Should I have few clients or many clients?

Few clients or many
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Should I have few clients or many clients? Let’s start this discussion in an unlikely location, O’Hare Airport in Chicago, Illinois. Ranked as the busiest airport in the world in 2014, it’s likely you’ve been there. Edward J. O’Hare (aka Easy Eddie) was one of Al Capone’s lawyers and business partners. In 1930 he joined forces with the IRS to help convict Al Capone of tax evasion. The airport is actually named after his son Butch O’Hare, who won the Congressional Medal of Honor as a naval aviator in WWII. What’s the connection with the topic? As Al Capone’s attorney, its likely Easy Eddie O’Hare took the “few clients” route to building his business.

Few clients – the rationale

Imagine having a practice where business came to you. Marketing wasn’t necessary. That’s the rationale for building a practice around a few major clients. In the late 1940s, Charlie Merrill of Merrill Lynch built his business model on the concept of bringing Wall Street to Main Street. In the 1990s many financial services firms decided they would be “all things to some people” instead. Their business models evolved to working with fewer, but larger clients.

The advantages are pretty obvious:

  • Generational business – Wealthy clients usually have wealthy parents and wealthy kids. Your practice grows through family introductions;
  • Digging deeper – You can help clients in areas they may not traditionally associate with accounting. There are many services they need to buy anyway. You can be the provider.
  • Specialisation – Your niche market is petroleum engineers or funeral directors. You understand the industry’s unique challenges. When they come across an opportunity, it makes sense for satisfied clients to refer business without prompting. They know you know your stuff.
  • Client continuity – You are the family accountant. They’ve been using your firm as long as anyone can remember. Inertia and tradition are powerful.
  • Quality of life – Since business development isn’t a major factor, your ratio of work time to play time improves.

But there are cons:

  • 24/7 availability – When you work for rich, powerful people they expect availability on their timetable, not yours.
  • Expectations – As major clients they may define your role differently. You won’t be assigned dog walking, but a nephew may need help getting into a specific school or they send an invitation to the charity gala they are chairing.
  • Loss of client – A small group of clients bringing in reliable revenue is good. Losing one to disagreements or personality problems can have a high cost.
  • Taint by association – Al Capone went to prison. Easy Eddie O’Hare helped put him there. FYI: O’Hare was shot to death a week before Al Capone was released from Alcatraz prison.

Many clients – the rationale

OK, being shot to death is a big drawback. Maybe the many client business model is right for me.

It also has many advantages:

  • Size of market – Kemmons Wilson founded the Holiday Inn hotel chain in 1952, and is often quoted as saying: “you can cater to rich people. I’ll take the rest. The good Lord made more of them.”
  • Standardised service – Henry Ford is credited with inventing the first moving automobile assembly line in 1913, increasing output and lowering costs.
  • Technology – You can grow your business without hiring large numbers of additional staff.
  • Pricing power – Your success is based on volume. You can compete on price if enough new people come through the door.
  • Losses are minimised – Losing a client, one of a thousand delivering the same amount of revenue is less serious than losing a major client representing 10% of revenue.

Of course, there are drawbacks:

  • Business development – Your success is based on volume. You need to be adding clients all the time. Fickle clients who shop on price won’t be loyal.
  • Pricing pressure – The easiest way for a new entrant to gain market share is to undercut pricing, even if they lose money in the short term. You will need to counter or fend them off. A (possibly apocryphal) story goes: “What did the barber charging £10 for haircuts do when a competitor started charging £5?” He posted a sign: “We fix £5 haircuts.”
  • Time pressures – Some clients will want personal attention. This takes time. It’s not built into your business model.

There’s a place in most industries for mass market and specialty providers. Which suits you best?

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book “Captivating the Wealthy Investor” is available on Amazon.

About Bryce Sanders

bryce sanders

Bryce Sanders is president of Perceptive Business Solutions Inc. in New Hope, Pennsylvania.

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05th Jul 2016 09:33

Good clients with a substantial margin are great but you can always lose them even if you have done nothing wrong. A few years ago my old employer kept a client following a private equity buy out but at a substantially reduced margin following a re-tendering process designed to make the supply chain pay for the buyout. Having a few clients is very risky no matter how good you are especially in this current business climate.

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to rememberscarborough
12th Jul 2016 20:15

Thanks for commenting. I agree. That's why I vote for the many clients approach.

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05th Jul 2016 13:42

As long as you have enough clients....

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to petestar1969
12th Jul 2016 20:16

I agree. Many is better than few.

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07th Jul 2016 10:23

For me the Jerry Maguire approach is better where you do more and better work for a smaller number of clients.

I suppose that knack is to have enough clients that you are working for that 1 or 2 on their own are not significant or will leave a black hole in your business if they moved on.

In my last FD role we were a reasonable sized company but used a lot of "one man band suppliers" who had grown up around the company and we effectivly were 30/40% of their business which allowed us to bully them (not me by the way) as without us they would not really be viable and that was a bad position for them to be in as we exploited the position.

The worry for me is that with MTD coming the thought of dealing with many small clients would be very daunting as the admin and management around it could see you swamped and managing the workflow would be difficult and inefficent.

Also the fee impact on once a year small jobs is likely to be significant whereas the bigger companies that already do quarterly accounting are arguably not that far away from where they need to be.

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to Glennzy
12th Jul 2016 20:21

You have made several good points. In the few client environment the client can make demands and it's difficult not to comply. It's been said IKEA goes back to its suppliers and says "now that you have been delivering a product for us for awhile, you have logically developed cost savings in your process. We would like you to pass these along to us so we can pass them along to customers.

One of the advantages of many clients is the ability to build many of them into something larger.

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13th Jul 2016 07:47

In some cases today's small client will represent tomorrow's big client. There's usually no way of successfully predicting this so perhaps as many small clients as possible is the way to go.

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to Scriptic
13th Jul 2016 08:37

So true. Taking it to the extreme "somebody is going to win the lottery." Providing you can maintain the desired level of service you want to deliver, the many client approach has its advantages.

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