January 13, 2018

1x €5k client vs 10x €500 clients

My thoughts on acquiring 1x €5k client vs 10x €500 clients:

I’ve been slowly weaning myself off the €3-5k/mth gigs.

Yes, it’s great to get the revenue for a while, but when they’re spending that much with you as their freelancer (and even more on ads), then the client wants to own the AdWords campaigns and landing pages.

I’m also under no illusion that I have to keep improving performance ever single month they pay me.

And what’s happened a few times for me (and other AdWords freelancers I’ve spoken to) is that after a while it may become more cost effective for them to hire someone in-house to manage the campaigns.

€3k per month will get you an entry level AdWords person, and you’ve probably done a lot of the heavy lifting by then.

Smaller clients are often different.

Your typical sole trader is quite happy for you to own the AdWords account if it means they pay €250/mth to get started immediately, and not get tied into any contract.

Frame the €250/mth against “I do this for €2-5k per month for some businesses” and the €250/mth rental suddenly seems good value to them.

I find that some slightly bigger businesses are still happy for this “rental” at about €500/mth.  But this is a more significant spend and can’t run unprofitably for very long.

These sole traders and smaller businesses just want it done, and are happy they can pull the chord at any month if they’re not getting the ROI.

So let’s say I dial it in after a few weeks (or months).  They get positive ROI and I can do slight tweaks over time but essentially have it in sunshine and water mode.

The client is paying the fee to me and the ad spend to Google and getting a steady flow of leads and sales each month.

They’re renting this funnel and see the ROI monthly.  Whereas the business paying me €3k a month every month wants their numbers marching upwards every . single . month.  Whatever new level I get them to becomes the new baseline and they want more.

This has been my experience so far.  Your mileage may vary of course, but just take with a pinch of salt the common advice you’ll get to increase your rates.
Some people will argue to always increase rates, and to always swim upstream to get bigger clients.

Me personally, I want to go the other way.  I think the smaller guys are underserved by the bigger agencies.  The agencies can’t touch them… their overheads are too high and their business model isn’t designed to serve the smaller guys.

It’s not just about the revenue, but how much work you have to do to get the revenue, and build that revenue stream.

I even have a client who’s been paying €250/mth for the last few months and the ads are paused!  He just wants the ability to turn it on at a later date when he wants to.

Other reasons I prefer to go downstream and have lower priced and higher volume of clients are:

1) I learn how to acquire “customers” in the vertical better.

2) I improve my processes quicker, so they become repeatable and maybe automated.

3) I learn things from each new client that I can rollout to other clients in the vertical.

4) If I can build a directory for it then I can build a brand in the vertical – think booking dot com and limo dot com. (I’ve not started this yet but that’s the plan).

5) I’m building a subscription business rather than an agency.  I think the sales value of one is better than the other (read “The Automatic Customer” for some of the maths).

6) You generate much more word of mouth when you have 10x the number of clients.

7) If clients are less bespoke then I can grow with a lower headcount.  Things are more likely to be repeatable and automated, and more junior staff can be used too.

8) Less dependency on any one client.

9) Better ability to see other common needs that I can solve (and increase the baseline MRR).

10) There’s more €500/mth clients out there than €5k/mth clients.  Even more €250/mth clients.  I also think there’s less people chasing the smaller ones.  The bigger the agency the more upstream they have to go.

11) If I can come up with a way to be profitable by charging less, or even going free, then I annihilate the competitors business models.  (Read “Free” by Chris Anderson.)