The bitterest pill is hard to take. Recently a former colleague of mine got in touch to bemoan the fact he had lost a key client whose business counted for nearly 40% of the revenue for his nascent social enterprise.
He lost this business because confidential documentation pertaining to some product research and development his key client had been doing which, owing to the target audience of the project they were undertaking together, ‘escaped’ from their server and into the welcome arms of another key social enterprise competitor. Yep, a real nightmare.
This former colleague, who had made the mistake of shifting his cash into marketing when it should have been put into more robust security for his servers, has learned a pretty harsh lesson. But at least it was a one-off error that can be corrected.
The mistake of an earnest, socially-minded businessman you may think, and in this case the fissure was a rapid one, but normally, when a client decides to take their business elsewhere, the warning signs go off like flares on a night sky, far earlier.
Red flags run from the obvious (a decline in sales volume or regularity) to the subtle (a slow-down in response times to missives and phone calls) to the opaque (a general growing disinterest with your services or product informed by market changes, competitor action or change in the nature of their own business).
Losing business is never easy to swallow and can happen for a variety of reasons. However, what is crucial is how you counteract any loss both financially and strategically. Here I break down a few steps you can take when one of your key revenue streams ups and leaves.
Firstly, don’t panic. If your business is still in its early changes, this could mark the first serious gathering of storm clouds. But they will dissipate in time.
Re-check your contract and ascertain where you stand legally. Have any terms been broken which would require the remainder of the contract to be paid in full? Once that is established, you can then decide on which approach to take.
In the unlikely event that terms have been breached and legal recourse might be necessary, then prepare for a long and expensive (and very trying) process. Hopefully, that is not the case.
If, on the other hand, there is another reason for this parting of ways which is more ‘amicable’ (the more common of occurrences – this is business after all), then there are far more constructive approaches you can take to the loss.
Be objective, remove yourself from the emotional low and analyze your mistakes. Why is the client leaving you for pastures new? Was it poor service? An obsolete offering you were still trying to push? A failure to understand their business and its needs? Carrying out a professional ‘exit interview’ is a very good idea. You may well learn things about your business that you did not know and about your staff also. You need to get a very clear idea of what your business could have done differently, how you can apply these lessons to your future strategy – but also, and this is one aspect new businesses tend to ignore, you need to analyse if it is worth it.
Businesses shed skins as they grow, the nature of their client-base will shift and it may be that you need to re-focus your efforts more on clients where the workload/revenue balance is at its most efficient.
As the final discussions take place, ascertain as to whether you can score a referral from the outgoing client, or indeed a mainstay? A common misstep is then go into overdrive on the remaining client-set, trying to find room for replacement business there but this often fraught with danger. Many just end up disturbing the relationship through their overcompensating.
Especially tenacious negotiators will always try and retain even a small portion of the previous business slate too. Failing that, and if terms are particularly amicable, it is always worth establishing if you can get in touch again after an initial period, after the air has cleared a little.
Finally, remember that as some doors close, the draught can often blow other doors open.
More Business articles from Business 2 Community: