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Wednesday, October 17, 2012

5 Actions may enhance customer diversity or allow you to recover from a loss

What plans do you have before they are GONE?

San Francisco is a great place to visit and walk around.  I often like to walk down to Fisherman’s Warf to look around.  Pier 39 has numerous shops of different types and is a little like an outdoor mall.  Just outside of the shops are a number of platforms where tourists would stand and watch the sea lions.   The sea lions were there for many years but the numbers tended to fluctuate as the animals migrated.  One Thanksgiving week yielded reports of as many as 1,700 sea lions present on the outdoor landings.   Tourists usually stand and watch the sea lions but they mostly annoy the local boating community.

A few years ago my visit to the area resulted in a surprise.  No sea lions were present! Google searches yielded articles suggesting they left for places unknown.  There were no reports of harm, but suggestions that they may have chased a source of food down the coast.  In any event, after many years that area was void of sea lions.

This is just another illustration of how unexpected events can cause changes that affect what seem to be the most stable situations.  A recent article, “Your best customers sometimes kill your company“, described the hazard of having one of your major customer leave.  Such events can take place for reasons other than actions on your part.  The loss is not a trivial issue to manage or predict.  It is much more devastating than having sea lions migrate away from a tourist location.  You cannot control the sea lions any more than you can control your largest customer, but you can be proactive in seeking ways to lessen the loss.  It will hurt no matter what you do but maybe you can keep your company from going under.  There is no activity assured to save you.  The stress and work required to survive will be exceptional.  In the end, your company may fail.  That said the following are a few considerations that may be useful for lessening the damage and providing a window to adjust and survive.

Plan – Consider the alternatives of customers that your business may appeal to.  Create a chart and determine the most diversity you can obtain as well as what type of revenue achievable.  Develop a strategy to sell to these and add to the mix of your customers long before you lose the big one.  Try to keep your mix such that you can survive the loss of one big customer.

Diversify -  Having a big customer is a great thing.  It will take significant resources to keep them happy and you should do that.  One way to diversify is to assign or hire a business development or sales person to seek other clients in different sectors.  Make every effort to create a range of customers, hopefully in different sectors.  Keep in mind that the loss of your big customer should leave you with residual revenues sufficient to survive.

Save -  Take a portion of your revenues and save them for a rainy day.   You can always use the funds for other things, but if you lose a customer, the funds may keep you afloat until you can find other sources of revenue.

Downsize – Have a plan to reduce the expenses of the company.  Also, determine the trigger point where you must implement the plan.  It is too late to try to save the company after all your funds are gone; act before it is too late.  Determine the residual window post downsizing and the events you must execute to keep the company alive.

Seek alternatives – If you have a cushion, one option may be to seek a merger or acquisition immediately.  The downsized company with residual sales may be a perfect fit with a different business.  Knowing these businesses in advance will cut the time it takes to engage in discussion.  The combined businesses may be able to grow sufficiently to make everyone whole again.

Taffy Williams is the author of:  Think Agile:  How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon