Why Working With Fewer Clients Can be Risky and How to Easily Avoid It

February 3, 2023

As a business owner, you likely understand the importance of building a diverse client base.

Working with a small group of clients can be tempting, especially when they bring in consistent and reliable income. However, relying on a narrow client base can be risky; it puts all your eggs in one basket.

If that basket happens to break, your business could suffer significantly.

So, let's dive into why it's crucial to understand the risk of working with a small client base and how to expand your horizons to create a more diverse range of clients.

Why is it Risky to Work With a Small Client Base?

As a business owner, you want to feel secure in your income and the stability of your business. Finding reliable clients who provide consistent work and income is a natural extension of growing your business!

Some business owners work with a particular niche to build their businesses. To grow a relatively large business, your niche must have: a large enough market size to capitalize and/or clients willing to pay more considerable fees.

When your niche contains a small number of clients willing and able to pay significant fees for the problem your business solves, your business can generate quite a bit of profit from a relatively small number of clients.

Though, having a particularly small client base can be a risky choice.

Think about it: if all your income comes from one or two clients, what would happen if they suddenly decided to take their business elsewhere?

It's a scary thought.

If your business grows beyond just 1-2 employees, taking big hits to your revenue can be catastrophic when managing payroll, rent, and other regular business expenses.

Working with a narrow client base can also lead to creative stagnation. When you're only working with a small group of clients, it's easy to fall into a routine and become stuck in your ways.

This lack of diversity can make developing fresh and innovative ideas challenging.

This is why, for most business owners, it's essential to have a diverse client base: so that you're not relying on just a few clients to keep your business afloat.

Free course: financial storytelling basics.

Using Pricing Psychology to Create a Diverse Service Offering

One of the best ways to attract a diverse range of clients is to offer a selection of pricing options.

Pricing psychology is a powerful tool that can help you attract a broader range of clients, including those who might not have considered your services otherwise.

For example, if you're a graphic designer, you might offer a range of packages that cater to different levels of complexity and budget. By offering various options, you're appealing to a broader range of clients and showing that you're willing to work with them to find the right solution for their needs.

Most small businesses offer a singular type of product or service and choose to create a niche depending on the market they believe they can serve best.

Your pricing structure can funnel your clients into a particular level of service or product that will fit their needs best.

For service-based businesses, pricing things like your availability and scope of work allow you to control how you serve your clients depending on the amount they pay. This can allow you to offer a product or service to anyone within your ideal market while maintaining control over how much work is required for each tier.

Many marketing experts suggest that offering three tiers of pricing may help close deals quicker.

Your lowest tier option should be one that allows you to provide your clients with a very basic level of service. Your highest tier can be one that provides the most value and is also the most expensive.

The pricing of your lower and higher tiers helps put the attention on your bread-and-butter: the middle option.

Your second-tier service is typically what you expect most of your clients to choose. It should be priced according to your value and be an excellent option for most people while still allowing the potential for growth to the highest tier in the future.

What to Do After Landing a Large Client

So, you've landed a large client? Congratulations!

Now what?

It's important to remember that landing a large client is just the beginning. You must ensure that you deliver top-quality work and maintain a strong relationship with this client to ensure that they continue to work with you.

One of the best ways to keep a large client happy is to stay organized and communicate effectively. Keep track of all deadlines and deliverables, and keep the client updated on your progress.

This will help to build trust and ensure that the client feels confident in your ability to deliver on your promises.

It's also essential to be proactive in addressing any issues that arise during the project. By addressing problems quickly and effectively, you can demonstrate your commitment to providing top-quality work and help to maintain a strong relationship with your client.

Working with a financial coach or accountant can be a game-changer for small business owners.

These professionals have the expertise and experience to analyze a small business' customer breakdown, which can provide valuable insights into where the business is succeeding and where it may be missing opportunities.

For instance, if a business is over-reliant on a small number of customers, it can be more vulnerable to fluctuations in demand or changes in the market.

However, with the help of a financial coach or accountant, small business owners can develop pricing strategies that diversify their client base and reduce this risk. Often this comes in the form of offering a range of pricing options to target different customer segments.

By using these strategies, small business owners can increase revenue and create a more stable and resilient business in the long run.

Ultimately, diversifying your client base is crucial for the stability and growth of your small business.

By understanding the psychology behind pricing, you can attract a broader range of customers and build a more resilient business model. Furthermore, working with a financial coach or accountant can provide valuable insights and support in analyzing your customer breakdown and developing effective pricing strategies for the future.

Small business owners can achieve long-term success and stability in a highly competitive market by taking these steps.

Unlock your financial story today.

Get started
Jeremy Millar
Written by:
Jeremy Millar

Want more of The Profit Plot?

Amarlo helps entrepreneurs combine intuition and accounting.


Free Video Course: 
Unlock Your Financial Story

Learn to run your business based on more than just intuition and emotion using Financial Storytelling: the easiest way to understand and grow your company.