Here’s a short post from David Heinemeier Hansson, one of the co-founders of Basecamp, about enterprise clients.
If you’ve ever worked in an organization that sold to enterprise clients, you know exactly what he’s talking about.
Enterprise clients are not even remotely the same as other customers. They are large, slow-moving, often bureaucratic, and typically represent a significant percentage of a company’s revenue stream. And because of this, enterprise clients can become so important to a company that everything the company does is to support that single client.
The cost to support an enterprise client begins even before they become a paying customer. The sales cycle for enterprise clients can span years. And during this pre-sale period, companies will often spend tons of money trying to win the business.
And once you finally land that whale, the real work begins. Onboarding an enterprise client can take months and months or even longer. These clients often demand new features, dedicated customer support teams, and expensive senior account managers. And often the pricing on these clients is too low to make a decent profit let alone actually pay for all these extra costs.
I’m certainly not knocking companies that pursue the enterprise client sales model and what they do to maintain the business. The revenue generated by a single account can dwarf all of your other customers combined. And in some industries, there isn’t much choice but to sell to these large accounts.
But companies just need to know what they’re getting into when they decide to go this route. While enterprise clients may be a quicker path to growth than selling to smaller customers, they can also lead to irreversible changes in your company. And because a company can become so reliant on a singe account, the loss of an enterprise client can even lead to your company’s downfall.
Readers, have you worked for an organization that specifically avoided selling to enterprise clients and instead focused all their sales efforts on smaller, individual customers?