Back in the Saddle

Well, some time in my schedule has unexpectedly freed up and I’ve re-committed to blogging for Sitepoint. Your kind words during my last blog were a factor, and I appreciate your support. And thank you to Sitepoint management for their support as well. So let’s get back into it.

Today let’s discuss a case study presented by a consulting client of mine.

He found that 20% of his design/development business was dedicated to small clients, while 80% was dedicated to bigger business. He hired someone to take on the smaller clients, but was finding that his service was slipping as more and more of those clients came to him. What should he do?

My advice:

1. He has a good problem, not a bad problem. Too much demand is a good thing and presents many opportunities.

2. Every professional, if they grow their practice well, reaches a point where they have the opportunity to move on to bigger clients or raise prices.

3. Providing bad service, even to smaller clients, is not a good idea. Word spreads fast, and will reach bigger clients.

4. I suggested to him that, since he has wisely hired someone to handle the smaller clients (leverage for him, assuming he makes a profit), he should keep that business and raise prices. That will reduce demand, improve profitability, and — with fewer clients to serve — his service to clients.

5. He should make sure he provides his employee with a consistent set of standards and processes to delight those clients.

6. He should refer any former clients or prospects who don’t want to pay higher prices to competitors, either with a referral fee or without. The key is to send competitors less profitable clients, leaving more room to take on the good ones.

7. He should focus on the 80% of his business that is made up of larger, more profitable clients. What’s his niche? How can he get more leverage on his time there? How can he dominate his niche?

Any other advice, or challenges to what I’ve suggested?

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  • http://www.designity.nl peach

    good to have you back andrew :)

    Im not sure I would have eliminated the option to hire a sub-contractor to take care of the little clients. If you take time to select a capable sub-contractor it might turn out to be even more profitable.

  • jan korbel

    Nice to see you back Andy. It was quite a hole in the SitePoint when you stopped posting.

    I like the idea with finding someone for “the little 20%”. It may be good as a kind of school for the sub-contractor and later he could prove a good partner in assisting as more and more big fish comes. (Maybe not exactly in this case but you see what I mean).

  • http://www.danylkoconsulting.com/ jdanylko

    YEAH!!!!

    Welcome back, Andrew. Good to have you back.

  • RSymonds

    Welcome back Andrew! Your experience and insight is hugely appreciated.

    What about when small clients become big clients? It seems to me that if you keep ownership of all relationships with clients big and small, you’ll be in a great position when your small clients grow and buy into the next level of your services. For example, we’ve had clients that have started off with small template sites and a year or two later progressed to full-blown eCommerce sites.

  • Tom Lyons

    Great to have you back, by far the best of the blogs on Site Point, really missed you while you were gone.

  • http://www.hurtdidit.com hurtdidit

    So good to see you return!

    Your client definitely has a nice problem, although I have to wonder if referring clients–even the “undesirables” to a direct competitor is necessarily a good idea. What if word spreads that he is no longer taking on new clients (which could be the interpretation of sending old clients elsewhere).

    Maybe I’m just paranoid though! I can understand the reality of keeping unprofitable clients as being a poor choice, too.

  • http://www.circle.co.nz nzgfxguru

    Welcome back Andrew, your discussions are always a great read.

    The above scenario just seems like a different take on the Pareto principle…whereby 20% of clients take up %80 of your time and the ones that take only %20 of your time are also the most profitable.

    The client should always focus on the business that brings him the most advancement from the least outlay.

    Your client should also look at maybe hiring designers on a per contract basis. Retain the core negotiations and communications and in this manner he can keep control without having to worry about doing the actual work.

  • http://www.satviz.com davestarr

    Let me add my welcome back to the chain, Andrew. And add avote of confidence to your discrimination by pricing suggested strategy. The only real differnce between small and large cutomers is typically the money they pay. I suggest your client raise prices and of course make the raises even higher on the small customer side, unil he’s grossing significantly more per hour/contract from the little guys. Those who can’t pay should be gracefully referred to other sources and those who stay in spite of theprice increases are the customers he really _wants_ to keep in the first place.

    Best regards
    Dave
    http://www.satviz.com

  • http://www.illuminationdesign.com HeatherID

    It’s great that you’re back – you’re one of the best blogs that I read on a regular basis. :)

  • http://www.primacognos.com bigduke

    Ahhh yeah! I’m a big fan of Andrew’s. Although I don’t know where and when you disappeared but I will welcome you anyway.
    I’m on the verge of starting my business and have seen a couple of aspectes mentioned above.
    Make a niche in the segment that gets you more profit. Small clients usually have a more or less standard set of requirements so developing core modules and having an application framework that works for itself would save time as well as help maintaining the service quality. Price raise is probably the easiest way to manage demand load.
    As for dominating his niche, this is a service oriented world, people love to be taken care of, so depending on the profits offer services to the 80% slot, thats where his main business comes from afterall.

  • http://www.sheppardweb.com Derek Sheppard

    Welcome back. Your blog was the only one I read.

  • http://www.lastcraft.com/ lastcraft

    Hi.

    Welcome back of course :).

    Did the client colocate the subcontractor with himself. If you want the values, pride, craftmanship and professionalism of the company to spread, everyone being in the same room is a good start.

    yours, Marcus

  • http://webtech.lv kaklz

    Welcome back! I was quite missing your posts and experience :)

    It seems to me like I’m the customer that did the case study. I’m not a business owner, but more like a sub-contractor, however, I’m in the same situation as your customer is – even more and more people come to me and ask for services. So I’ve decided to keep the contracts, but let do the job some of my friends – programmers and taking some quality control on my own shoulders – to guarantee that customers receive the same service they would get from me. It’s like hiding the person who does the job behind my back :)
    The reason is as somebody already mentioned – I’m somehow afraid that if I reject a project, somebody can spread a bad word about me, that I’m not taking any new projects. And this could lead to loosing some bigger profits.
    As about rising the prices – well, that’s an option, however, you should be really careful about that. I guess you should make some calculations on how much profits you can get from a certain client and then make decision – is the time you spend for him worth it. If not, feel free to raise the price to a level that he makes you desired profits.

  • wildscribe

    Thanks for staying on Andrew!

    One of the biggest mistakes I ever made when I started in web development in 1995 was trying to be all things to all businesses and as a result, I took on both large and small clients. I tried to treat everyone the same, but after a few years, I determined that I was making more money from large clients. I gave away most of my small clients to other developer friends who needed business.

    Right now, I have four core clients – all large businesses that keep me busy. I did consider hiring someone full time, but I decided it was too much paperwork. Instead, I have two key freelancers who I can depend on.

    I found that it usually takes a much time to work for a small company as it does for a large company and large companies almost always pay more and can provide a more steady stream of work.

  • tcwatts

    I definitely stopped visiting for awhile (while I was sulking)… Welcome back!

  • http://www.eleytech.com beley

    Thanks for continuing to blog here… it’s a blessing to those of us who can’t quite yet afford your rates ;)

  • scattermachine

    Welcome back, and thank you for another great blog.

    Not very original, but why not? Since it’s sincere…

  • http://www.dannyfoo.com/minifolio/ etsuko

    Yeay! He stays! :D

    I like point-6 the most. Has some.. urm.. reverse psychology in it. *grin*

  • domletoeldar

    elologet