Why That Big Customer Will Kill Your New Business

3 reasons big companies make bad early-stage customers.

Casey Winans
Nov 6, 2020 · 6 min read
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What are you to do, if you want to punch above your weight class?

Many small businesses focus on rationalizing the positives while downplaying the negatives. Before you answer this question for yourself, let’s explore some of the harm that is likely waiting for you.

The downsides of going too big, too early

1. Big companies represent too much of your revenue

A new business, almost by definition, has a small number of customers. This translates into dependencies on a subset of them. Getting input from large customers is fantastic. No one would argue that point. Yet taking their money can create pressure to make them happy. Oftentimes, at the expense of what is best for your business in the long-run.

What if you discover an opportunity that would be great for your business in the long-run?

Now you have to consider whether it will hurt your big customer. The company that is paying your bills. It’s a real risk.

2. They need more than you can provide

Big customers need big results. That can translate into large projects or sales for your fledgling business.

Stress breeds poor decisions and poor decisions create stress. Now you’re caught in a downward spiral and not even Trent Reznor can help you.

Let’s flip the script.

3. They decide what and when they will pay you

Big customers are bureaucratic. That translates into complex procurement processes and large accounts payable departments. These groups strive for favorable financial outcomes for their company. This comes at the expense of your new business.

Real-world feedback from a blockhead

I lived this scenario.

It felt like an incredible win

Yet we had no idea what it would cost us in the long-run. The trade-offs were enormous yet the allure of fast-growing revenue overruled our concerns.

The big customer loved the results

Paying for individual contributors yet getting people that could lead teams. What incentive did they have to call out the resourcing mismatches?

But other customers paid the ultimate price

While we worked hard to build statements of work with most customers, the pressure was high to remain flexible for our large customer.

Those pesky trade-offs came back to bite us

We had agreed to a blended hourly rate. It felt like a safe decision when our team had been 3–4 people with zero overhead.

A final takeaway

If nothing else, know you are making trade-offs when pursuing big customers. Go in eyes wide open. The problems and inequities that you see early on will only grow in size and complexity over time.

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Casey Winans

Written by

Sold my 8-figure software consulting firm in 2018 to help service firms align with customers for better outcomes. More at caseywinans.com

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +776K followers.

Casey Winans

Written by

Sold my 8-figure software consulting firm in 2018 to help service firms align with customers for better outcomes. More at caseywinans.com

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +776K followers.

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