Shifting Your Customer Base

Over the past few weeks we have looked more closely at the issue of change – both personally and for your business.

This week we will look at how to handle one of the most significant changes of all time in a business – shifting your customer base.

You might be thinking, "Why would anyone want to shift customer bases?" Well, the answer is simple – to grow your company further.

For example, perhaps the market that you are currently serving is made up of businesses that have less than 20 employees. However, upon performing further market research, you realize that if you stick to your current profile of customers that you will only grow at approximately 5% a year. You want to grow at 20% a year – what do you do now?

Well, you might need to shift your customer base “up market”. By this I mean that you may well need to target a different profile of customers. Perhaps to achieve your growth targets the profile of your ideal customer has shifted considerably. What is your target needs to be companies with more than 50 employees. What will be different?

In considering such a radical change, here are some critical questions to ensure that you have answered prior to making the shift:

• How much do I know about this new customer base? For instance, how different is their purchasing pattern or the way that they buy different than what I am used to? A common mistake here is to assume that the new target customer is going to buy in a similar fashion when in fact how they buy is very different, the sales cycle is much more complex and much longer than you expect. This fact alone could kill your company’s cash flow.
• Can I provide a full solution to this new customer base or will I need to look at partnering with other solution providers? What partners or strategic alliances might I need prior to entering this new market and how do I solidify them?
• How different are the needs of this new customer base? Make sure you do your homework prior to making this radical shift.
• What different skill sets might I need in order to properly serve this new market? For instance, recent research for a company revealed that their new target customer expects a higher level of technical support available 24/7. That is going to radically change this company's business model, including having to hire a number of advanced technical support personnel.
• What will happen with my existing customer base? I have seen companies shift radically up market and abandon the very customer base that has helped them achieve their success to date. I would suggest that the company needs to look at alternatives, such as having a separate division to support these customers, increasing their pricing, increasing the scope of services available. Handle your existing customer base with care – they can be the vital cash flow that you need when targeting larger customers.

So step back and take a good look at where your company is today. Perhaps in order to achieve the growth and lifestyle that you desire, you may need to shift customer bases by shifting up market. Building a couple of scenario-based business models that are based upon solid market research will help ensure that you make an informed decision while minimizing the risks.

Take the words of Victor Kiam, a serial entrepreneur to heart, “"Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage." Perhaps the opportunity to shift customer bases will be your company’s greatest achievement.

Steve Burns, CA, CMC, CFP, is the President and CEO of the Burns Innovation Group Inc. and Steve Burns Inc. Chartered Accountant, which provides consulting and accounting services to entrepreneurs. If you have any questions or comments, contact Steve at 763-4716 or e-mail at steve@steveburns.ca.

back to top