I was reading a post in the computerbusiness group on Yahoo! this morning by Brad at Aspen Computer Services called The Economy and Elephants. He was discussing Steve Kaplan’s book Bag the Elephant!: How to Win and Keep Big Customers. The “elephant” in this respect is the large client. The concept is that obtaining a couple of these big spending accounts will provide a steady revenue stream for your business, allowing you spend less on administrative overhead such as marketing to new clients, invoicing and collections.
In the past this was every small computer consultant’s dream: land a couple of big ones and your business is set. But times have changed.
The current situation with the economy has created uncertainty in the marketplace; even the largest elephants are no longer immune to its effects. Layoffs are occurring everywhere within large corporations and many companies in the enterprise are scaling back or cutting tech spending in 2009. If you rely on two or three large companies to keep yours profitable and you lose revenue from one, how would that impact your business? Unless you have alternate streams of revenue, it could be a serious blow to your bottom line.
This is where the old adage of “putting all of your eggs in one basket” rings true. While ‘bagging the elephant’ is always a great boost to your business, to rely solely on the elephants to make your hunt a success is risky business.
This is how a lot of investors lost their life savings. They relied solely on the stock market, their 401(k) or their pensions for their retirement nest egg instead of diversifying their savings in a number of different venues. When the stock market took a nosedive and the banking industry began to meltdown, many of them lost it all. Those who diversified were hurt as well, but they were able to take the blow.
In these uncertain economic times, we need to be ready for anything. Bagging the elephant won’t necessarily help much anymore. If the elephant is becoming lean it could be more trouble than its worth and if it is sick, lame or even dying, instead of an asset, it could even become a liability.
In his post, Brad considered this himself and suggested that diversification may be a better alternative. I agree.
We are currently running a four part episode of The Force Field podcast on The State of the IT Industry. While the discussion primarily centers on how the current economic situation is affecting IT service providers and how they think it will impact their businesses in the coming year, we do talk about how to deal with the prospect of a downturn in business.
In Episode 29 Patrick Palmer told us what he was doing to market his services to a broader client base. In Episode 30 Kris Crispell stressed the importance of keeping up with the latest technology with continuing education in IT. The guests made suggestions in each interview that I think are good ideas to consider, but the one thing they all mention is the possibility of diversifying.
There are many new and emerging technologies entering the marketplace and this translates into new opportunities for staking a niche in the delivery and support of new products and services, and possibly creating a niche in new areas of IT.
Even if you are not particularly interested in entering these new arenas, it is still advisable to check them out for possibilities. The truth is that in this day and age, under current circumstances, sticking to business as usual may not carry you through the rough spots to come. Sure, the more clients you do have for a specific product or service the better, but as the economic climate changes and consumers react to it, their needs and priorities may change as well. If you are not prepared to meet them, they will find someone who can.
