Why diversification – not putting all your eggs in one basket – is so important.

Why diversification – not putting all your eggs in one basket – is so important.

By Janita Kapoor

Experts advise that no single client should account for more than 8-10% of your total revenue as it can leave your business vulnerable. Having a diverse client base, with revenue coming from multiple clients and sources beyond your primary service, is crucial.

Relying too heavily on large accounts poses risks. If those clients choose another provider or face financial difficulties, you not only lose the client but also a significant portion of your revenue.

Now, let’s explore the benefits of having a diverse mix of clients for your business.

Risk mitigation and stability: Assessing client diversity helps you gauge how protected your business is from sudden fluctuations in demand, industry challenges, or other client-related issues.

Robust cash flow: While having a few large and secure clients ensures consistent monthly cash flow, taking on smaller clients and one-off projects can boost revenue during slower periods and maintain a steady flow of interesting work.

Efficient capacity management: Underutilized teams can be stressful for both you and your employees. While secure base clients may provide enough work each month, a lack of projects for even a few weeks can lead to decreased productivity. A diverse client base enables effective resource allocation for both existing and new projects.

Encouragement of innovation and creativity: Clients from different industries bring new learnings and exciting opportunities, preventing boredom and stagnation that can arise from repetitive work.

To diversify your client base, consider implementing the following strategies:

Broaden your customer base.

Nurture relationships with existing clients.

Target smaller businesses and accounts.

Expand into new sectors by offering your existing products and services to new customers in different segments.

Foster strategic partnerships and networks.

Expand your geographic, demographic, or cultural reach.

Offer referrals and discounts.

Continually seek new sources of revenue and diversify various aspects of your business.

While long-term relationships with respected clients can be important for initial business growth, it is vital to diversify beyond that point.

By continuously expanding your client base and diversifying your business, you will secure more stable clients in the long run.