Don't Put All Your Eggs in One Basket - Truths of Business Development
Have you heard the saying, “Don’t put all your eggs in one basket?” This mantra is especially important when you think of it in the context of your business. How much of your work is tied up in just one or a few clients?
The 39th Annual Deltek Clarity A&E Industry Study found that across all A&E firms, 53% of revenue came from a firms’ top three clients – including 29% from the largest client. Compared to last year, the percentage of net revenue generated from the top three clients increased substantially, up 17 percentage points from 36%. This may seem like a great sign of happy clients and it is, but it also may highlight a potential risk factor for your firm. With much of a firm’s revenue tied up in just a few clients, it can put a firm at financial risk if something goes wrong with one project and the client walks away for any reason.
If we learned anything from the housing collapse of the early 2000s, it was that a client can stop a project at any time and walk away. There was no such thing as a safe project or a safe client. Projects need to be managed to identify risk, adjust accordingly and diversify the firm’s portfolio tp live happily ever after, right?
Ask yourself a few key questions. Who is your biggest client? How much of your firm’s resources and revenue are tied up in just that one client? Who is your second biggest client? Do you have the visibility to know? And, more importantly, what are you doing to nurture and maintain those relationships and keep those clients happy?
39th Annual Deltek A&E Clarity Industry Study
If you think about this in terms of your personal finances, would you ever invest all of your money in just one thing? Definitely not for fear that if that one thing failed, you would lose everything. However, many firms are too busy delivering projects to realize the potential risk. This doesn’t just apply to clients. It could be even a specific industry or project type your firm’s business is focused in. If the majority of your work comes from your state’s Department of Transportation, for example, and then the new Governor decides to halt spending, how will that impact your current projects and pipeline? And, how will you backfill the gap?
What do leading firms do to avoid this risk? They regularly review their client and project portfolio to identify opportunities for diversification. They monitor the current revenue of backlog by client, industry, project type and other segmentation breakdowns. From this, they can see if the portfolio is too heavy or light in any area and can build a strategy to minimize the risk. They are also constantly monitoring industry trends to get ahead of potential challenges with funding or understand how industry changes will impact their projects.
How diversified is your portfolio? Do you need to make a strategic move today to diversify your client base, project base or industry mix?
If you missed the other blogs in this Business Development series, be sure to check these out as well:
- 5 Basic Truths of Successful Business Development
- You Can't Be All Things to All People
- Make Every Marketing Dollar Count
- Developing a Go/No Go Strategy is Essential
To learn more about Deltek’s CRM solution, visit our CRM page.
For the latest in-depth look into A&E industry averages for business development, download the 39th Annual Deltek Clarity A&E Industry Study.
This blog is part of a series. To receive an automated alert when new blogs are posted – subscribe to the AEC blog on this page.
About the Author
Megan Miller is a product marketing manager with Deltek and works with architecture & engineering firms around the world to help them improve their business processes through technology and thought leadership with resources like Deltek Clarity and Deltek’s leading project-based software solutions. Connect with Megan on LinkedIn.
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