3 Steps to Create Diversity in Your Client Mix
Working with one or two large clients might look good on your bottom line but fostering diversity in your customer base will ensure better financial health for your business long term. It mitigates risk if one big client leaves, presents new and interesting challenges for you and opens up future opportunities for taking on more large clients down the road.
All business owners want to find the right clients: The ones who are easy to work with, have the right budget, and who need and value the services you provide. But it’s also about the mix of clients. You also need a diverse customer base.
Developing a more diverse customer base mitigates risk, and provides additional financial security and stability. It also gives you the opportunity to work on different types of projects, with different kinds of people.
As a business owner, your role is to find the mix of clients who will satisfy both your bottom line and your desire to do interesting work.
But What Does a Diverse Customer Base Look Like?
Every business and industry is different. Multiple factors—including geographic regions and the current economic status of your city — can impact your ideal client mix. But there are some best practices you can start with:
1. FIND THE RIGHT CLIENTS
As part of your initial business plan, you likely completed an exercise that helped determine who your ideal and next-best client types are. That exercise is one you should go back to every couple of years. As a refresher, here are some tips on identifying ideal clients:
- Pinpoint the needs or problems that your services solve
- Find the clients that need what you offer, based on: industry, business size, location and budget
- Identify who’s buying from you, especially if it’s different from the person using your services
- Consider implementing web functionality or an app to supplement your client business
You can brainstorm the answers to the above questions, but make sure to marry that information with what you actually know. Always look at your current client base and your analytics for more specific answers.
2. ESTABLISH THE DIVERSITY THAT WORKS FOR YOU
How do you know what diversity in your customer base looks like for you? Every business will have a different breakdown. But here are a few of the high-level types of clients you should look for. Consider them when building out your client mix.
Your anchor clients deliver consistent business. They have long-term contracts and you expect the relationship to continue unless something unexpected happens. These clients provide the bulk of your revenue, and should be the client type you spend most of your marketing and advertising budgets on trying to acquire.
Many service-based businesses have clients with seasonal needs or needs on a specific schedule. These clients are reliable in their own way, but require extra attention to ensure you stay top of mind during their off-seasons. When possible for your business type, these clients should be a smaller portion of your overall client mix.
These clients are the ones that come to you with a specific need. You might not have pursued them on your own because they don’t fit your ideal customer definition, but are a surprising fit because they have the right budget, they present future opportunities, or it’s just a cool project. These clients will come and go more often than your anchor clients. The portion of your client mix dedicated to opportunistic accounts can fluctuate depending on the types of projects that come in, and your capacity alongside seasonal clients.
Ongoing Small Accounts
Many businesses have a number of smaller accounts that don’t fit their ideal, next-best or opportunistic client definition. These accounts stick with your business because you have a good relationship, or the work is fun or easy. They’re also a great fail-safe in case a bigger client falls through. But keep an eye out for scope creep. Small accounts can balloon quickly when you aren’t looking.
3. UNDERSTAND NOT EVERY CLIENT IS RIGHT FOR YOU
Not every client that comes in the door is the right client for you. It can be difficult to say no. Turning down business rarely feels comfortable. But if a client or project isn’t the right fit—the budget is not right, the project has too many red flags or potential pitfalls—it’s OK to say no.
So why do you want a diverse customer base?
1. RISK MITIGATION
Reliance on a few big accounts could put you at risk. Another risk? Working in just one industry or sector: An economic downturn in the industry might leave multiple clients with limited budgets. A diverse portfolio of clients and project types helps protect you if one or two go away.
2. CASH FLOW SECURITY
Having large, anchor clients helps to ground cash flow so that you meet a certain baseline each month. Smaller clients and one-off projects that fluctuate month-to-month can help boost certain months, as well as ensuring different and interesting work.
3. CAPACITY MANAGEMENT
Reliable clients are crucial for time management. Your best clients give you and your team the confidence that you’ll have work every month.
4. FOSTERS CREATIVITY AND INNOVATION
Doing the same work over and over can leave you feeling stagnant. Smaller clients in different industries present opportunities to try something new. They might not have the same budget as a big company, but it could be a fun and different project to get excited about.
To round this up, a diverse customer base means your revenue comes from a number of clients or customers—not just two or three.
Simply put, the more customers contributing to your sales revenue without a few dominating that figure, the more valuable your business will be. Because it reduces the risk of serious cash flow issues if one or more customers leave.
As with all value drivers, it is all about risk. Just like the old saying “don’t but too many eggs in one basket” strategy is risky, so is a small concentration of customers dominating your revenue.