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Managing Your One-Customer Exclusive Small Business

Simple Alliance, Kenya Limited

The Dangers

If you find yourself relying on a single customer for the continuity of your business, you could be in a dilemma. Such an exclusive business is likely to constrain your revenues. The major challenging feats you engage in include:

  • Always striving to satisfy the solo customer so as to maintain them
  • Continuously shoring up your business such that the downfall of the single customer will not cause your collapse
  • Entering into a unsecured loan arrangement if you extend credit to your customer   
  • Always facing the risk of going under should your single customer faces serious problems

Your Risk Mitigation Strategy

The single customer scenario is not a particularly satisfactory one. If you are in such a situation, you need to consciously work towards changing the challenging business environment. This strategy will require you to go through a number of processes, namely:

  • Setting goals
  • Instituting a plan for acquiring additional customers
  • Gradually implementing your stipulated plan 

Recommended Plan for Handling the Single Customer Situation 

If you find yourself in a situation whereby you have one customer, you need to institute measures for guaranteeing your business’ integrity and survival. Some approaches you would take include:

  • Always being in touch with your customer
  • Generating a survival strategy in case your single customer collapses
  • Being wary of exclusive arrangements
  • Conducting periodic assessments on your customer

Be Careful of Exclusivity

By signing an exclusivity contract, you could commit to supply your services or products solely to a single customer. Although they promise huge profits, exclusive business arrangements can be constraining. Suppose the customer is unable to take up your supplies? Suppose your production expenses go up. To mitigate these risks, you need to seek a commitment from your customer for price modification allowances or minimum yearly income guarantees.       

 Setting Up a Survival Strategy

 You need to put in place exit strategies should your solo customer go under.  Your selected options could incorporate seeking loans, cost reduction, or halting operations.  

Periodically Assessing Your Customer

So as to get an accurate picture of the goings-on within your customer’s business, conduct occasional checks on the client’s accounts. Do not assume that your customer’s previous creditworthiness still stands.       

Constant Customer Engagement

So as to avoid unpleasant outcomes in relation to your single customer’s preferences, sentiments, or needs, you need to be regularly in touch with your client. An advisable approach to ensuring this continuous engagement would be holding consistent meetings with your customer. At these meetings, you would discuss pertinent business issues that have a mutual slant. Key discussion items would include:     

  • The progress of your customer’s business
  • Customer’s suggested ideas for improving the business relationship
  • Your proposed investment plans
  • Your customer’s views on such new investments 

 New Investments

When contemplating new investments, always seek audience with your single customer. Secure an enduring commitment from the client. Make sure that your customer gives you an allowance for price changes. This arrangement would save you from losses in case production costs go up in future. You will appropriately raise the selling price so as typo cover the additional costs.      

Important Caveat

Even if you have a supposedly large customer who is flanked by small, supposedly insignificant clients, do not underrate your minor clients. These small customers give your business some unique advantages. They:

  • Assure you of unbroken, dependable revenue
  • Could serve as ideal means for testing your new products
  • Are useful when you want to establish new markets

If you have an exclusive business pact with a single customer, you need to institute proper survival as well as exit strategies. The contract of exclusivity is among the most serious small business agreements. True, single customers, especially the huge ones, could offer lucrative business. The downside is that should these customers face difficulties, you, the small business owner, could have to face the brunt. For this reason, you need to conduct consistent customer reviews to determine the fiscal health of your clients. Further, whenever exclusive deal terms are pushed your way, you need to be extra careful when signing under the black line. Be careful when signing the exclusivity contract. You also need to seek for long-term relationships with single customers. Such arrangements could allow for price modifications and year-long minimum income guarantees. With a bit of foresight and strategizing, you can effectively manage the single customer situation.

Copyright (C) 2016, Simple Alliance Kenya Limited

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