How to scale a business with no retainer clients
Small business owner Q&A.
As I mentioned last Wednesday, in December I’m doing a series of mailbag style AMAs in which I respond to the specific questions you have about your business.
Here’s the question. I hope you find this helpful.
How do I scale a business when I have no retainer clients. It either rains or pours. I can not forecast anything!
This is such a good and important question!
To get started, I’m going to make a couple of assumptions so that we’re on the same page. The first is that you’re a service provider and your work is project-based (perhaps you’re a branding expert or a web designer).
And then I have a few questions…
Why do you not have retainer clients?
Does your area of expertise lend itself only to project-based engagements?
Or is it a case of it being the way you’ve always done it?
Is it possible to shift future proposals to retainers rather than project fees?
How could you restructure the way in which your services are delivered to shift to 6- or 12-month retainers?
My goal with these questions is to create some space for new ways of thinking about your business.
Offering structure
Assuming your core offering is project-based by default, I’d ask you to consider whether there’s an aspect of what you do that can be designed as a retainer. This would be a service that complements your core offering.
Some examples:
Is there one aspect of what you do that clients want on repeat? If so, package that as an entry level offering to allow people to experience your magic or as an add-on once someone has complete a project with you.
Monthly advisory — a set number of hours per month that you’re available to answer questions, advise, guide your clients for a set monthly fee
Monthly maintenance — this works well for website designers/developers
Quarterly design/content refresh — too often we think in “all or nothing” terms; this gives you a middle path where the client signs on for an annual retainer that you can invoice monthly or quarterly
A membership — is there an aspect of your work that can be applied to a group setting once you’ve completed the core project?
These are just a few ideas to get you imaging the possibilities. The idea here is to keep your main services intact and add an offering that is retainer-based to reduce the financial impact of the feast or famine cycle (aka, smooth out your cash flow).
Reality check… should you not be able to move beyond project-based engagements, here are some actions you can take to help you move beyond it raining and pouring.
Cash flow
This is the challenge with project-based work. As you point out, it either rains or pours. This directly impacts your monthly cash flow. I’ve written about this topic in detail — you’ll find that article here.
Having a solid handle on your consistent monthly outflow (expenses) and the timing of your inflow (revenue) is key. With that number you can calculate the amount you should ideally have in savings to help smooth out your cash flow and provide a cushion for lighter revenue months.
Seasonality
Every business has some seasonality baked into it. When does your ideal client typically look for what you have to offer? What months are typically quiet (perhaps it’s year-end or the summer). If you’ve been in business for at least a year, you’ll start to see patterns. And awareness of those patterns allow you to plan for them in your savings and cash flow, as described above.
That said, traditionally quiet periods can unexpectedly be busier some years. I have one client who for whom this is typically their slow season and they’re busier than ever leading right up to the Christmas break.
Payment structure
How (electronically!) and when you get paid is critical to your project-based business.
Always send an invoice for 50% deposit up front, with payment to be received before the work starts.
Then the next 25% is invoiced at a reasonable, mutually agreed upon milestone. That could be as simple as midway through the project — for example 6 weeks into a 3 month project. Payable upon receipt.
The last 25% invoiced before the project is complete or final deliverables are sent. Again, this is payable upon receipt.
If it’s a short project, go with 50% and 50%
This does a couple of things. It helps you to avoid doing work for which you don’t receive payment; and it mimics a retainer… in this example above, 3 months, but it could be 6 or 9 months. If the project is short, let’s say 4-6 weeks, keep it to two invoices of 50% each. And map out your revenue and cash flow with this in mind.
Set up the right payment structure from the start. And always get payment before the work starts.
Business Development
As you’ve no doubt heard before, there’s working IN your business and working ON your business. When you’re in “pour” season, it can be easy to devote all of your time to client work (working in your business) and spend none of it tending to your own needs (working on your business).
In my clients’ businesses, this most often shows up as forgoing any proactive business development work. Which of course leads to the “rain” season once current the client project(s) end.
One way to help is to schedule even one hour per week for proactive business development activities. It gets booked on your calendar and it’s non-negotiable. You can reschedule it within a given week if need be, but you cannot punt it to the next week.
Your Team
If you have a team, even a VA, leverage them to free up your time to work on your business, doing the high value activities that only you can do. As your revenue increases, thoughtfully grow your team to support this continued evolution.
Client Feedback/Testimonial + Referrals
When you wrap a client project, ask them to complete a feedback form regarding your work together, one that includes a request for a testimonial, or simply ask for the testimonial on your wrap call or via email. And let them know that you always welcome referrals… those from current and former clients are always the best.
Your turn… submit your question.
Does this have you thinking about your own business? What would be helpful for you to know?
It could be on the topic of getting new clients, your positioning, your offerings and pricing, hiring a team, your operational setup… Whatever challenge you’re facing that has you stuck or opportunity you’ve created that has you not quite sure how to move forward.
Just hit reply to this email to submit your question.
Until next week.
Katherine
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