Reliance On One Big Customer A Dangerous Path

Published in San Diego Union-Tribune, October 5, 2015

Harry: “Partner, I have good news and bad news.”

Betty: “Pray tell.”

Harry: “The good news is we got Facebook as a customer. The bad news is we got Facebook as a customer.”

Monogamy is a great concept in marriage — not so great in building a company. If you get too dependent on one big customer (one very big, demanding, time-consuming, bet the company on the customer and if they leave, we are dead meat customer) — well, not so great things can happen.

Bill Keane, owner of Keane Studios, has been a professional photographer for more than 45 years. For many years, over half of his business came from a contract to take graduation pictures of the seniors (that number eventually grew to 2,000) at several area high schools. The agreement was that he give a photo of each senior to the schools for their yearbooks. He made money because seniors (and all the parents) could purchase photos from him, but there was no requirement.

Keane operated with a five-year contract that was renewed one year at a time.

(Note: Long-term contracts can be financeable, but short-term, not so much.)

When he was on the second year of the third five-year contract, he got a phone call that the district had decided to let parents decide who to use for their student’s senior photo.

“Our entire infrastructure was based on photographing 2,000 kids per year. We had gone from a space of 1,300 square feet to 2,700 square feet, and we hired 12 employees during the busiest time,” Keane said. “When the plug got pulled in January, I was worried that we would go bankrupt. I called my landlord, who agreed that he would reduce our rent temporarily, and we would settle up later.” Photos are generally taken the summer before a student’s senior year.

(Note: This is limbo for Keane. Impossible to plan, because he does not know with any certainty whom the parents will pick.)

He estimated that his business would likely be cut in half. He decided candor was the best option so he told his staff what had happened. One person left, and Keane gave equity to a young photographer who had hopes of eventually taking over the business himself.

Upset about the change in policy, the teacher advisers of the various high school yearbooks complained to the school district, and in April, Keane said he got a phone call extending the contract for another year. Saved by the bell, but clearly a warning.

The evolution of a business is always interesting.

After graduating from Claremont Men’s College (now Claremont McKenna) with a degree in Greek and Latin, he realized that his degree didn’t qualify him for a job (that subject about college and education is grist for another time). He had started working as a photographer in high school and college, and when he moved to San Diego, he started the Bridal Bazaar, an annual showcase for wedding products and services. By the 1980s, he was married with two small children, so he didn’t wanted to spend his weekends at weddings. He turned his photography focus to families and children.

(Note: What is today called the pivot. But as you can see, changing direction is not only the purview of the technorati.)

His wife, Mary, formerly an elementary teacher, is an active part of the business. “We sit side by side in the office. I was an art major in college, and I do a lot of painting at home. So in the business I work with the digital files and do retouching.”

Keane’s advice to other business owners is to make sure they understand the basics of accounting. “I didn’t have a business background. I was out of college and had done over 200 weddings before I knew what a profit and loss statement is. The first time that someone asked for a P&L, I didn’t know what it is.” Keane took classes through SCORE (Service Corps of Retired Executives).

(Note: Numbers do not lie. Take a finance course.)

Keane settled with his landlord and is selling the business to the young photographer in an earn-out over time. He leased a smaller space. He has maintained a positive attitude and a sense of humor. I like this story, because it mirrors most of us who slog it out and somehow survive.

Rule No. 435

“I’m still standing.” — Elton John

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