In 2012 we shut down our startup. It was devastating and emotionally draining. Walking away from something you’ve put your blood sweat and tears into is a gut wrenching experience.
Fortunately we had a team with a skillset so we pivoted to being a software consulting business.
Hooray, we’re saved!
Very quickly we signed a contract huge client (a 100+ year old not-for-profit) and started doing small projects for them. It seemed like we were saved and at least had a source of revenue.
They liked our work, so they kept giving us more projects.
Every year, we were given bigger and bigger responsibilities and slowly owned bigger pieces of the IT pie. We had no choice but to start building our team.
Having a team means having payroll. Payroll means we have expenses.
By 2015, we were doing 80% of their IT development and maintenance. We had completely overhauled their API layer and security and modernized a few of their UX tools for managing staff and volunteers.
But large businesses are very political, especially not-for-profits, and trouble was brewing. Despite the risk, we were still growing, so things seemed ok.
As leadership changed, the incoming heads of departments wanted to make their mark and prove their worth.That meant bringing in their own people and teams.
You can already see where this is going.
Trouble on the horizon
We weathered that storm a few times, but the winds kept shifting.
At that point we recognized we had a lot of risk having one major client make up 80-90% of our revenue. We had a few small projects here and there, but nothing consistent.
All of our time was taken up by supporting our biggest (only) source of revenue and it felt like we were too busy to search for and support a new client.
Until we weren’t.
After one of the leadership changes, we were suddenly given less and less work.
Our revenues were sinking, and we needed to find new clients.
We started a business development campaign and signed a few smaller, short-term contracts that helped, but just delayed the inevitable fall.
By 2017 our big contract ended and all of a sudden our revenue was cut by 70-80%. It took us most of the year to find another big client.
We’d found another whale, albeit a much smaller one. That saved our agency for a while and we thought we were back in business, even though we had to let go of most of our team.
Unfortunately we found ourselves once again too busy to be hunting new clients even though we recognized the danger. “This time will be different,” right?
A year later that contract ended too and we were right back where we started.
The downfall is complete
That was the complete fall. Our agency was no longer a 7-figure earner, and we vowed to never have a single client make up more than half our revenue again.
It was at that point we changed tack and started focusing on transitioning to a product- first business rather than a professional services business. But that’s a story for another day.
Moral of the story, whale hunters eat well after a kill, but starve between hunts. Start fishing while you’re busy and derisk your business.
It’s almost always worse to start trying to expand when you urgently need it.