Which would you rather have? A one million dollar new customer or ten one hundred thousand dollar new customers? Careful what you wish for.
Of course this is an unfair question, but one I have to ask all too often. Sure, we all want a big client. It means lots of guaranteed revenue. Smaller clients seem to take as much energy to acquire and maintain as a big client, so why not go for broke? Because chasing that one big client or project is the ultimate shiny object in business.
Customer acquisition in the services industry (that’s probably you if you are a regular reader) can be extremely expensive and time-consuming, but the potential payoffs are very promising. Service customers tend to buy again and again – provided that you can demonstrate repeatable value. So why do leaders often want to chase big projects, which may not be repeatable? Why would they take the risk?
- Big revenue helps cash flow.
- The work will keep a lot of staff busy.
- The prestige will drive new business.
Too often, none of the above come true. I am often hired by companies after their best revenue year ever. Why? That one big project caused the firm to hire folks they can’t keep, expand infrastructure too quickly, and overextend company finances. The big job margins started low and became worse as the project progressed. All this while the sales pipeline shrank from lack of focus. My case studies often look like this:
- An $8 MM Contractor plus $1 MM project equals $7 MM Contractor the following year
- A $4 MM Rental Company plus a $500 K project equals a $3.5 MM Rental Company the following year
I see this time and time again. Big wins require a lot of focused effort usually over a long period of time. The size of the potential win made the sacrifice seem worthwhile – in theory. In reality, every other project became more difficult to execute and ongoing sales efforts were stifled by an over-extended project team. And to add insult to injury, your competitor probably benefitted the most from you winning that big client.
“But..we want bigger clients!”
Yeah…no you don’t. If I had a choice between ten steady customers or one big one, you can bet that I would take the ten. Less risk, more opportunity for growth, and better overall margins. What’s not to like? Shouldn’t your sales strategy then be focused on quality of customer instead of size of project?
“But Tom, this job just fell into our lap. Should we have walked away?” If a big win wasn’t part of your strategy and was instead, just luck (good, bad, or dumb), then the project becomes an exercise in execution. In hindsight, most victims of this kind of success would have been better served if they had treated the job as a windfall rather than mistaken it for strategic growth. Windfall projects require a quick rallying of resources, hiring of subcontractors, and a gentle allocation of staff to the opportunity. In other words, maintain business as usual and treat the new job as the exception.
But I digress. Big jobs look great when they are in the future, but are often a big ‘ol mess upon review. Sometimes we can’t avoid them, so treat windfall jobs as outliers to your business. As for your sales strategy, Beware the Big Customer. It’s a trap.