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Business scenario: You’re overly dependent on a big customer

July 19, 2017

This post is part of our Business Scenario series. Read the entire series here on the Clover blog, and check back for more tips and tactics.

It’s a blessing when your existing customers decide to buy more from you…but beware of becoming overly reliant on one big-time spender. If that customer becomes a disproportionate part of your business, any change—whether it’s a delayed payment or the customer just stops using you—is potentially disastrous. If you find yourself in this situation, start planning now to limit your risk.

Here are 7 tips for reducing your dependence on one customer:

1. Build up cash reserves.

Every business should have three to six months’ emergency cash, or more if it’s a seasonal business. Consider making automatic investments to make this easier. If you only need $5,000 to stay afloat every month, automatically dump your extra revenue into a savings account until you have a suitable cash reserve. Alternately, try to run the business without taking into account the extra money this customer brings in. Part of becoming reliant on a customer is operating as if you’ll always have them.

2. Create a contingency plan.

Don’t wait for a problem to arise—come up with a plan of how you would handle a sudden loss of your most profitable customer. Make short-term plans, such as a flash sale, and longer-term plans like building up clients and customers to replace any lost business. Do an analysis on what promotions in the past have brought in the most net cash.

3. Target similar customers.

Using Clover Insights, a free data analysis app, analyze your star customer’s spending habits to figure out how to find more customers like them. Are your best customers single women 18-35, or senior citizens looking for a deal? Are they parents with small children, business executives, or “early adopters”—people looking for the hottest trends? Once you have a clear picture of the demographics of your ideal or most valuable customers, consider how you can market to them or perhaps get them to purchase more. You might be able to use your current big spender as an anonymous use-case example when talking to other customers: “You know, I have a customer who loves these scones so much he buys them for the entire office once a week.” “Are you sure you don’t want to try the spa day? One of our customers loved it so much she gave it away as bridal party gifts to her attendants.”

4. Leverage the relationship.

There are many ways you can use the big spender to increase business. If, for example, you’re doing a lot of catering to a department at a local university, perhaps they can introduce you to other departments. Perhaps they would be willing to give you a positive review on Yelp! or other business sites. Maybe you can get a testimonial from them you can include in your marketing. If you’re uncomfortable asking your customer directly, consider cold-calling similar businesses. For example, if you’re a food business, ask the operator who manages catering for the company and call them. “This is Sarah from Coffee Break. I’m calling because we do a lot of business in your building. In fact, we are there every Wednesday to cater a weekly business meeting. We’d love to extend you an introductory offer of free delivery on Wednesdays for the next month if you’d like to give our services a try. Are there meetings you typically cater?”

5. Manage the workflow.

Beware the time sink that surrounds big-time clients. It’s natural to want to keep big customers happy. That doesn’t mean you, as the owner, should spend all your time servicing that customer. Start to train lower-level staff to manage the needs of this customer at the level of quality needed. Not only will this free you up to scout for new business, but it reduces the costs of keeping this customer, which helps you build up cash reserves.

6. Stay relevant.

Another way to reduce risk is to embrace the relationship and look for ways to make yourself more indispensable to the customer. Ask them questions like: I’d love to figure out a way to become a preferred vendor for you—what kinds of problems can I help you solve? Who do you use now for catering parties and meetings? Would you ever consider using us for [a new product/service]? What would prevent you from choosing us for other services like stocking break rooms with fresh coffee in the morning?

7. Reconnect with your other customers.

Clover Insights can help you identify other (relatively) big spenders in your store. You can uncover trends in what they buy, and when. Consider what would be attractive to these customers and run a promotion to entice them back into the store. Clover’s Promo app can help you construct a “win-back” campaign to engage older customers who haven’t shopped with you in a while. Think about what you might be able to offer these customers, as a loyalty program, to turn them into regulars. (For ideas on loyalty programs, check out 3 things to consider when structuring your loyalty program and Overhauling your loyalty programs: beyond freebies.)

Periodically evaluate whether your business is diversified enough. Preferably no single customer or client represents more than 10 percent of your income—if they do, start thinking of ways to limit risk. Also take a look at whether you’re overly reliant on a particular industry or type of customer such as tourists or university students. If so, consider ways to attract different types of customers.

Diversity your business. Clover can help. Check out our promotion and data insights apps in the Clover App Market.

[image: coffee shop 1 by DaveBleasdale on flickr]

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