Chicagoland SIA Blog

Avoiding the Risks of Over-Reliance on a Single Client

Written by Amanda Yaniz | Sep 26, 2024 2:11:37 PM

As an independent insurance agent, landing a large client that makes up more than 30-50% of your revenue can feel like a major win. After all, you've worked hard to secure that account, and the profits are flowing. But what happens if you lose that client?

It's a scenario that's all too common: a nephew gets a job as an insurance agent, and the client decides to support him, or another agent offers a better rate with a carrier you don't have access to. Suddenly, your revenue is drastically reduced, and the future of your agency is at risk.

The Risks of Relying on a Single Client

When a single client makes up more than 30 percent of your revenue, you're putting your agency in a vulnerable position. While it may seem like a good idea to focus all your resources on maintaining that relationship, it's important to remember that no client is guaranteed.

Clients can leave for a variety of reasons, many of which are beyond your control. Whether it's due to a personal connection, a better rate, or a change in their business needs, losing a major client can have devastating effects on your agency.

Tips to Avoid This Pitfall

Diversify Within Your Niche

Focusing on a niche or a specific line of business can be an excellent strategy for growing your agency. Specializing allows you to position yourself as an expert and attract clients who value that expertise. However, it's crucial to ensure you have more than just one or two clients within that niche. Even if you’ve cornered a specific market, relying too heavily on a small number of clients can still leave your agency vulnerable. By building a larger client base within your niche, you'll reduce the impact of losing any single client and create a more stable revenue stream.

No agency should ever lose sight of “growing the business” year over year.

No agency should ever become complacent in being satisfied with the status quo. Without a business plan to grow and retain business, the agency becomes vulnerable to the ever present “threat” that the client could leave.

Build Strong Relationships Across the Board

While it's important to maintain strong relationships with your largest clients, it's equally important to invest in relationships with your smaller clients. Make sure they feel valued and appreciated and look for opportunities to grow those accounts over time.

Develop a Robust Growth Strategy

Don't rely solely on your existing clients for revenue. Develop a strategy that focuses on consistently bringing in new business. This could include networking, digital marketing, and client referrals. A steady stream of new clients will help balance your revenue and reduce your dependence on any single client.

No agency should ever lose sight of “growing the business” year over year.

No agency should ever become complacent in being satisfied with the status quo. Without a business plan to grow and retain business, the agency becomes vulnerable to the ever present “threat” that the client could leave.

Every agency should seriously consider doing a SWOT analysis to understand their WEAKNESSES (vulnerability) and THREATS ( things the agency has no control over.)

Monitor Your Revenue Sources

Regularly review your revenue sources to ensure you're not overly reliant on any single client. If one client starts to make up more than 20-30% of your revenue, it's a sign that you need to focus on growing other areas of your business.

While landing a large client can be a major win for your agency, it's important to avoid putting all your eggs in one basket. By diversifying your book of business, building strong relationships with all your clients, and developing a robust growth strategy, you can protect your agency from the risks of losing a major client. Remember, no client is guaranteed, and the best way to ensure the long-term success of your agency is to spread your resources across a broad base of clients.