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The Danger of Putting Too Many Eggs in One Client Basket5 min read

August 7, 2018

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The Danger of Putting Too Many Eggs in One Client Basket5 min read

eggs in one basketIn nearly three decades of freelancing as a public relations consultant and ghostwriter, I’ve listened all too often as clients and colleagues bemoaned the fact that they just lost a big client and were going to suffer a significant financial hit as a result.

In several of these cases, it turned out that this now-gone client had represented a huge portion – a truly alarming 80% in one case – of the revenues my client or colleague had been earning. In short, these people had put too many eggs in one client basket, a surefire recipe for eventual disaster.

Having one client represent the majority of your income is a truly dangerous position for any freelancer. But it’s all too easy to let this happen to you. A client comes along that is a perfect match for your skills; they love your work and as their business grows, you gradually devote more and more of your time to them. You start feeling ultra comfortable with this relationship and its long-term potential. You slack off on your new business activities as your dance card fills up with this client’s projects.

Then one day you get the bad news. In the case of one of my close colleagues, this news was that the privately owned construction company that had been monopolizing her time for four or five years had been sold. Her public relations and marketing services would no longer be required since the much bigger company that purchased her client’s business already had several PR agencies on retainer. This scenario is far from the only reason you might lose your biggest client. The possibilities are endless and in many cases, they have nothing to do with the quality or value of work you’re delivering.

Warning signs

Often we’re taken completely by surprise when a major client decides to stop using our services. Other times, red flags have been flying but we’ve just chosen to ignore them because the status quo feels so comfortable. You may think something along the lines of: “I’ve been working with this company for years; I’m part of the family.” Wrong!

Here are just a few signs of impending trouble that you can’t afford to ignore:

  • A change in payment patterns: Is a client who has always paid on time now suddenly running a week or two (or even a month) late? If this happens just once, it’s probably not an issue and there is usually a good explanation. But if this now becomes the “new normal,” it is probably a sign that your client is in financial trouble and you may soon not have this client any more.
  • The client starts to beef up in-house staff: Many growing companies may eventually decide they want to bring the services you provide in-house so they have more control. If you see signs that your client is looking to hire people who do what you do, this is a clear warning sign that the work from this client is about to dry up.
  • The new department head is hired: If a new leader comes from the outside to take over the department you work for, this could spell trouble. Often new folks already have a stable of vendors they like to work with and so they clean house and bring in the freelancers they’ve worked with before. They’re in and you’re out.

The best strategy

You can avoid the too-many-eggs-in-one basket danger by never falling into this trap to begin with. Yes, many freelancers do start their businesses with just one major client, but the smart ones quickly start to build up their client roster so their destiny is not reliant on just one client. This means engaging in networking and other activities that will get your name and availability out there.

Once you do have a nice roster of clients, don’t let your guard down, however. Always make it a practice to know what percentage of your income is coming from each client. Personally, I start getting nervous if 40% of my revenue is coming from one client. I figure that is an amount of income I could survive without during the several months it might take to hustle up replacement business if that client disappeared. Yes, I might have to dip into my rainy day account, but I would survive.

That 40% is not a magical number, but I think it would work for most folks. So if you find yourself inching towards 40% of your income coming from just one client, it’s time to give serious thought to fixing this situation.

Now, of course you’re thinking that you’re already busy 100% of the time working for that big client and your smaller clients. How are you going to find time to start a new business initiative?

Here’s the strategy I’ve always used to solve this dilemma: Hire subcontractors to do some of the work on your plate so you have time for new business activities. I have frequently had two or three subcontractors working for me during really busy times and this works out well, especially if, like me, you want to grow revenues without taking on the responsibilities that come with hiring employees.

Finally, realize that it is far easier to go out and attract new business when you’re actually busy and feeling upbeat than it is when you’re feeling defeated and possibly even desperate because you just lost your biggest source of income. When things are going well, you’re less apt to make mistakes like underpricing work just to bring in some income.

Take a good look at where your income is coming from to see whether you’re in danger of having too many eggs one basket. That’s a situation that almost never ends well for a freelancer, so do whatever you can to avoid it. This will help you survive and thrive in your freelance life.

Jeanne Yocum is author of The Self-Employment Survival Guide: Proven Strategies to Succeed as Your Own Boss, published earlier this year. Her book is based on her nearly 30 years of experience as a freelance public relations consultant and ghostwriter of business books. Her blog for small business owners and solopreneurs is succeedinginsmallbusiness.com.

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