Diversify! Diversify! Diversify!

Earlier this year, one of our law firm members contacted me with some alarming news. They just lost their largest client. This client’s business was 85 percent of the firm’s revenue.

The firm joined the NL in 2005. They often turned away new business when we called on them, because they felt they were at capacity. This was not a small firm. They had more than 10 lawyers on staff and more than 20 collectors. Over the years, they continued to grow with just this one client. Because they knew having one client responsible for 85 percent of their revenue was a bad idea, they tried to diversify. However, the big client kept increasing placements and demands. The most urgent matter always seemed to be meeting this clients needs, and the important matter of diversification was put on the back burner.

Feel Their Pain

I could feel this attorney’s pain as he shared this story with me. I had always respected him for declining new business when he was at capacity. He received good reviews from clients we referred that he did work with, and he was very responsive to our requests. I liked this firm, and I wanted to help them. I contacted a few clients whose requirements could be met by this firm, who had the type and volume of business this firm was accustomed to servicing, and referred the law firm member to them.

Learn from Their Example

I visited with this attorney at the 2011 Fall NARCA Conference to see how he was doing. He told me the firm has picked up some new clients, but if they don’t get a few more, they may have to downsize even more. I asked him if I could share this story anonymously with our readers. I told him I have spoken with many firms in the debt collection industry that have one client responsible for the majority of their revenue. He agreed that could be the case for a large number of firms, and that if one firm could benefit from his story and make diversification a priority, then it would be worth it.

As experts advise when you invest in the stock market, “Diversify! Diversify! Diversify!” Obviously, the same advice applies to how we invest our time with clients in the debt collection industry.

Share Your Stories

Have you thought about what you would do, or how it would impact your business, if you lost your largest client today? Your comments and stories regarding diversification will be of interest to our readers.



Categories: Business Relationships, NL Insider

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