It’s counter-intuitive to grow by taking on fewer clients, but it’s necessary.
The thing about client services you find out is that there is an allotment of energy you expend servicing each client you have. You email back and forth, you have meetings, you spend time designing, etc.
Here’s the list of things I do that doesn’t change (or changes very little) according to the scope. All of these things take up my time and energy:
- Receiving initial inquiry
- Reviewing initial inquiry
- Sending qualifying questionnaire
- Reviewing qualifying questionnaire
- Preparing follow-up questions
- Scheduling the initial call
- Sending a confirmation and agenda setting email
- Preparing for the initial call
- Having the initial call
- Reviewing the call findings
- Doing research
- Writing a proposal or creating an estimate
- Presenting the proposal or sending the email
- Writing a contract
- Sending the contract and invoicing the client
These are all things done in the onboarding phase—before getting to any of the actual working together—and already you can see how this can occupy your mind and tie you up.
You can, and should, automate as much of this as possible by using editable templates, using contract or invoicing software, reusable email scripts, etc.
Some things can’t be automated and you end up spending time on them.
So if you have to spend time on these tasks, it becomes crucial to select clients that will pay you a decent wage. You are already doing the same repetitive, (mostly) non-billable tasks, so it makes sense to target higher paying clients if they are going to take up roughly the same amount of time and energy from you.
How many clients can you service at any given time?
Depending on the project’s size, I can’t service any more than 3 clients at a given time. Not if I want the work to be any good. You might be able to do more, I don’t know, but what I do know is that you also have a limit.
[Tweet “Don’t let the quality of your work suffer by taking on too many clients.”]
After you cross that threshold, the quality of work you can do on your own starts to drop off and things get sloppy.
Have you figured out what that ideal number of clients is for you? It’s worth taking the time to figure out your capacity.
That number is a way to project how much money you can make while still doing good work. And you want to do good work. Good work brings in referrals to do more good work and helps to create a virtuous cycle that can sustain your business for years.
So let’s take a scenario of one largish project per month. That’s twelve large projects per year at an average of three months per project from start to finish.
Now, let’s assume you are charging an average of $5,000 per project (and for the sake of simplicity you are getting paid the full sum up front for each project).
$5,000 x 12 = $60,000
Is $60,000 (before taxes) enough?
It might be for some. If that’s the case, great. You don’t need to change anything. But if it’s not, you might think about raising your prices.
Not because you want to stick it to your clients, but because if you want to have a business that is thriving (and satisfying), you simply have to make enough money to support yourself. Sometimes that means letting go of smaller fish so you can pursue larger fish.
So let’s say we raise our prices by 50%. Now we are at $7,500 for an average project.
$7,500 x 12 = $90,000
Now we are starting to get somewhere. $90,000 is nothing to sneeze at.
I know (hypothetically) that if I average one large project per month at $7,500, I’ll be pulling in a decent wage.
In a perfect world, I would stagger each project so that when one is finishing up the other is starting. And so on and so forth. So I know I can service 3 large projects staggered at various stages over a 3-month period.
So now the question becomes how can I sell a $7,500 vs. a $5,000 project? What do I have to include in the scope or who do I have to be pitching it to for it to sell at the same rate as the $5,000 project?
Finding answers to these questions and applying what we learn to our business is being strategic. Now we’re putting a more focused effort into our business that is light years ahead of simply taking on whatever client walks in our door.
This is how you level-up.
How to free yourself by using constraints
The first question that comes to your mind when you hear this is, “Well, what if I can’t find $7,500 projects?”
It’s a fair question, but when you narrow your focus and say, “I’m only going to take on projects of a $X size.” you start to do things that will enable you to land those bigger projects.
It’s like the difference between a design project with no constraints and one with a detailed brief. The project with a detailed brief frees you to work within those particular limitations.
Any designer who’s ever worked on a project with no design direction knows how hard it is. If there are no parameters to work within, you don’t know where to start and where to end.
The possibilities are endless, and you are paralyzed with the paradox of choice. Yet if you add in constraints (design style, target audience, project goals, etc.), suddenly it frees you by giving you guides to work within. It gives you a direction to aim for.
It’s the same thing with limiting yourself to a certain size project. I call this my Minimum Engagement Amount (MEA). I ask myself this question, “What is the smallest size project I will work on?” The answer to that question gives me my MEA.
[Tweet “Having a project minimum rate helps to ensure a ROI.”]
Placing this constraint on myself forces me to pursue projects of a certain size or higher.
So when a project comes around with a $2,500 budget, I say no to it because the time spent on that project has an opportunity cost.
I have limited capacity and filling that seat means potentially giving up $5,000 worth of work. That’s the opportunity cost of taking on that smaller project.
There is always a trade-off
While it’s hard to pass on money that is staring you in the face (and if you really need the money, you should probably take it), what I do when I have spare time, or I’ve passed on a low-value project is I reinvest that time saved back into my business.
I work on my business instead of in my business. What I mean is, I work on long-term planning.
I wrote a blog post back in 2012 that brings in most of my traffic and is how most of my clients find me. Since then, I can probably attribute about $175,000 worth of business directly to that 1 blog post. (1 blog post! I think that is pretty good ROI for writing one measly little blog post.)
Now, there’s no guarantee that if you write a blog post, you are going to get that type of return on it, you likely won’t. The point is that I wrote the post during my down time.
Imagine if I was too busy to write it because I was working with a low-value client and never got around to writing it?
Every project and every client you take on have an opportunity cost associated with it.
So ask yourself if it is worth it. Ask yourself if it’s a project you can do good work on. Ask yourself if it pays you a fair wage, and if you’ll like working with this client that you are giving up your time for.
If the answer to those question is no and you can at all afford to pass on the project, do it.
Working with crappy clients, getting paid less than you deserve, and doing work you don’t believe in are all signs you could be doing something else to improve your business and see it pay off down the road.
What to do today
First, realize you need to cut off low-value clients in order to scale up. If not today, then at some point in the near future.
With limited capacity, you can only take on so many clients. If a low-value client is taking up one of your precious seats, it’s like an anchor weighing you down and eating up your time and energy.
After that, put your foot down and create a minimum engagement amount (MEA). Below that number you don’t take on the client.
Then go ahead and leave me a question or a comment letting me know what your MEA is going forward will be.
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