Did you know that hundreds of staffing firms will fail during this upturn? No, this is not some cruel joke. This reality has happened in each economic recovery and is destined to happen to at least some reading this posting. That is, unless you take action now.
First, let’s look at why some firms fail during times of growth. A perfect case study involves a company in Ohio owned by Doug, who agreed to share his story. His firm’s failure following the last recession occurred on what, at first, looked like their best day ever.
“I’ll never forget that day,” commented Doug. “It started out like so many others. Then, we got THAT callback. The one from the company we had been chasing for so long during the recession. They now wanted to give us business. Lots and lots of business.”
Just how much? Thousands of hours within a few months, combined with over a dozen executive search placements. So much attention was placed upon this one account, that many other customers went by the wayside.
Within six months, this one client comprised over 80% of their business. Then, in the month that followed, this same customer decided to change services, leaving Doug and his firm with no choice but to close their doors for good.
“I always knew the value of a diverse book of business. But I lost sight when we caught ‘the big one.’ If I had it to do all over again, I would never let one client become our primary focus.
Doug’s story illustrates the first of ten benefits of increasing market share…
1. Having a larger share of the market helps you avoid becoming too reliant on too few customers.
In addition, increased market share…
2. Allows you to “lay off” difficult customers.
When you have a healthy and diverse book of business, it’s much easier to let go. This includes clients who demand the most and pay the least, buyers who do not keep commitments, and customers that are consistently unresponsive or uncooperative.
3. Reduces the pain when you lose a client.
Losing a customer is typically not much fun. However, the sting goes away much more quickly when that one client represents just a small portion of your business.
4. Leads to consistent growth in profitability.
Since 1999, I’ve monitored the profitability of hundreds of firms. Those with the most depth and diversity in their markets consistently have had the largest growth in profits each year.
5. Turns your firm into a client magnet.
Who would you rather hang with? The successful firm that attracts the best companies or the mediocre operation that takes what it can get?
Those five reasons are just the start. Watch this blog for the other five next week.