Loyal customers or high-risk strategy? Over seven out of 10 small businesses depend on a small group of customers, risking the stability of the business
Research by small business lender OnDeck confirms that over one in 10 (12%) small businesses say they do not face any risks associated with a small customer base.
- Over seven out of 10 (71%) small businesses in Australia say the stability of the enterprise is at risk because of dependence on a small number of customers.
- More than one in ten (10.2%) small business owners say their enterprise is at ‘extreme risk’ of instability due to a small customer base.
- Only 12% of small businesses report ‘no risk at all’.
- OnDeck’s Lightning Loans provide fast, efficient funding that can allow a small business to reduce risk by expanding into new markets, diversifying their product base and/or attracting new customers.
Sydney, Wednesday 31 January 2024: Research by dedicated small business lender OnDeck Australia reveals that many of the nation’s small businesses have a surprisingly limited customer base, thereby putting the stability of the enterprise at risk.
According to OnDeck’s survey, over seven out of 10 (71%) small business owners say they face some level of risk arising from a small customer base.
More than one in 10 (10.2%) business owners believe this risk is ‘extreme’ owing to dependence on a small number of customers.
Only 12% of small business owners see no risk at all associated with the scale of their customer base.
Mr Cameron Poolman, CEO of OnDeck Australia, said, “Our survey results highlight how common it is for small businesses across Australia to rely on a small number of customers. This phenomenon is referred to in the industry as “concentration risk” and brings inherent challenges, particularly if, for whatever reason, an enterprise loses one or more key customers.
“I appreciate that not all small business owners want to scale their enterprise. However, by growing a customer base, a business can significantly reduce the risk of instability that tends to go hand-in-hand with a restricted customer base.”
Small business funding can facilitate expansion
For many small businesses, the ability to grow its customer base can hinge on access to funding.
OnDeck’s unsecured Lightning Loans®, which are available for up to $175,000, can offer a fast, efficient source of funding for small businesses to market their products/services more broadly, explore new markets or grow their customer base by expanding into new product/service lines.
Loan applications involve a simple online application form and just six months of business bank statements. From there, funds are available to approved applicants in as fast as two hours.
Mr Poolman said, “A small business is a valuable investment, and like all investments, an enterprise can benefit greatly from diversification.
“OnDeck’s Lightning Loans® give business owners a clear upfront picture on how much their loan will cost. This allows business owners to determine the return on investment of exploring new products, new markets, or just increasing marketing efforts to attract new customers.
“As we head into a New Year that may bring difficult trading conditions for some small businesses, it has never been more important to explore ways to expand an enterprise’s customer base,” concluded Mr Poolman.
Five cost-effective ways to grow your customer base
Mr Poolman offers five low-cost strategies that can help a small business grow its customer base and reduce the risk of instability:
- Expand product lines – Engage with customers to determine the additional products or services that are most likely to appeal to clients. Consider introducing complementary product lines.
- Introduce loyalty programs – Consider customer loyalty schemes that reward repeat purchases and/or referrals to new customers.
- Leverage customer data – Aim to capture customer details to facilitate direct marketing through low-cost means such as electronic direct mail.
- Engage with social media – Utilise social media platforms such as Facebook, Instagram and LinkedIn to grow your brand.
- Boost your online presence – Review the business’s website to be sure customers can find your enterprise online. Identify keywords/phrases that will drive targeted traffic to your venture’s website to grow your customer base.
OnDeck Australia is the proven leader in transparent and responsible online lending to small business. Since launching in Australia in 2015, OnDeck Australia’s focus has always been on supporting small businesses with access to fast, efficient unsecured finance.
Today, OnDeck Australia offers a wide range of term loans customised for small business owners’ needs. OnDeck Australia is focused on taking the friction out of business lending offering unsecured business loans from $10,000 – $250,000 across 6 – 24-month terms*. We’ve helped thousands of small businesses across a range of industries access funding quickly and easily, while maintaining a 5-star TrustPilot rating.
In 2021, OnDeck Australia launched The KOALA Score risk-prediction model that draws on big data, predictive analytics, plus data from multiple credit reporting agencies to enable more Australian small businesses to be approved for a commercial loan.
In 2021, OnDeck Australia also launched Lightning Loans®, which enables the quick decisioning of loans from $10,000 to $175,000* in as fast as 30 minutes, and funding in as fast as two hours^. For more information, visit www.ondeck.com.au
About the Research
The independent research was conducted online in October 2023 by Octopus Group across more than 500 small business owners Australia-wide.
Important information from OnDeck:
* Loan amounts and loan terms are for illustrative purposes only, which the lender may adjust in its sole discretion without notice. Eligibility and approval are subject to a standard credit assessment and the applicants’ business circumstances which may include information such as industry, time in business, estimated revenue and other data. Not all loan amounts, term lengths or rates will be available to all applicants. Loans are subject to lender approval. Fees, terms and conditions apply.
^The timeframe required to process and fund loan applications may vary for each individual application. Factors such as the completeness and accuracy of application materials, verification processes, and external circumstances can influence the processing & funding timelines.
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