One of the biggest mistakes that a company can make, especially small to medium-sized security guard companies, is to rely too heavily on just 1 or 2 big customers. I remember winning my first big security guard contract. It was a real rush and gave me a true sense of accomplishment! But for small to medium-sized security guard companies who don’t follow-up that one big win with a few more big ones, or a lot of little ones, they are in danger of creating a very poor customer mix. A poor customer mix can lead to three potential problems for small companies.
First, what happens if that big customer decides to cancel their contract, or they go out of business? For the security guard company it would probably mean drastically cutting expenses and laying off staff. I once worked for a company that lost a customer that represented 30% of their revenue. Needless to say mass layoffs followed soon after. Unfortunately, many companies never rebound from the loss of that big customer.
Second, winning a large contract often leads to that client becoming the focus of a small to medium-sized company’s efforts. They may even find themselves pulling resources from other areas of the business to try to keep that one customer happy. Often times moving those resources will impede that company’s ability to source other contracts or perhaps even service current customers. Both of which are activities that contribute to maintaining or developing a healthy customer mix.
Third, if you are looking to sell your security guard company, which many people are nowadays, having a bad customer mix can be a deal killer. That’s because buyers recognize that when there is a poor customer mix large customers can effectively dictate that business’ margins, price, and relationship.
Despite this, many security guard companies do not actively try to prevent this type of concentration of their customers. I typically find that most business owners understand the seriousness of the situation. But they are less concerned about this type of liability when things are going well. But what happens when they lose that major customer? In most cases panic sets in and they begin making poor business decisions.
A better way to approach your customer mix is to acknowledge that that big customer may cancel their contract one day, and when they do you want to be ready. When did Noah begin building the ark? Before it started raining.
What To Do With A Poor Customer Mix
Having a poor customer mix is not an easy problem to solve in the security guard industry. Long sales cycles and stiff competition ensure that acquiring new customers is always a challenge. As you examine your customer mix, keep in mind that most experts define “poor customer mix” as having one customer that represents more than 20% of your gross revenue. So if that sounds like your company, here are a few tips for you.
First, after you get that big client make sure that you meet and build relationships with everyone in the buying process. You need more than one champion for your company in your client’s buying process. I recently spoke to a security guard company whose contract was going out to bid because their biggest advocate and only point of contact at the customer had left the company.
Second, think profitability and not revenue. It’s a tempting trap, especially for smaller security guard companies, to marvel at that big top number. But in the long run, you are better served by devoting your resources to finding more profitable customer contracts.
Third, FIND MORE CUSTOMERS!
For small to medium-sized companies, when you land a big customer it is a perfect time to try to win a few more to help optimize your customer mix. The momentum that you gain from winning that big customer can often help you win your second. Your second can help you win your third, and so on, and so on.
Have you ever had problems with your customer mix? If so how did you fix it? Please feel free to leave your comments below.
By Courtney Sparkman
