It is widely accepted that a client making up 15% or more of your total revenue is risky. Being highly dependent on a major client will leave your agency financially vulnerable should they reduce their spend or leave you completely. There is now more cause for concern.
Earlier in the year, the Government launched the Corporate Transparency and Register Reform White Paper. Included within this was that the profit and loss statement for companies of all sizes will have to be included in sets of accounts that are filed with Companies House. Generally, independent agencies with a turnover of less than £10.2m and 50 or fewer employees benefit from only having to disclose their balance sheet.
The thought of anyone being able to look at your company’s financial performance is bad enough. It’s worse when you consider that clients will be able to accurately work out what proportion of your revenue their spend makes up. That could give the client (and their procurement team!) the advantage when it comes to negotiations.
The good news is that there is no timetable for change and we usually get fair warning. If you have over-dependence on one or a few clients then you do have time to put this right. Hopefully, this change won’t be made until we are long out of recession.
When was the last time you reviewed your client concentration? This is something that should be reviewed regularly and is included in the management information packs that we produce. Please get in touch if you would like to learn more.