17 Jun The Dangers Of Having One Big, Dominant Customer
The customer is always right, except when they aren’t. If you’re the owner of a small business, then you may have seen this firsthand. If you haven’t, wait a while and you probably will. Problems, sometimes serious problems can arise when the greater bulk of your business comes from a single source. The old adage “don’t put all your eggs in one basket” might be a cliché, but those kinds of sayings are cliches for a reason. That reason is because they’re true.
The Big, Bad Wolf
You’re in business, and things are going great. People love your products, and they’re flying off the shelves as fast as you can make them. Then, a miracle happens. A gigantic company gets in touch. They’ve heard about your product, and want in. They give you an order bigger than anything you’ve ever gotten, and you’re ecstatic. Who wouldn’t be? You feel like you’ve arrived. All those late nights and heartburn finally paid off.
Or have they?
See, the problem is that the dynamic changes if nearly all your business comes from a single source. When you sell to a wide range of customers, they need you just as much as you need them. You’ve got a great product at a great price, they’ve got money. Win-win.
But that’s not what happens when you’re reliant on a single source of sales for your company’s continued survival. You need them more than they need you. The big company was a big company before they ever heard of you. If they dropped you tomorrow, they’d still be a big company and go on about their business. You, on the other hand…you’d be bankrupt by the end of the week. That’s never a good position to be in, and it’s neither pretty, nor fun. You’re essentially a captive company, and they’ve got most of the advantages of having bought you out, without actually cutting you a check.
For instance, suppose that your big customer decides that they still like your product, but they’d like it better if you make X, Y, and Z changes. They don’t outright tell you that they’ll pull the plug if you refuse to comply because that would be rude, and for the most part, such Masters are ever so polite, but you get the message. That’s how it starts. The big company uses its leverage over you to begin enforcing its will on your product design, and possibly even your core processes, management style, and company culture.
The Fix Is In
There’s only one fix for that. Clearly you can’t drop them. Do that and you might as well shut your doors. What you can do though, is grow bigger. Get more customers. Even it out so that if the Big Bad Wolf suddenly pulls the plug, you’ve got a stable of other customers to carry you through. That can be a long, painful process, because the big company might be straining your resources to the limit, and it can be hard to grow when you’re operating at full capacity and dealing with pressures from the big customer. It is what needs to be done, however, and the sooner the better, because the moment you move out from under their shadow, the dynamic shifts back again. You don’t need them for survival, and their influence over you wanes.