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How vulnerable is your business
 

How vulnerable is your business

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    How vulnerable is your business How vulnerable is your business Document Transcript

    • What would happen if you lost your largest customer? Think what would happen to your business if your largest customer cancelled its orders or demanded a 20% price reduction?” When Marks and Spencer’s switched production out of the UK a few years ago, several large companies collapsed within weeks. Many businesses fall into the trap of developing an operation overly dependent on one customer. Whilst this seems advantageous when everything is running smoothly this could lead to failure if the ‘big’ customer pulls the plug. Companies stop trading with suppliers for a variety of reasons: (a) liquidation; (b) acquisition by another company; (c) a change in strategy or (d) a cheaper deal somewhere else. Whilst you may believe you are protected because of a contract, it may in practice be difficult to enforce. The net result is that a gaping chasm suddenly appears in your cash flow – usually when you can least afford it. There are various reasons for falling into the cash flow trap: lack of a clear business strategy, lack of sales and commercial skills or that the current trading arrangements are trouble free and secure because of long standing relationships. Sounds familiar?? A policy adopted by many successful organisations - no single customer should constitute more than 20-25% of sales. Whilst the loss of such a customer would be painful it would not necessarily be fatal. A bigger customer base provides a buffer against individual customer whims, who after all are in business to produce profits for themselves NOT support you. Your customer base can be developed in 3 common ways: (i) identify similar customers and offer them a similar product or service (ii) use your core strengths and produce a new offering for customers in similar business sectors (iii) diversify into entirely new product and market sectors Benefits to your business of this approach: (i) you understand the business, market prices and quality requirements. You still face a risk, however, if the entire customer sector faces a cyclical downturn; (ii) as you go up the ‘stack’ you are, however, moving further into the unknown but are also reducing your long term exposure to business downturn from an individual customer or sector; (iii) reducing the risk of entering into new business can be achieved through proper market research and business planning. Understanding customer requirements and the strengths/weaknesses of your new competitors will allow you to understand the opportunity and plan how to be successful. New Mindset consultants helped a company supplying market research and information develop and implement a strategic plan which restructured its customer base and increased revenues by over 400%. o: 01276 537282 e: andy.hamer@new-mindset.com w: www.new-mindset.com b: www.new-mindset.blogsot.com
    • Over 10 years the ‘company’ had built sales to £750k pa, although recently growth had been stagnant. One customer accounted for approximately 40% of sales which were retained through ongoing annual contact. The underlying target market, however, was consolidating due to the merger of smaller companies. Even revenues from the clients largest customer were under threat due to the potential acquisition by a global competitor which performed the research services, provide by the client, in-house. Following a structural review of the market the consultant formulated a business strategy and through ongoing support established an in-house sales and marketing team, re-branded the business, extended/deepened the product portfolio, formed new channel alliances and launched a direct marketing program to win new customers in North America, Europe, Middle East and Asia Pacific. Want to know more about how New Mindset can ensure that your business is not vulnerable - call now on 01276 537 282 or email andy.hamer@new-mindset.com o: 01276 537282 e: andy.hamer@new-mindset.com w: www.new-mindset.com b: www.new-mindset.blogsot.com