Have you ever considered what would happen to your business if you lost your best client? How much revenue does your best client generate? How hard would it be to replace this key account for your business?
I’d like to share a story with you that keeps many of my CEO clients up at night. Last year, I got a call from a former client who shared this nightmare scenario with me. They had just gotten a call from their largest client telling them that they (their client) had been acquired by an overseas competitor and all of their current vendor contracts were being renegotiated.
My former client was blindsided and wanted to know what I knew about the new owners. What should they prepare for? After all, this was their best client.
For midmarket CEOs, this scenario is playing out more and more often. Industry consolidation and increased acquisition activity for global organizations is changing how we must look at our key accounts. When a larger organization buys a smaller business, they bring new ideas and strategies to the acquired business.
Depending on the larger business’ success, the more likely it is that they are used to working with their vendors differently. I don’t really like the word vendor. If I’m seen as a vendor by my clients, I don’t have the key relationships inside the organization I need to provide significant value to my executive stakeholders. And significant value is what keeps us in our clients’ lives. Today, I share several challenges occurring in purchasing that could put your key accounts at risk.
The first challenge is most global organizations have spent significant time and money to increase the skills of their purchasing professionals. Many of these individuals have significant training in all aspects of purchasing. In many ways, these professional buyers sitting across the desk from you have received similar training to what we give our sales professionals, but even better. Because of this advanced training, they are well prepared to negotiate a better deal than in the past. In some cases, organizations bring in hired guns to help deal with their larger purchasing decisions. The rub is these individuals are compensated on the savings and concessions they get from you, the vendor. Sounds like a challenging position to be put in, and you’re right. Your best client may become unprofitable very quickly.
The second challenge is many successful CEOs are aligning their purchasing initiatives with their corporate strategies. In many industries, the purchasing team has a seat at the table. This means that going to your best contact in your best client may mean that you still have another level of decision making required to make the final decision. Your sales may be at risk and your sales team, if you have one that has a limited view of your client’s business strategy. In many cases, the person who found the business may have limited strategic skills. They are great at hunting, but tend to fall behind on the follow up.
The third challenge is the integrated supply chain. Big data and integrated supply chains mean that the buyer has a significant advantage of knowing as much or more than you do about your products and services. Their people are always asking your people questions and then assembling the information into a strategic tool in your negotiation process.
Because they are increasing their own effectiveness, they are beginning to erode your inside sources of advantage. In many cases, the people you are working with may choose to retire versus going through the process of securing their role in the new organization. This means you best contacts are no longer with the firm.
The final challenge is that your business has limited structures and processes in place to support a key client. They don’t have a key account planning process in place. Your sales professional is challenged to provide the critical information required to enhance your organization’s position in the client’s mind. This increases the risks involved in dealing with a local supplier.
Now, I understand that this may not be happening to you right now. My former client felt quite secure in their relationship until the acquisition happened. Having an executive partner involved with you and your best client may have helped you be more involved before the acquisition.
Today, I’ve shared several purchasing trends. For many large companies, they can survive the loss of their best client, it’s not easy. Depending on the steps they took, it’s manageable. Many midmarket businesses cannot survive the loss of their best client.
This Friday, I’ll share several ideas that can help you keep your best clients. I also include several key metrics you want to know about your key accounts. See you then.