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Mike Fraser - 10 May 2010 (0 Comments)
A slightly twee headline, sure - but the collapse of a leading digital agency this week has made the above clear. After losing a client that was responsible for nearly half of the agencys turnover, trouble was on the horizon. Even with a roster of quality clients, this agency could not survive such a loss, with the result of many people out of work, with no redundancy packages, apart from the statutory minimum.
How can this type of situation be avoided? Always look out for new business, even if your current client base seems solid. Ask yourself if the loss of one or two key clients would cause serious ramifications.
However, dig slightly deeper into the story, and it seems the agency which has gone under had done just that, it had gained many new clients since the loss of their major cash cow, and seemed to be in a healthy position - it may infact be that we are not hearing all of the story, and that in fact VC investment had left the group saddled with a debt burden it simply could not surmount.
The view that the loss of one client caused financial meltdown may be too simplistic, there were other underlying factors causing these issues. Obviously constantly sourcing new business if key, however when there are deeper financial issues that can destabilise your business, even a good roster of clients may not keep the wolves from the door.
Lessons to be learned? Firstly do not become complacent with your current stable of clients, they can move, spend can be cut, alternative routes to new clients may be sought. Keep moving forward looking for new opportunities, while at the same time making sure the back end finances are stable. Venture Capitalist investment may not always be the way forward, as they will want a quick return - whether that means shutting a business down and selling its component parts to get that return, or streamlining to such an extent the business cannot function, neither option ideal for the workers at the coalface.
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