top of page
Search
  • Writer's picturefran7996

Review your client portfolio: how diverse is it?


A recent discussion at the MSYS headquarters revolved around the dangers of client homogeny. Even for very specialized niche businesses, it is important to monitor and strive for clientele diversity. Careful planning of your customer base can be a valuable protection measure during industry based seasonal or economic fluctuations. How well protected is your client portfolio? If you are like many small business owners this isn’t something that you’ve considered up to this point and you probably don’t appreciate me adding one more worry to your plate. But hear me out, this is definitely one ounce of prevention that is worth a pound of cure.

The task may seem daunting, so let’s start small. Dig out the ole’ financials and let’s do some quick analysis, we need to identify your top 5 customers. If you are on QuickBooks, pull down the report window, go to Company & Financial reports and select Income by Customer Summary. Once the report comes up, modify the date range and hit the collapse button on top of the report if it is listing more than just the clients name and the total income from that client. Sort the list by total and hit the A-Z up or down arrow to get your big money clients at the top of the list. There are your top 5 clients! How many industries are represented by these 5 clients? How much of your total income is represented by these 5 clients? Are all of your eggs in one basket? What sort of situation would you be in if their industry experienced a major downtown? Think back to the bursting of the housing bubble and the construction, supply, real estate, etc. businesses that went belly up.

Most businesses will have certain similarities across their client base and that it to be expected. Since evolution is a slow process, it will take some time to meet your new client diversity goals. In the meantime, keep a close watch on your receivables in the over-represented industries. Pay attention to danger signs such as customers reducing staff, customers claiming they can’t pay you within terms because they had to make payroll (especially if this is a frequent excuse for tardy payments) or because they haven’t been paid by their client (especially if they don’t know when/if their client will pay them). These are signs that your customer may be headed for serious financial trouble and steps need to be taken to minimize your exposure with these clients.

The only way to gain additional diversity in your clientele is to pursue a variety of customers. From this point forward, focus on taking on new customers that will enhance your portfolio. If most of your customers are from the private sector, go after some City, State or Federal government contracts. If most of your customers are residential housing adjacent, go after commercial and public works. If most of your customers are white collar workers, bring something to the table for the blue collar folks. Think outside the box to identify customers you aren’t currently serving who could use your products or services. After all, variety is the spice of life and the companion of the savvy business owner.


7 views0 comments

Recent Posts

See All
bottom of page