Don’t Think Transactional, Think Long Term (A Note to Entrepreneurs)

Managers and entrepreneurs sometime struggle when first acquiring and serving major clients. This is especially true when they are small but growing rapidly and coming into their own. They acquire a major client who believes in what they are doing and carves off a relatively small piece of business to see how they do. The major client, their dream client, hopes that they will do well so that they can give them more of their business; they need a dream partner.

But the manager or entrepreneur doesn’t recognize the difference in serving a major client instead of serving their smaller, more transactional clients. Because they don’t recognize the differences, they make the mistake of thinking transactional instead of thinking about the long-term strategic value of their major client.

Transactional Thinking

Serving major clients is very different than serving transactional clients. Smaller, transactional clients don’t generate a lot of revenue or a lot of profit. That makes it very difficult to invest in them individually. An investment in a single transactional client would mean that the company would lose money serving that client. So they manage the transactions, ensuring that the company profits from each one.

But major accounts don’t work that way. They often require investments that allow the company to serve the client and to make enough of a difference to gain access to greater wallet share. Young companies and entrepreneurs often make the mistake of trying to avoid making those investments, believing that the client’s value is measured at each individual transaction, like their other clients. So, they don’t make the investment.

This is different version of Aesop’s famous fable, but instead of killing the goose to get all of the golden eggs, they decide not spend any of the gold to feed the goose. Then they wonder why so few eggs.

Long Term Strategic Thinking

Major accounts can’t be managed at the level of the individual transaction. Their size and their value make them impossible to look at this way. Instead, the cost of serving the client needs to be looked at against the value of the client over the long term and across all the transactions.

This is especially true at the early stage of serving a major account, when managers and entrepreneurs want to avoid making the investment. The investments made in ensuring that you can serve a major client and achieve their outcomes are what open up the opportunities to develop the relationship, to acquire other opportunities, and to gain more wallet share.

Too many new businesses and entrepreneurs fail to make the investments they should make to capitalize on having won a major client, and their failure to do results in the loss of the client or in their never gaining any more wallet share. Instead, because the entrepreneur treats the client like it is transactional, the client behaves accordingly.

Salespeople: How to Help Your Manager or Entrepreneur

Your job in sales requires that you sell internally. Selling internally means making sure the investments are made, and to continually insist on measuring the client on the total value, not the individual transactions. There isn’t anything easy about this; it’s sometimes more difficult than winning the account in the first place.

One idea that makes it easier is to ask that the investment be made contingent on an agreement that if performance metrics are met for some period of time that you get additional wallet share. Managers and entrepreneurs understand these kinds of agreements and will often be agreeable.

If you can’t obtain that agreement, you can sometimes gain an internal agreement to make the necessary investment for some time, like a quarter or two, and then evaluate the profitability of the account and the likelihood of gaining additional business. A couple quarters is often enough to prove your case.

Whatever you do, make sure that the investment is made and that you do enough to capitalize on having won the major account. As difficult as it is to do so, it’s easier than winning a replacement client (or replacement clients), and a whole lot cheaper in the long run.

Questions

How are transactional and strategic clients different?

Should you measure the value of a strategic account at the transactional level?

Why is it sometimes difficult for young companies and entrepreneurs to make the investments that would allow them to capitalize on having won the major client and gain additional market share?

How do you shift the conversation internally from the individual transactions to the overall value of the client?

What problems have you seen that stem from a failure to invest and transactional thinking?