will go bust, but you survive without them. It also very likely means that you're on your marketing "A" game because you're always on the look out for more clients. Direct relationships with business owners
Owners of small businesses can make faster decisions. You can get directly through to them by phone or email, and you're not subject to the staff churn you see in larger corporations.Small clients pay faster
As a corollory to the notion that big businesses tend to pay late, well...small businesses are way more conscientious when it comes to money owed. The small business owner will pay faster because they feel the responsibility to avoid late payment.
In my opinion, it's better to spread the risk among many smaller clients than rely on one large client to feed your business with work. Article kindly provided by carpetcleaninginfarnham.co.uk