What if your contract is not renewed?

What if your contract is not renewed?

Losing a customer sucks, don't let it turn into a trauma

The end of a client relationship can happen for many reasons outside your control. You provide superlative service and results, of course, but your client could shutdown or move the work in house anyway. What then? How much of your revenue was that one client? If it was 20% or more, you're going to feel some pain.

Diversification of your client base, services, and markets is how you avoid these situations in the future.

Diversity of clients

Diversifying your client base is the most obvious way to reduce risk to your business revenue. Limit the amount of time you are spending on any single client so that losing that client is a manageable pain. Better to be patching up a skinned knee than rushing to the emergency room with an open artery!

If you are earning 20% or more of your revenue from a single customer you need to make finding new clients a big priority!

Diversity of services

Focus within a niche is a great way to begin growing your business, but taking this strategy too far can lead to a massive risk to your business. If all your income comes from the same type of service you can find yourself in great difficulty if that market dries up.

There is still work for COBOL programmers for instance, but the peak of that market has long passed. You may be writing blog posts 40 hours a week now, and it is hard to imagine blogging going away, but there is no guarantee that the next hot startup won't somehow make it obsolete.

Some small projects using a different skill will help smooth the ups and downs, and it might be a nice change too.

Diversity of target market

Likewise, if a large part of your revenue comes from customers in the same industry or market segment your business is at risk. If the companies you serve as a group go through a downturn your business is going to suffer right along with them, no matter how well you serve them. Imagine that you specialize in digital marketing for heating and AC repair companies, an unusually temperate year would impact everyone in that market and as they reduce their marketing budgets to wait out the weather you are left scrambling to make up the difference.

Leverage what you know to expand into new markets, find customers whose businesses are independent from your current client base.

Final word

Diversification is about reducing the risks your business faces. As you can see, these are systemic and can effect every service provider in your industry at the same time. It is best for you to think about this in the good times, put in place a plan now to grow your business into new areas to provide resilience against these unavoidable ups and downs.