Many of you are probably familiar with the term feast and famine in business. It typically means the company ‘feasts’ when business is good, and ‘starves’ when business is not so good.
For service providers, and especially smaller ones, these ups, and downs are a regular occurrence due to the fact they do not have a repeatable sales system in place to help sustain or diversify their business when activity slows down.
Industrial service providers (as the name implies), typically provide on-demand contract services to other businesses. For example, in the oil and gas industry, service providers such as a well service company, ‘service’ exploration and production companies by visiting the well regularly to ensure it is in good working order and to clean various components.
As a result of this working relationship, service providers are dependent on the business ebb and flow of their customer(s). tweet
When their customers slow, they slow. This dependency is made even worse by the fact that service providers often have a small number of customers based on factors like capacity, or geographical limits. The good news from this is that their cost of sales and marketing is very low, or even non-existent, as the customer simply calls them as needed for a required service.
The bad news is that the service provider typically doesn’t develop its customer base, or new markets, unless its customer grows or moves into different markets. tweet
So what happens when business slows? The service provider is left out in the cold and famine sets in. This is why it appears that industrial service providers are synonymous with feast and famine. Thankfully, some service providers have been through this cycle enough to have developed ways around it.
By using profits from when times are good, they invest in sales and marketing systems that help them to reach new markets, sell new product lines, or even export to reduce their reliance on the same small group of customers. None of this is as easy as the referral and word of mouth business they get from their ‘regular’ customers, but it is imperative to shock-proof their revenue streams.
In business school, it’s commonly taught that no more than 5% of your business should come from one customer. tweet
Service providers often fall into this trap by not having a repeatable method of acquiring new customers. To break the feast and famine cycle, all it takes is some investment and sometimes you’ll be able to build a more durable business model when you do.
Don’t let this equation be yours: Service Provider = Feast and Famine!
About Fred Yee
Fred Yee is the founder and CEO of ActiveConversion, a company specializing in industrial online marketing, marketing automation, and demand generation. His work with ActiveConversion has helped hundreds of businesses succeed online and expand internationally. Fred was voted by the SLMA as one of the Top 50 Most Influential in Sales Lead Management for two consecutive years, and continues to gain recognition for his work in online marketing.