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A Radical Way To Make Your Management Consulting Business Better

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Posted by John Beveridge on Aug 17, 2016 5:30:00 PM

A Radical Way To Make Your Management Consulting Biusiness Better

Okay, before you think I'm crazy, let me just say that this radical strategy is like the nuclear bomb. You should only use it in the most life-threatening of circumstances. This radical way to make your management consulting business better is to fire your biggest customer. Yes, you heard me right - fire your biggest customer.

Does any of this sound familiar?

You have a really big customer. Let's say they represent 35% of your revenue. But there's a problem. They're constantly late with their payments. They treat you and your team like you're their houseboy. They don't include you in strategy discussions, but expect you to know the strategy cold. They change direction like you change underwear. They give you impossible deadlines for work that they end up not using. But they represent 35% of your revenue.

Here's the problem: the nature of your relationship with that big customer is such that it's keeping you from working on your business. Instead of working on strategy and growing your business, your life as a business owner has evolved into putting one fire out after another with that big customer. And they've beaten you up so much on price, that you're not making money on their account. Simply put, you're stuck. And you're not having any fun.

What can you do?

Many would advise that the first step is to sit down with the customer and see if there's some way you can make the relationship better. While that's certainly something you should do, do you really expect this terrible customer to see reason and totally change the way they do business? Who knows? Stranger things have happened. But here's what I suggest:

  • Ramp up your sales and marketing efforts. A healthy management consulting business should have a diversified book of business. Ideally, no one customer should represent more than 10% of your total revenue. That's not always possible for new and smaller businesses, but it's certainly something to strive for. The most important thing you should do is start working on getting more customers to diversify your revenue stream.
  • Start tightening your belt. Even if your big customer is a delight to work with, it's not a good idea to be so beholden to one customer. The good big customer could be acquired, a new executive team could come in or they could lose a big customer. Now is not the time to be investing in anything other than acquiring new customers. Of course, you will need to pay your team and invest in customer delivery, but now's not the time to move into that cool new office space you've had your eye on.
  • Understand what leverage you have in the relationship. Although the customer treats you poorly, they many need you to accomplish important business functions. This is particularly true when you have some institutional knowledge that other competitors don't. If you have some leverage, now is the time to politely start negotiating ways to make the relationship better for you. For example, you can define a negative consequence if you're not paid on time.

Your goal at this point will be to put yourself in a better position to grow and manage the business that you want to have. If your big customer is making you and your team miserable, you need to face up to the fact that the situation can't continue indefinitely - something's got to give.

When is it time to pull the pin?

The best scenario is that you take the steps described above and grow to the point where the customer's percentage of your total revenue has declined to a more acceptable level. But if you're just not able to devote the time and resources necessary to grow your business because of the demands of that client, it might be time to bite the bullet and fire them.

Before you do that, understand what the consequences are and come to terms with them. You may have to fire someone on your time. You may have to cut back on expenses further than you really want to. But if that's what you need to do to build the kind of business you want, c'est la vie. Sometimes you have to take a step back to take two steps forward.

While it's never easy to fire your biggest client, we all need to pivot in our businesses to grow. You can never be satisfied and complacent with your business. Having a consistent, repeatable process for filling your sales pipeline is the best way to avoid the pitfalls of a bad customer. Download our Professional Services SMART Growth Guide to learn how to build that process.

Topics: Professional Services

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