As a good friend of the Seven Creative team, it’s only appropriate that we share some of Tano Rebora’s business wisdom. Tano is a partner of Icon Business Solutions and an experienced Business Adviser specialising in turnaround and growth. We are lucky enough to be able to share this great article, written by the man himself.
Tano asks, ‘How many clients are too many?’
In the eternal quest for bigger revenues the hunt for new clients continues without stop. Yet many companies have little idea if client acquisition is appropriate either in terms of quality or quantity.
Recently I met an M.D. of a company that was started three years ago. After steady growth they currently have so much demand for their product that production is unable to keep up with demand and the number of ‘reworks’ has started climbing. The fact is that any abnormal growth in any one area of the business will have impact on others. So, similarly, for example, their employee satisfaction is now lower than it has been.
Two points come to mind;
1. Growth is a planned activity, it does not just happen. It may be under or over estimated and the plan has to be flexible enough to cater for both eventualities. In either case the ultimate price may be paid for in cashflow terms.
2. Are all clients good clients? What company are you trying to build: a company that is focused on pure commodity or one is that is focused on quality? In the first instance be prepared to compromise on price in the second be prepared to qualify who is going to be your next client.
In the case of the organisation introduced earlier, analysis showed that the clients were clearly divided into three business areas. Whilst two of these areas are highly profitable and attracting clients that require a quality, personal product the third is more focused on price and less on ultimate quality. As is the norm, this last area is more ‘stock ‘em high, sell ‘em low’. A problem? Only if the amount of resources associated with this area overshadows that associated with the higher margin business. Yet, there is space for both types of business. In this case it really was a question of having too many clients and of the wrong ‘type’.
Following a thorough analysis and strategic business plan development the company has now re-organised to develop the higher margin business and has clearly set objectives to be the market leader in that sector. Coincidentally, the M.D. has now developed a strategic alliance with his biggest competitor in the ‘other’ area. Having agreed that their focus is different they are now happy to refer business to each other.
How many companies know what their niche market is? How many know what their competition is? How many know when the point comes that they may be facing too many clients? How many companies have the necessary internal processes defined that will enable them to provide the necessary information needed to answer the previous questions?
Analyse the client base on the basis of profit margin. Are they all individually appropriate for your business? If not, is it your competitors that have led you away from your sweet spot?
Tano Rebora, Icon Business Solutions Ltd.