I’ve lost a key customer/client; can my business survive?
The loss of a key customer or client poses a significant risk for many businesses, and can result in a severe financial decline for both limited companies and sole traders. So if you’ve lost a major customer, initially you’ll need to find out the reason why.
A number of potential reasons exist – maybe they’ve suffered their own financial decline, for example, or a general dissatisfaction with your service levels or pricing structure may have caused them to move away from your business.
If a problem with customer service or pricing was the reason, this feedback could be crucial to your survival as a business over the long-term. You may not be able to stop them leaving, but the loss of a key customer or client doesn’t have to spell disaster for your business.
So what can you do in this situation?
Assess the impact on your business
Your accountant will be able to assess the effect of losing this client, and offer professional advice on what to do next. This might include preparing regular cash flow statements to highlight your cash needs over the coming weeks, for example, or drastically cutting your costs to ensure that you can pay the bills on time.
Cross-selling to existing customers/clients
Use your existing client base to boost revenues by cross-selling or up-selling goods and services. Although you’ll also need to quickly attract new custom, leveraging the value of your current customers could provide crucial income to help you avoid insolvency.
Cut your costs
A cost-cutting exercise might involve drastic measures such as making staff redundant, or simply reducing your regular outgoings to release more working capital with which to operate.
Although it can take some time to attract new clients, increasing and diversifying your marketing efforts, and carefully measuring the success of each method, will help you get back on track.
Sourcing additional finance, either as a cash lump sum or regular cash injections, can help you deal quickly with the emergency you’re facing, and facilitate business growth for the future.
Alternative finance is generally flexible and fast to secure when compared with traditional bank lending, and could include such methods of funding as invoice factoring, invoice discounting, or crowdfunding.
If you believe your business may be nearing insolvency, it’s vital to seek specialist advice. Importantly, if you run a limited company, trading whilst insolvent can lead to your disqualification as a director for up to 15 years, and potential personal liability for the company’s debts.
There may be a number of options open to you even if your business does enter insolvency. These can include formal agreements with your creditors, negotiated by a licensed insolvency practitioner.
Company Voluntary Arrangements (CVAs) and Individual Voluntary Arrangements (IVAs) for sole traders, can help you trade your way out of financial difficulty whilst repaying creditors a proportion of their debt. You can then attract the new custom that sustains the business over the long-term.
It’s reassuring to know that your business can survive the loss of a major customer, but you need to be realistic about what when wrong, and proactive in limiting the damage.
If you’d like to know more about how to deal with the loss of a major client, your accountant will provide expert guidance, and in some cases may refer you to a licensed insolvency practitioner.
If you don’t currently use accountancy services or are looking for a new accountant, we can narrow down your search. Handpicked Accountants provide reliable referrals for fully-qualified and trustworthy accountants around the UK, and will put you in touch with suitable professionals in your area. Contact one of our team to find out more.