“A Large Percentage Of Our Revenue Comes From A Small Percentage Of Our Customers,
Putting Our Revenue At Risk If We Lose One Of Them” (Lesson 6)

All things being equal, if you have 100 customers and one of them leaves, you’re only losing one percent of your sales. But if you have one customer and that customer leaves, you lose 100% of your sales, which means 100% of your revenue. Even if that one customer is as sticky as they come, this is still putting you in a vulnerable position. 

I’m sure you’re familiar with the old idiom, “Don’t put all your eggs in one basket.” If your business is relying too heavily on a single customer or few customers, losing just one of those customers will have a pronounced negative impact on your business.

It rings true for your vendors, too. Imagine you own a breakfast restaurant and you have only one egg supplier. One day the supplier puts your entire egg order on one truck and the truck gets into an accident. Now you can’t sell any eggs at all because you really did have “all your eggs in one basket”!   

When you develop a relationship with only one supplier, you will always be at risk of losing that one supplier. Have you considered that, if you only work with one supplier and they stop supplying you with your “ingredients,” how much of an impact this will have on your revenues? 

At the end of the day, if more than 15% of your sales are coming from a single customer, you’re putting your revenue at risk. And if you purchase more than 15% from one supplier, then you are also putting yourself in a risky position.   

Are You In A Vulnerable Place?

Think back to the florist we spoke about in the last article. If they have only one supplier of roses and that gardener suddenly has a pest infestation that wipes out her prize rose bushes, then the florist has just lost all their product and they can’t sell roses anymore.

Without diversifying your suppliers, you are in a similarly vulnerable place. 

It’s exactly the same vulnerability you’ll experience if you only have one or two customers. It takes effort to find new customers. It takes effort to advertise and market your services. If you don’t make that investment in time and energy, or you only make a minimal investment or aren’t consistent doing it, then you remain stuck having only one or two customers.

The phone is not ringing, and the customers are certainly not coming in.

If you’re stuck in this blind spot, ask yourself these questions: Are you developing the right relationships with customers and suppliers? Do you have a marketing strategy in place that’s effective? 

Build A Pipeline Of Trust

Regardless of whether you’re trying to get your customers to buy into a recurring revenue stream versus a single purchase, the fact remains you have to get them to trust you over and over again. If you want them to buy from you time and again, you have to actively maintain that relationship.

Without an effective and appropriate marketing strategy, you will not be able to build the requisite trust with your customer base to encourage more of them to buy. This reflects a lack of awareness around the value of having a pipeline of trust in place. 

If you have a recurring revenue model, you create that level of trust once and then it runs on autopilot. As long as you don’t screw up, you have them locked in. They’re committed to being a customer. It takes effort and time to build that trust.

Ultimately, it’s easier to work with someone we know, like, and trust. This applies not only to your customers and their relationship with you but also to you and your relationship with your suppliers.