We’ve all heard the saying “Don’t put all your eggs in one basket.” If you have more than one income stream, you still have a source or two if one of those streams dry up. If you get it right, diversification could be your biggest driver of growth and profitability.
In this episode, you’ll learn how to:
- Diversify the number of relationships you have within an account
- Use different locations and departments as a diversification tool
- Use your service offering as leverage to derisk your exposure
- Have a 3-point strategy within your own company
- Repeatedly increase exposure to unearth more sale opportunities
What do I mean by diversification? Grow in a new direction. Make a strategic analysis to choose the best option. Diversifying your business can attract a wider range of business development opportunities and safeguard your income.
Mentioned in this episode:
Full Episode Transcription
Big accounts are fantastic. They add a logo to your website. They give you all kinds of opportunities to upsell and cross sell and do different things, but they also present a significant risk. Now, according to David C. Baker who’s the author of The Business of Expertise, among lots of other books, he claims that there is a large percentage chance that you or any other business will disappear if 20% or more of your revenue is tied up in a single client.
Now, if you’re an individual, this is really tough to diversify with more than those sources. I actually just did a look-back at my 2018. I’m recording this as of December 7th, and this calendar year, I’ve been paid by 26 different people and companies. That obviously gives me a little bit of breathing room because if I lose any individual client, not that big of a deal, but the pressure to acquire is greater. Like everything in life, it’s full of trade-offs, but if you have a big account, let’s say 20% or more of your revenue, and in many cases, it’s going to be a third or even 50%, which is pretty scary.
If you have an account like that, there are a couple things that you can do to diversify within that account, so I’d still highly encourage you to go out and find other accounts and decouple your business from someone else’s business. That’s a great thing to do, right, because you’re going to see the dividends of that if you continue to do it, but if you’re in a situation now where you are dependent on a larger count, I want to give you some tools and strategies in order to de-risk that as much as possible, because I mean let’s be honest. Your contact to that account, they could leave. Their priorities could change internally. I live in Portland, Oregon, and one of our largest companies, Intel, laid off, I think, something like 10% of its workforce, which is fairly normal. If you look into the data, it’s pretty clear …
I don’t know why I said data just now. I always say data.
If you look into the data, it’s pretty clear that even when unemployment is extremely low, which it is right now, 3.9%, of course, how they measure unemployment is a whole other topic, but we won’t cover that now. Right now, unemployment is extremely low by pretty much any historical measure, and even in times of really low unemployment, companies will go and lay off significant portions of their workforce. The larger the company you’re working for, the greater the chance that they’re going to lay off a significant portion of their workforce, which may impact you.
The other thing is, especially at large companies, CEOs turn over really quickly. According to a study that I found in a quick Google research project … I mean how else would I do that, right? CEOs are lasting for about five years right now. That actually seems pretty high to me at a large company, but let’s say it’s five years. Every five years, someone new is going to come in. They’re going to have pressure to demonstrate some change, some fresh new thinking, and often, that’s going to change the priorities and the agenda within that company. Of course, if that company is your whale account that you’ve been dependent upon, you may have a problem, and so here are my suggestions to diversify within that account, so that you can brace for some of these impacts that will inevitably come at some point, of course, right? Nothing is steady state. Everything is influx at all times.
I would definitely recommend that you’re going out and actively selling and building thought leadership and becoming the one and only choice in your market. I definitely recommend that you still do that, but in addition to that, if you diversify within this account, I think you’ll be better off, so I’m going to give you three really big ways that you can diversify within your largest accounts.
Number one, of course, is to just add more contacts. Know more people within the company, so what this is going to address is if your contact leaves, if they get fired, if they get transferred to a different unit. One of our big local companies here in Portland, Oregon is Nike. They’re very known for moving people around the company. GE is very known for this too, so definitely know if you’re working with a company like that, how they approach management, because if they approach management in such a way where they believe their employees should be exposed to new parts of the business, new functions within the business even. Even one, two, three years, then you know for sure you’re going to lose that contact, and so what you really need to do is find other contacts like that and look for opportunities to add value to other people within that company. The way I would recommend doing this is going to your contact and asking them, “Who else do you know within the company who I might be able to help, who could benefit from the things that I do?”
Now, I’d really recommend that you do this looking for lateral contacts so people who are on the same level as your existing champion and contact within that company or people who are above them. Obviously, going above them, not to cut them out or anything. I’m not saying that in a negative way, but going above them gives you the opportunity to now potentially even have a higher quality contact than before. Another way to think about this is to go to different locations. If you’re working with a really large company, again, it really depends on how the company is structured, but let’s say you’re working a client in the real estate industry. Most of their offices will be set up in similar way, so they’ll have people in sales, marketing, admin, IT, at different locations because those locations serve a locality or a region.
In a situation like that, I would want to know people at other locations if I could do my work remotely or at least semi-remotely. That would be a good time to get introduced to your contacts counterparts at different locations. Now, that’s really dependent on the types of accounts that you have and the type of work that you do. For me, I work remotely, so it doesn’t really matter to me where people are, as long as the timezone works out for us. That’s all that really matters, so this strategy of getting introduced to people at different locations really works well for me.
Another way you can think about adding more contacts is looking into different departments. For instance, if you did software development and you’re working with the marketing department, you might want to know if product people or the engineering team or the IT team or the sales team or whoever you might want to work with, you might want to know if you can chat with some of them, because again, if priorities change for the marketing department, you could very well be screwed, but it’s unlikely that all software development funding would be cut off by a company in the event of a change in priority, very unlikely that, that would happen, especially for large companies. That’s another thing that you can do is, to look into different departments and how you can help different departments along the way. That’s number one. Add more contacts.
