Turning a loss into a gain - company recovers from loss of major client - Entrepreneur's Notebook

For any business owner, losing a major customer can feel almost like having a loved one die suddenly. It elicits a range of emotions--from shock to sadness to disbelief.

But behind the grief lie the questions "What now?" end "where do we go from here?"

It's never good to lose a customer, especially for a young company, but some customers are tougher to lose than others. That was the case for JB Chemical Co. Inc., the North Las Vegas, Nev., specialty chemical manufacturing and distribution firm that my husband, Jim, and I started in 1981. (Jim is the company's general manager and treasurer.)

In 1986, we lost one-third of our revenues when a major account closed its Nevada plant and consolidated manufacturing operations in Tennessee. Not only was this one of our original accounts, but it also had been an integral part of our growth from a home-based business to a company with four employees, a 3,500square-foot warehouse, and construction of a 20,000-square-foot office/warehouse under way. The customer had represented $15,000 to $20,000 in monthly revenues.

Today, we have $2 million in annual sales and 25 workers. In overcoming that early setback, many of our survival tactics fueled our growth.

The key to surviving the loss of a major customer is to make sure you don't let it bring you down. Here's how:

You can cry, but don't wallow. Don't allow yourself to be swallowed up by grief. Step back and view the situation objectively. List its pros and cons, and consider what can be learned from the experience and what good could come out of it.

Look for ways to diversify. It quickly became apparent that we had put too many eggs in one basket. Consequently, we diversified our product line--creating and manufacturing more of our own products--and our target markets. As we increased production, we also diversified our suppliers to guard against being overly dependent on too few of them.

Rethink your position in the company. Rather than remain in sales, I began managing the office full time and developing name recognition for the company through the news media and business contacts. Changing roles allowed me to focus on how the company was going about its business.

Start networking. For promotional reasons and for moral support, we became active in business organizations such as the local chamber of commerce and other business-owner groups. Networking introduces your business to people who might not know about it otherwise, and it helps you develop professional relationships that can increase your knowledge and offer support.

Put your money where your mouth is. Reduce overhead wherever possible. The more modestly you live and the more you do yourself, the more you can funnel back into the business. By stocking shelves and doing other chores ourselves, we not only saved on payroll costs but helped employees see our commitment to the firm.

Regroup but don't retreat. You may have to rethink your timetable, but continue to position yourself for growth. Cutting overhead doesn't always mean cutting jobs or service to customers. We avoided firing anyone, and we hired the talent needed to expand our markets and product lines. One of our hires was the main sales representative of a key competitor, and his arrival helped rebuild our sales. Without the addition of new talent, our diversification efforts might have failed.

Don't panic; be patient. It's natural to worry, but staying cool is vital to keeping you and your employees productive. Remember that it took time to build sales initially, and it will take time to cultivate new sales. We figured it would take two years to recover from our loss, and that's indeed what it took. Hard work and patience are their own rewards.

Paula Brown is president of JB Chemical Co. Inc. in North Las Vegas, Nev. She prepared this account with Contributing Editor Susan Biddle Jaffe. Readers with insights on starting or running a business are invited to contribute to this column. Write to : Entrepreneur's Notebook, Nation's Business, 1615 H Street, N.W., Washington, D.C. 20062-2000.

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