The 80-20 Rule, AKA the Pareto Principle, states that “for many events, 80% of the effects come from 20% of the causes.” This can be observed in any volunteer organization, for example, a church, where 20% of the people do 80% of the work. In our eight-plus years of doing web development at Pelago, we have concluded that the inverse of this rule applies to client drama. That is, 80% of your negative experiences will be caused by 20% of your clients (and maybe even a smaller number like 5%). As a small business owner, how do you navigate this effect? You get tough.
Identifying problematic clients and take action
- Decide which clients are causing you the most grief
There is no formula. Just make a list of the five or ten clients who require the most energy keeping them happy. Which clients don’t understand or appreciate your expertise? Which clients want it fast, good, and cheap? Which clients grumble about their invoices or pay them late?
- How much are they spending?
Next, find out how much the client has spent compared to your other clients. If they are not in the top ten, then you are not getting paid enough to keep them as a client. One way to quantify client spending is to use a time tracking and reporting service like Intervals.
- How much hand holding are they requiring?
Another factor to consider is how much the client depends on you. If the client is calling you up weekly with unrelated questions (i.e. asking your web designer how to setup email in Outlook), they are too dependent. You want to focus on the core of your business and growing it. Getting pulled in different directions can have fatal results.
- Firing clients
We realize that when starting out as a small business, you won’t have the luxury of firing problematic clients. They are a necessary to starting any business. However, you can start identifying them early on, and jettison them when the business has matured enough. How you fire the client depends on your relationship with them. Some effective methods are raising rates, lowering project priority, finding them another company, or letting them know they are no longer a good fit.
The reality is that you will spend an exorbitant amount of energy removing problematic clients from the fray. However, once they are gone, the process will have been well worth it. You will have freed up more time to grow your business and focus on the 80% of the clients you enjoy. Life is short and you want to feel good about your work and who you are working for.