One of the biggest concerns that anyone that works for themselves has is what do you do if your clients all of a sudden quit at the same time. The fear and desire to protect against clients leaving drive the self-employed, as they invest in their business.
This anxiety leads to attempts to put off financial requirements to better the client relationship. Should I invest in a customer retention tool or save for retirement? What if I skip an estimated tax payment now so I can afford a service to increase my customer base? Could I hold off on paying myself this month in order to fund another client relationship coaching class?
But this fear of client flight can lead to delaying other tactics that can go a long way to building a protective fence around your business.
That’s why it’s important to invest and plan for client retention, but also build in safety nets into your business that can make you client-proof (to an extent!).
You want to rely on clients, but just not rely on any single client. Here are a few ways on how.
Diversify Your Client Base
As a therapist or recruiter, this tactic may be one that you know very well. But it’s the ability to have many clients under your umbrella as opposed to four or five.
When I worked as an independent personal finance writer, despite being successful in the profession for many years, I could never quite get over the hump of having more than a handful of clients.
This fact created continual highs and lows, year over year. When I had five or so clients, money came in steadily. But if the economy changed, decisions shifted or targets adjusted, I could lose two or three customers very fast. I hated this paradox, but it wasn’t one I could escape. It’s a big reason I wanted to shift to financial advising – along with the ability to work one-on-one with people.
You can avoid this issue, though. If you’re a therapist, you can have 50 clients or more. If you’re a recruiter, you can work with a number of organizations.
But also diversify in terms of the client industry as well. If you’re a recruiter that works with tech experts, don’t just service technology companies. A lot of sectors need tech expertise. Having different sectors under the umbrella will reduce the potential that one sector’s decline would impact another.
Build a Backstop to Protect Against Clients Leaving
Backstops, to me, are the key to self-employment success. Without them, you’re putting all your eggs in the proverbial basket. When it comes to clients, that’s a very insecure place to let yourself rest.
To protect yourself from client flight, with a backstop in mind, it requires creating a business emergency fund.
Having four-to-six months of your income, business expenses and taxes in your business account gives you that protection.
You can pay yourself through the business account even if you suffer from client flight. This allows you to weather most short-term storms. You can use that time to find clients that will replace the old.
Diversify Your Wealth Streams
One of the most important things I tell those that work for themselves to do is invest in retirement. What does retirement savings have to do with keeping clients you might ask?
It speaks to building a business that can last. First retirement funds reduce your taxes, which allows you to make and keep more of your revenues. Second, they grow in an account and build over time.
As your business continues, these funds grow to a size that provides you with a secondary source of future income. It’s a wealth building tool.
What happens when you have a wealth building tool? You invest more in your company, making it stronger in the process.
But you don’t have to stop there. You can now use additional resources to build other streams of income, which further protects your business from client loss.
Such a shift in mindset builds security around your finances from the fear of client flight. And it protects the business, since you have backstops working for you in the short and long-term.