The start of a new financial year usually comes with a familiar list of jobs. Sort out the books, update your budget, check your subscriptions, set a few goals you’ll hopefully still remember by September.
If you run a service business on your own, however, there’s another part of the business worth reviewing: your customers. The people you work with have a huge impact on your income, workload and working week. A good client can become a long-term source of reliable revenue, refer new business and make your working life considerably easier. A difficult or unprofitable one can chew through hours, push out better opportunities and leave you wondering why you ever agreed to the job.
The new financial year is a good time to look at your customer list and decide who you want more of and who you want to let go.
Start with your numbers
Pull up a list of every customer you worked with over the past financial year and check how much revenue each one brought into the business. You may already have this information in your accounting software. If not, crack open a spreadsheet and get to work.
Revenue is the obvious starting point, but don’t stop there. Look at how much time each client actually required. A $10,000 client may look impressive until you add up the extra meetings, last-minute requests, revisions and unpaid phone calls. Meanwhile, the client who spent $6,000, paid every invoice on time and needed very little hand-holding may have been considerably more profitable.
So, try working out your approximate effective hourly rate for your major clients. Take the total revenue earned from the client and divide it by the number of hours you spent servicing their work, including administration, meetings and other unpaid tasks. The result can be illuminating.
Work out who your best customers really are
Your highest-paying customers aren’t automatically your best customers. For a soloists, a good customer is usually profitable, reasonably straightforward to work with and a good fit for the kind of business you want to build. Go through your customer list and consider a few practical questions.
Who pays on time? Who respects your boundaries and working hours? Who regularly buys from you or books repeat work? Who refers other good customers? Whose work do you enjoy doing? Versus: Who takes far more time than you expected when you quoted the job? Who regularly asks for extras without wanting to pay for them?
Give each customer a rating from one to five for profitability, ease of working together, repeat business potential and how well their work fits the direction of your business. Patterns will start to appear pretty quickly.
Where do your best customers come from
Once you know who your strongest customers are, work backwards. How did they find you? Maybe they came through referrals or maybe they found you through Google, LinkedIn, a local business network, an industry event or a partnership with another business.
Many soloists spend time and money chasing new customers without checking which marketing channels have already delivered good ones. Look at your five or ten best customers from the past year and trace where they came from.
If most of your best clients came through referrals, you may be better off building a simple referral system than spending more money on social media ads. If a particular service regularly attracts good customers and profitable work, it may deserve more attention in your marketing. The aim is to find the shortest path between your business and the customers you want more of.
Check whether you rely too heavily on one customer
A big client can make life easier. Regular work means predictable income and less time spent looking for new business; it can also leave your business exposed.
Work out what percentage of your total revenue came from your largest customer over the past financial year. There’s no absolute percentage that applies to every business, but it’s still worth caluclating. If losing one customer would immediately put you in financial trouble, reducing that dependence should be your number one priority for the year ahead..
Look at how you can build other sources of revenue so one customer doesn’t have too much influence over your income, workload or business decisions.
Deal with the customers who are costing you money
Most solo operators have at least one client they know they should do something about. It could be the scope of the work has grown while the price has stayed the same. Maybe it’s that they take weeks to pay, expect immediate responses or regularly ask for ‘a quick change’ that turns into hours of unpaid work.
The start of a new financial year gives you a natural opportunity to review the arrangement you have with your clients. It’s the perfect time to increase your prices, tighten the scope of work, introduce better payment terms or move the client to a different service package.
In some cases, you may decide to stop working with them altogether. Before making that decision, check the financial impact and make sure you can afford to lose the revenue and have a plan to replace it.
Don’t keep an unprofitable customer indefinitely because you’re worried about an empty spot in your calendar. Time spent servicing clients who are a bad fit is time you can’t use to find and serve better ones.
Get back in touch with good customers
Winning a new customer generally takes more effort than reconnecting with someone who already knows your work. Check your customer list for people you enjoyed working with who haven’t bought from you recently.
Found some? Send them a personal message to check in. Ask how things are going. Mention something specific about the work you did together. If you have anything new to share, now’s the time … It’s surprising how many customers may not know the extent of your services. A client who hires you for one service may have no idea you can help with something else.
Make it easier for good customers to buy from you
Now take a look at your business from a customer’s point of view. How do you show up? Is ist easy to understand who you are and what you do and most importantly, how you can help them if they hire you? What happens if someone makes an enquiry? Do your systems work? How easy is it for someone to get a quote or book an appointment?
Soloists often build systems around what is easiest for them to manage, so the new financial year is a good opportunity to check whether those systems also make sense to customers.
Ask your customers what they need now
When’s the last time you spoke to your customers? Your customers’ priorities may have changed over the past year. Take some time out to catch up with a few of your best customers to test the waters. Ask what they’re spending more time on, what’s become harder and what they wish they could hand over to someone else.
Conversations liek these can help you improve your services and develop new offerings because you’re responding to problems your customers are actually dealing with.
Set three customer priorities for the year ahead
After reviewing your customer base, resist the urge to create a 100-point customer strategy; choose three priorities instead. You might decide to reduce your dependence on your biggest client, reconnect with two former customers every week and generate more referrals from existing clients. Perhaps you need to increase prices for unprofitable work, introduce a minimum project fee and focus your marketing on one type of customer.
Write the priorities down and make them concrete.“Get more referrals” is easy to forget. “Ask two happy customers for a referral every month” gives you something you can actually do.
Running a business on your own means your time, energy and capacity are limited. You can’t work with everyone, and filling your calendar with customers isn’t much use if the work itself isn’t profitable or takes you further away from the business you want to run.
Source: Flying Solo
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