Orders are coming in and you’re busy with production. But, do you know what percentage of revenues are coming from your biggest clients?
The 80/20 rule is an old business adage that states about 20% of your customers produce 80% of your sales. Does this rule apply when reviewing your client portfolio? Is 80% of your revenue coming from 20% of your customers, or is 80% of your revenue coming from far less than 20% of your customers?
Maybe you got to where you are today by growing with a few accounts. Hats off – you’ve likely done a great job serving them and earned more and more of their business. Large accounts offer tremendous value to your company because they provide an on-going predictable volume of both production and revenue. But with that value carries risk.
If your clients operate in a particular market vertical, and that vertical is in decline, then your level of business will decline. You might look around and see that although you haven’t lost any customers, the work they’re sending to you is less than historical norms.
What actions do you take if your business is weighted heavily toward a few clients within a market?
In the Spring issue of Print Illustrated, we offer some practical approaches. One of which is to proactively diversify your customer base. Like a good stock portfolio, diversifying could strengthen your business and reduce your risk.
How do you go about diversifying your customer base?
Start by looking at the markets you currently serve. Are there opportunities to serve similar clients in the vertical markets you already know and serve? Alternatively, are there new markets you could target for growth?
Growth can best be achieved by evaluating your current capabilities and leveraging them or by adding new capabilities to expand your range of services. Sometimes current clients can create seasonal demands. If you’re busy at certain times of the year serving these clients, consider targeting new business that would level load the production volumes during slower production periods.
Diversifying your customer base is a good strategic move and it all starts with looking at your current customers.
Do you fit the 80/20 rule? Leave a comment with your perspective.