Watch Out For The Whale! Overcoming The Perils Of Over-Reliance!
In the world of events the single most important thing that event professionals must do is to create great relationships with their clients.
?By creating solid relationships, you can increase the Long Term Value of that client and also maximise the amount of profit that you can make from them.
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There is a big difference between maintaining a relationship and relying on a relationship.
I suspect many of us in the events world have depended on the revenue generated from one or two big, or what we sometimes call “whale”, clients.? And this is totally fine while the relationship remains strong, and you keep on delivering outstanding service. You can float along in the knowledge that you will keep a steady flow of income from your number one client, but beware, this can lull you into a very dangerous false sense of security.
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The trouble is that the dynamics of any relationship change over time.? Your contact may leave for some reason, there might a financial issue with the client, or a change of policy internally, or a change of personnel that means, suddenly without warning your best, your most valued and dependable client suddenly ceases to be a client at all and if they were making up 30% or more of your total revenue, them leaving may be catastrophic to your event business.
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Ideally, as a rule, no single client should make up more than 20% of your annual revenue (25% at a push), because if they leave you, the gap in your P&L will be far too big to make up with other clients at short notice.
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Obviously, if you already have a Whale, you are not going to refuse its business or reduce it to a safe level or % - so what can you do to protect your business?
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Having contracts in place is the best way but if this is not possible you should at least have some form of written and signed documentation which sets out the agreed terms of working together. Think about taking a bigger deposit up front and limiting the payment terms for the balance to be paid in order to protect your cash flow. You might also consider offering a lower price to customers that will sign a contract with you, especially if there is a possibility of repeat work or multiyear assignments.
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Oh, and there's an added benefit of creating this “Long Term Visibility of Earnings”, in your business which is a higher business valuation when it comes to a potential exit.
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Additionally, businesses can’t afford to stand still, they constantly need to be looking into the future, developing a pipeline of new business that will sustain them even if they lose a “whale”.? Sustainable growth necessitates a diversified client base and proactive lead generation. While transformation may seem daunting, with a structured approach, it's entirely achievable.
For those in our industry who resonate with this narrative and seek to fortify their business strategy, we’re here to discuss potential pathways forward.
Stability in business requires foresight and action. Let's ensure our foundations are robust and resilient.
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