“I get too much work from one client. Should I be worried?” This is a question I often hear from freelancers, especially those who work for agencies. Is a client that/who provides 50%, 60%, or even 80% of your income a problem?
On the one hand, someone with a full-time salaried job earns 100% of their income from one “client,” their employer. And, these days, many salaried jobs are not much more stable than a freelance client. That employee could be let go with minimal notice and minimal severance pay, and be left with no income at all. In an ideal world, we’d all have 20 clients, each providing 5% of our income so that we’re nice and diversified, but the real freelance world doesn’t always work that way. Sometimes you have a client who sends you tons of interesting work, and pays well, and is easy to work with; letting them become dominant in your client portfolio might make sense. Additionally, fewer clients generally means more billable time. You get to know the client’s processes, so you spend less time negotiating rates and turnaround times, figuring out the client’s preferred style, etc.
On the other hand, a dominant client puts you at risk. Here’s a situation that happened to me last year. I started out in about 2010, translating small projects for a direct client, and over the years the work increased into the five figures. They weren’t a dominant client, but they were a substantial client. And then one day (can you hear the ominous music playing the background?), they e-mailed me to say that in the course of hiring an employee for a half-time position, they had found a native English speaker who had also worked as a translator. They decided to hire that person full-time and include translation in the job. So, literally overnight, that client dropped from five figures to a couple of hundred dollars a year (when the in-house person is away or overloaded).
Other risks of having a dominant client include:
- Being asked to lower your rates, and worrying that your income will decrease if you say yes, but you’ll lose the client if you say no.
- A sudden decrease in work volume, if the dominant client is an agency and they lose the major end client you work for.
- Becoming overly comfortable with that one client; not updating your marketing materials or plan, because the client feels so secure.
- Losing the client entirely, if they go out of business, retire, your main contact leaves, etc.
So, what to do? Here are some suggestions, and please add your own in the comments.
- If you have a dominant client, make sure it’s a deliberate decision, not a passive one. If you’re intentionally saying, “I choose to earn 80% of my income from this client for reasons X, Y, and Z,” that’s a lot different than “Holy… How much did I earn from them last year?? And now they’re going out of business?”
- Build up a rainy day fund for your business. When I lost my substantial client, I actually didn’t panic. It was a bummer because I really like their work, but I knew that I could draw money out of my business savings account if I needed to (because I force myself to pay into that buffer fund for just such an occasion). The rainy day fund can save you from the dilemma I mentioned above, where you feel trapped in a bad situation with a client who won’t pay your rates.
- Have a plan B. If your dominant client dropped you tomorrow, what would you do? Are your marketing materials in order? What kind of client would you want to replace them with? If you were rebuilding 80% of your work flow from scratch, what would you want to be doing?
- If the dominant client is an agency, pay attention to where your work is coming from. Is it from one end client, or from multiple end clients? If it’s from one end client, you’re in a doubly risky situation, because you’re subject not only to the agency’s vicissitudes, but to their potential loss of that end client. If you work for multiple end clients, things are little safer.
In sum, I’m not totally opposed to the idea of a dominant client. But it needs to be a purposeful decision, not a passive one, and you need a) some buffer money to tide you over if you lose that client, and b) a plan for how to find new work when/if that happens.
Readers, over to you? Any dominant client stories to share?