Last week, you were successfully running a very profitable $5 million company. Then, the unthinkable happened. You lost your largest customer. Unfortunately, without them, you are now running an unprofitable $2 million company.
What are the first steps to take to rebuild your business?
1. Don’t panic. Many successful small business owners have traveled this path before and survived. While big customers drive the growth of many small companies, they also leave a huge hole on their way out. Mourn the loss of your largest customer. But then let it go and move on to look at other prospects for success. Kicking yourself or playing the “if only" game does not help. In addition, planning strategies to “win them back” are typically not a good use of your company’s time.
2. Examine all fixed and variable costs. Your expenses now need to reflect being a $2 million company, not a $5 million one. How are your costs of goods sold affected with the smaller volume? What overhead can immediately be cut based on the smaller business size? Does the company need less office space or administrative support staff? What variable costs can be cut that were part of servicing your largest customer that are no longer needed until the size of your business grows again?
3. Keep resources variable and available. The short-term goal is to only spend fixed expenses to support current clients. How can your company keep its largest costs (like people, inventory or work in process) variable yet available to use when needed? What parts of the business are still profitable at the small size?
4. Become cash flow positive…again. Sales and costs need to get in line. Being cash flow positive will give the company’s sales and marketing efforts time to generate new business. Cash reserves need to go toward current expenses and future investments, not past accounts payable. Extend payments to vendors that your company will no longer be using as a result of its smaller size. Payments to these vendors can only be made from new company profits, not gross sales.
5. Practice the rapid release of all “maybe” prospects. Now is the time to clean out the sales pipeline. Delete and let go of all the prospects that have not called back or have said “maybe." These people clearly do not have the pain your company solves or the money to solve that pain right now. Move to focusing on new prospects that can say “yes."
6. Establish systematic relationships. The knee-jerk reaction would be to pump up the marketing expense to find new customers. This is an incorrect and expensive tactic. Implement a monthly system to stay consistently in contact with the top 200 prospects, customers, influencers and connectors so when they or someone they know has the pain your business solves, they will contact your company. We can’t sell anything to anyone. We just need to be there when people are ready to buy.
7. Diversify your customer base. As the expression goes, “Fool me once, shame on you. Fool me twice, shame on me.” Don’t get fooled again. Understand the risks of having a concentrated number of customers and seek to diversify them now before a big one leaves again. Ask, can my business survive losing another large customer?
What have you done when your biggest customer left?