It is quite common for small-medium businesses (SMBs) to battle along for the first few years of existence winning clients here and there, trying to keep their head above water. They are on the lookout for that big client contract, and then finally, after the pitching, posturing and pleading, they complete the deal with a well-respected, well-entrenched big firm that not only has offices in Australia but all around the world. The champagne is opened, backs are slapped, and for the next 24 hours, it is pure elation.
Then the reality sets in – how will we service this client? How many more staff do we need to employ? Who will look after the account? How will we service our existing clients? All these questions and more run through your head but without doubt, the biggest question you should be asking is; what are the payment terms? And can we survive on them? It is not uncommon to see payment terms of 90 days with big clients and sometimes the terms stated involve that you can’t invoice until the work is completed. If one piece of branding or marketing strategy work takes you 60 days to get final sign-off, you could then have to wait a further 90 days to be paid, meaning that your cash flow will be seriously tested with 150 days of no income from your biggest client. Your initial business plan had never budgeted for that! How will you pay your staff if that happens?
It is important that your strategy for taking on a new important client that long-term could change the face of your business is detailed and strong. In my experience, here is what you need to be aware of when you sign a big client.
Tips for ensuring that your business stays afloat when taking on a new client
1. Negotiate reasonable payment terms
Negotiate payment terms that are reasonable and will ensure that you have some form of income being deposited into your bank account at least every 60 days. See if you can invoice upfront at the start of a long-term contract for a percentage of the work and then invoice for smaller percentages along the way at regular intervals.
2. Don't over-commit to staff
It is very tempting to hire new staff and assign them to your new priority client. But be wary because there can be delays with work or projects such as re-branding, market research or a new product launch, meaning you have staff on the payroll, with no extra income coming in. Where possible, hire staff on short-term contracts or even day rates until everything is finalized.
3. Beware of the temptation to move into bigger premises
Many companies race to lock in new, bigger premises in more expensive locations taking on long-term lease deals. Again, cash flow could be an issue here if you haven’t been paid and the extra rent is starting to eat away at your bank account.
Stay at your existing premises for as long as possible, bring in extra desks and let staff work from home. It is important to note that most big companies when leasing out new office space take 20% less than they need due to the fact that they know the staff will be working at alternative locations due to the advent of technology.
4. Make sure you assign senior people to the account
It is a common mistake for many SMBs to win a major account and then assign a junior account manager thinking that the hard work has been done. Wrong! It is imperative that you service this client professionally at all times and having at least one senior person in regular communication will ensure that happens.
5. Look after your existing clients
Look after your existing clients with as much dedication as before. It is important to remember that they not only stood by you at the beginning but were also imperative in keeping your business afloat. They were the ones that allowed you to get into this position to sign a new major client and ultimately improve your business.