The danger of ‘big’ – it sometimes goes away

One of the first business lessons I learned many years ago was that it is often better to havemany smaller customers than fewer large ones. At the time, I was learning the ropes from a battle-hardened magazine publisher. He said (in reference to my naive comment that I would rather have Microsoft as an advertiser than a dozen smaller ones), “Where are you when your big customer decides to ‘shift focus’? Your loss will be 100% of income, rather than 15% or 20%. How long does it take to find a replacement for your big customer? How much time does that big customer suck up? And how much more does that big customer demand?”

Needless to say, I ignored my publisher’s advice, chased after the big customer, got them – and then lost them a year or so later, when they, ahem, ‘shifted focus’. Ouch. Hurt my pride and my pocketbook. (And no, the short term gain was not worth it – I spent months rebuilding my ad bookings).

Job boards face similar dilemmas. Do you get in bed with a major aggregator or ad network? Focus on the top 3 employers in your niche? Create ‘sweetheart’ deals for thebiggest spender? The lure can be powerful, especially as we come out of a challenging recession.

Sometimes the answer is ‘yes’ – but it’s best to think about all aspects of the deal, not just the nice payoff you may get up front. For example, if you rely on AdSense to generate revenue, can you live without it if the ads go away? If you focus on the biggest employers, do you have the bandwidth to take care of your other clients – or do they fall by the wayside? What’s the expected life of the deal (because, as we know, nothing lasts forever)? Is the ‘big deal’ a gateway to more clients at a higher level – or an end in itself?

As I’ve mentioned elsewhere, there are a lot of changes happening in our industry – and some of them will be surprises. Possibly unpleasant. My advice? Examine your potential ‘deals’ carefully. Look at what your potential ‘partners’ do – not what they say. And remember – there is power in numbers. The more customers you have (and the happier they are), the safer you are.

Comment by Paul S. Gumbinner on March 29, 2011 at 10:17am: I once had a recruiter who worked for me who actually suggested that we drop all our clients except for the top five, which accounted for about 30% of our business. Her logic was that if we committed to them we would get more business. I explained that her suggestion would cost us 60% of our bookings and that we got all the business from these five that we could or would get. She is now in business for herself and, I suppose, has learned what you learned. Your post is a good one.

Comment by Brian Whitfield on March 29, 2011 at 1:32pm: Dead on. It is difficult in the recruiting business to continue focus on smaller accounts when your biggest customer gives you more business by themselves than you can really handle. However, it is absolutely mandatory for your firms long term success. Been there. Done that. Never allow more than one account to be more than 20% of your business if you want long term success.

Comment by Lorena Carretero Arjona on March 30, 2011 at 7:29am: I completely agree with this. This was also my strategy. Now the big companies, in Switzerland, are starting to buy the small ones. Fortunately I am also working with some big clients.