Losing our best customer. Without half measures, this is one of the worst things that can happen to us when we are owners of an SME and a large part of our turnover depends on one or two accounts. They have tried to put themselves in this situation at the American Express Open Forum , and they show us how we should react when the worst, the unthinkable, knocks on our company’s door.
To demonstrate this situation, the guys from American Express tell us about a theoretical company that has a turnover of 5 million dollars a year and that, after losing its best client, they realize that at most they will be able to bill two million dollars, spending in one week from being a prosperous and well-positioned company to another that clearly seems to be economically unviable. What should be the steps that the owner of this SME would have to take to redirect his business?
- Do not become victims of panic or unjustified pessimism
We are neither the first nor the last to go through this trance. Many renowned companies have been forced to make their particular “journey through the desert” and have managed to survive.
It is true that large clients are those on which most of our profits are usually built. It is true that in economic terms a large client is sometimes equivalent to dozens of small ones. And it is also true that when we lose a large customer, the “hole” they leave is considerable.
That said, after “crying” over such a tragic loss, it’s time to take action. Regretting what we have stopped doing is not going to help us and on the other hand, trying to develop a strategy to get them back with us doesn’t usually work either. If we want to survive, we must get going .
- Examine your fixed and variable costs
Considering that for the moment we have lost three million euros, it seems quite evident that for the moment, we cannot maintain the structure of a company designed to work on a basis of five million. Now is the time to face one of the hardest stages of this “adventure”: cutting expenses.
How does the loss of the customer affect our fixed costs? What superfluous expenses can we eliminate almost immediately? Can we adapt to working in a smaller office? And ultimately … Would it be more profitable for us to outsource certain departments? Should we make the painful decision to lay off some of our staff?
On the other hand, we must also examine what variable costs were directly involved in maintaining that large customer that we have lost. Which ones are we going to stop needing?
- Variable and available resources
Our short-term objective should be exclusively to respond to the fixed costs involved in maintaining our current portfolio of clients. But how can we respond to higher costs (personnel, inventory, workload) if we need them? What parts of our business are still useful even now when we are smaller?
- Return to the path of positive cash flow
Now that we have reduced expenses, sales and costs need to be realigned again. Having a positive cash flow again is what will allow our company and its sales representatives to generate new business. At this point our financial reserves can be used not only to maintain our business but also projected towards future investments.
In the event that, for example, we have been forced to reduce salaries and we want to rebalance them, we must bear in mind that we will have to do so based on our new benefits and not on our turnover.
- Order
At this point it is time to clarify our sales line, to take into account which of our new potential clients will never be, to eliminate from our agenda those who have not called again or those who have responded with a laconic “maybe.”
As the Anglo-Saxons affirm, we must bet exclusively on the “prospects” (business opportunities) that are likely to prosper, concentrating our resources and energies on few, but theoretically very valid business opportunities, unceremoniously discarding all the others.
- Diversify your customer base
If we have learned anything from this experience, it is that we cannot afford to make the same mistakes twice. At this point, we will have understood the risks of betting most of our business volume on one or two large clients, and we will take into account that in diversification we can now find one of our great strengths.