You can diversify within your account by adding more people whom you know and you can help, and especially, you have contracts with by just adding more contacts at that company. The next thing you can think about, my second piece of advice is to add more services. Now, this works especially well if you’re already offering, say, three, five, maybe even 10 services in your product offering. Now, this suggestion may be related to adding more contacts, of course, because if you’re adding more services, those services may be consumed by other people in the company. Your contact may not be the right person to talk to about those services, but basically, here’s the thing. There’s something that I call the buyer’s trust curve. At the beginning, the acquisition part, which we all get so excited about but is the hardest part of the whole thing, acquisitions really difficult. It’s really expensive. It takes a really long time. Once we have a contact within a company, we’re much, much more likely to sell more within that company than we are to acquire a new client. That’s just the way it is.
I think it’s something like seven times easier and more cost-effective to sell within an existing client. This is really simple. If you’re already offering a client, say, two services, and you have 10 services, I’m just going to make a little matrix. On one of the axis, you’re going to write out all of your services, and on the other axis, you’re going to write out all your clients. You put a little X in the boxes where you’re providing services to these existing clients. When you do that, what you’ll find is all of the untapped opportunities you have to not only diversify your services within these large accounts, but also expand the scope of your engagement. What this represents is unrealized opportunity. You’re going to want to go after that, of course, but it also gives you the opportunity to become more indispensable.
Now, I do believe that everybody is replaceable. There’s no one person in the world who is doing something that literally no one else could do even in an inferior way. Of course, that’s not true, right, but the more you offer, the more you help, the more you provide for these clients, the more you become something that looks like it’s indispensable. Now, you may never fully get to indispensable, but you can definitely expand the scope of your engagement and de-risk your revenue that’s tied to that client. If you’re already doing hundreds of thousands of dollars with a client, but you’re only offering them two out of 10 services, if you added another service or two, you may be able to add more hundreds of thousands of dollars or more tens of thousands or whatever it is, but now, you probably have access to a different budget or a different team within that company or a different agenda item or a different strategic initiative, right?
We can definitely diversify across different companies, which is probably the best kind of diversification. Some companies even go so far as to diversify across industries. That presents a whole new set of challenges, which I don’t have time to cover here, but you can also diversify within this company. Those two ways that I’ve already listed are, number one, adding more contacts within that account. Number two, adding more services.
The next thing I would recommend is to add more contacts at your own company who know this account, so four consultants, four account managers, four professional services providers. This can be a scary one because I know you’re protective of your clients and maybe even, unlike me, I’m not calling anyone any names here, but perhaps you feel that you are indispensable. You feel that you are so much better than other people on your team, but that thinking obviously is quite destructive for many reasons, but if for no other reason, what happens if something happens to you? What happens if you change roles? What happens if you’re the functional CEO right now, and you decide you want to step out of that role? What happens if you get hurt? What happens if the star account manager on your team decides to leave and try to take the clients that they have, that you’ve worked so hard to build?
Well, I’ll tell you what happens. You may lose those clients, right? That’s a gigantic risk that you’re facing, and so having a structure and a strategy within your own team so that you can diversify your company’s exposure to your client, so maybe that includes a point person and a junior person and the business owner or someone at the principal level. Maybe your strategy is exposing your accounts to a minimum of three people. If you work on larger teams, maybe it’s 10 people. Maybe it’s at the next meeting, you let someone who’s on the account team do the presentation who hasn’t done a presentation before. Now, of course, we don’t want to confuse our clients, and we do want to show unified leadership structure, so this may merit a conversation with them about your goals and your intentions and who’s actually in-charge and who remains the point person on their account? You should still do that.
Here’s another scenario. What is some sitcom Seinfield-esque situation happens? Shit just goes wrong for whatever reason. Feelings are hurt. People are pissed off. That would be probably a more realistic and more reoccurring situation than someone leaving your company, but that stuff happens pretty routinely. There are mistakes. There’s confusion. There are communication breakdowns, and let’s take that as an example, actually. Let’s take a communication breakdown where expectations just aren’t aligned, and things go a little sideways. If you have multiple points of contact within that account on your company side and you’re the point person who had this miscommunication, you now have an ally on your team. You have someone else on your team who can go talk to your contact in an effort to understand and remedy whatever the issue is. That’s number three. Add more contacts at your company who are exposed to this account and have relationships with people at the account.
Just as a quick review, if you’re looking to de-risk your largest accounts, number one, don’t stop your sales effort. Don’t stop your marketing effort. Keep looking for more accounts so that you have a diversification of accounts, but if you are dependent on one large account or a few large accounts, diversify within those accounts by, number one, adding more contacts that you have within that company. Number two, adding more services that you can offer them so you can touch different parts of their strategic goals, and you can touch different departments within the company. Number three, have people at your company create more relationships with the people at the account so that you can fully diversify your exposure here. I think what you’ll also find as a byproduct of all of this is, you’ll be able to surface more sales opportunities, more project opportunities, more opportunities to help your clients than you did before because of the increased exposure. That is my advice on how you de-risk your large accounts.
If you’re looking for more of my advice or some sales training, go to Liston.io. You can fill out a strategy form there. I would love it if you told your friends and your colleagues about this podcast, and I hope you have a fantastic day. Bye.