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Bumps in the road

Posted on 31/10/2018 by Tom Holmes

It’s inevitable that you will lose clients at some point on your business journey – and in more than one way – but what matters most is how you prepare for that loss.

Having a clear plan for dealing with the loss of a client is sound business practice because it reduces the risk on the business and ensures the company can operate despite the loss of revenue.

“In the last six months, we’ve lost four clients because they’ve gone out of business,” says Nutbourne’s Marcus Evans. “We think that’s down to a softening and uncertainty in the market – but it’s something we’re prepared for.

“We’ve always ensured that there’s enough money in the bank to pay our debts and we’ve always ensured that our revenue is spread fairly evenly across a number of clients, at least since we became a grown-up business.

“In instances where a single client accounts for 20% or more of your revenue, there’s a big risk – few companies could survive the loss of a client that size.”

Nutbourne’s decision to sever ties with its second largest client is a case in point. The loss in revenue has been managed effectively and carefully, allowing the company to maintain its focus on growth and development of the business strategy.

“Business relationships that aren’t working for either party can be problematic for the service provider,” says Marcus, “particularly if you’re bound to them or overly reliant on that revenue stream.

“In our case the relationship was amicable but we weren’t suited to the client's demands and industry. The decision to sever ties meant we could free resource and focus on other clients and new prospects.

“Having the flexibility to do that is valuable. What could have been disastrous was in fact just a bump in the road.”

Posted in Business, business strategy, strategy, SME

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