The Rules for Entrepreneurs

Avoiding a Few Whale Customers

As you build your business the thing you need the most are those first customers. They are what provide you cash flow and a track record to win new customers. Getting the first few are the hardest because they are usually buying from you and believe in your ability to deliver. This is one of your greatest strengths, but over time, it can become one of your biggest liabilities. Let me explain…

Selling yourself is different from selling your business

As I mentioned, when starting a business there is probably just you and maybe a partner. Many people bring contracts and relationships from previous jobs that help jump start the business and gets the cash flow going. These customers are buying from you because they know you and your ability to deliver. This is great and is the way many companies start, but you are really just selling yourself and not selling your business. This is the habit you must break.

Within the first six months of your business you should be planning a major marketing and sales effort to expand your client base beyond your core relationships. This takes your business to the next level where people are looking at the business and not just buying from you. Still they are buying from you but you must have people that can manage the project and be ready to take the lead. This accomplishes two things:

1. You have more time to continue selling and growing the business
2. You do not become the “go to person” for every issue keeping the perception that they are buying from you

Whale customers are great to have in the beginning

As the business grows, you might be lucky enough to land some great big clients that provide a lot of revenue to help you expand. This is great and we should all be so blessed by winning these kinds of clients. However, what develops is the “90/10″ rule – 10% of the clients provide 90% of the revenue. This could mean that 1 or 2 clients are keeping the company running and losing one of them would be catastrophic to the business. So you must do one key thing quickly – diversify.

You must diversify or your put your success in jeopardy

Diversification is hard for some companies. Many people get lazy and confident that they will never lose them. Trust me, I speak from experience, you will. It could be a change in management, your champion leaves to take another job, budget control moves to a different department that doesn’t know you and doesn’t see your value, or the company goes out of business. What I am trying to say is that anything could happen and it could happen at any time.

So what do you do? After I learned my first hard lesson, I applied this rule – for every whale client, I worked over a six month period to find 5-10 customers that matched their revenues so that over a two year period those whales went from 90% to 10-20% of your overall revenues. This gave us a greater sense of comfort so when we would lose one of those two whales, which we eventually did, we only had a dip in revenues and used our sales campaigns to pick up the slack and pick up a few new smaller customers to fill in the revenue gaps.

Editor’s Notes: Suggestions for Entrepreneurs?

Entrepreneurs follow similar paths regardless of industry. Whether you have a web startup, or are building a brick and mortar business in finance, productivity, consumer goods or services, chances are you are running constantly, pounding the pavement trying to make your business work. Some of you are looking for venture financing in an economy that, frankly, sucks. Some of you are extending your credit lines as far as the banks will allow you to extend them in a valiant effort at bootstrapping and retaining ownership of 100% of your company.

What are your suggestions for your fellow entrepreneurs? What are the toughest, but most rewarding lessons you can pass on?

I leave you with this video from Gary Vaynerchuk, the entrepreneur who built a multi-million dollar wine brick and mortar wine business then, not being satisfied with starting a successful company, started on his ventures into the web space where he had to learn all over what being a successful entrepreneur was.

Hire me! I am actively looking for full-time work. If you're interested in discussing opportunities, please email me at aaron@technosailor.com

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