Existing clients are your bread and butter. Once acquired, they should be viewed as a major asset and treated as such. Your repeat business from them is much more profitable because you don’t have the cost of acquisition to deal with.

The lifetime value of a client

This has already been discussed but its worth repeating. The lifetime value of a client is how much revenue that client will bring you over the years. It is such a critical concept because it tells you exactly how much you can afford to pay to acquire a client.

Let’s say you placed an advertisement that cost you $120 dollars. You get one appointment and that customer pays you $120 for 2 hours work. Three months later this client has not re-ordered from you.

Did you waste your time doing 2 hours work for $0 in profit?

Unlikely.

On average, most clients will re-order. Some of my best clients did not re-order until several months after their first appointments. Then their re-order frequency just kept going up!

The danger of ignoring the lifetime value of a customer is that you will stop using cost-effective advertising opportunities because they don’t bring an immediate return. If the lifetime value of that client was $1,200, you have a 10 times return on your initial advertising cost. This would be very successful.

The difficulty you have is you don’t have any statistics to go on when starting out.

Let me provide them for you!

I reckon most of your clients will order more than once and some will order dozens of times. These best clients raise the lifetime value averages quite considerably. Just hit gold once and you will never look back.

How to encourage regular repeat business

Apart from just doing a good job, there are several specific techniques you can employ to encourage repeat business:
• Send out sales flyers with all correspondence. Include this literature with your invoices, appointment confirmations, thank you letters and company profile. You never know who might read your correspondence and most times your client doesn’t even know everything that you do.
• Make follow up calls just to stay in touch. You’ll be surprised at how many people will say, “I’ve been meaning to contact you.” You have to help your clients overcome their inertia.
• Do a bulk email to your client base once every 2 months, offer special offers or discounts. This is easy to do, costs nothing and will remind your client of your existence. To do the same using the postal system would be very expensive.
Offering specials deals to existing clients
Offer a discount for all work over X within one month. This means that if a client spends, for example, over £500 within a month you will offer a 40% discount on all work over that £500. This could encourage them to spend more and do it soon.

Alternatively, just offer a bulk purchase price where they can buy, up front, a X hour block of your time at a discounted rate. If your rate was $64 per hour, instead of charging them $1,280 for 20 hours work, do it for $1,000.

Say “We are offering this to our preferred clients only.”

Your client will be pleased to have the choice and may buy in bulk even thought they had not planned for that.

Here’s another idea that can also help your cashflow. Tell clients that you will knock 5% off the bill if they pay within 10 days of the invoice. This is quite some discount and many will take you up on it.

Beware the crafty client who will pay you late and still take the 5% discount. If they are 5 days late, don’t worry about it. Your client relationship is worth too much to be petty. If they are over 5 days late, chase them up. The discount is intended for prompt payment and is not just you cutting your hourly rate.
How support contracts can guarantee you a steady income
Why not offer your client a support contract that ties them in for 12 months at a time? The contract could state they have to spend a minimum of $300 per month with you. In return, you knock 20% off your standard billing rate. The client benefits because they get your services cheaper.

You benefit because:

1. You generate more revenue from an existing client without the extra cost of acquisition.
2. You get a regular guaranteed flow of income, which gives you stability in the long run.
3. It helps build your relationship with the client so they won’t defect to your competition.

Reflections on how my existing clients have affected my business, 5 years later
my existing clients have saved my bacon. When I’m going through a slow patch and not many orders are coming in, I always seem to get calls from my client base. I never predict them – they just happen and it still surprises me, even to this day!

My client base has given me the stability every business needs. There will always be times when – through no fault of your own – the business just does not come in. But my clients come to my rescue! They give me the confidence that I will always have enough business to survive, no matter what happens.

The 12 mistakes most beginners make, costing you a fortune instead of making you the money you deserve.

In reality, the mistakes you can make are endless. You will always make them and you’ll never stop learning. The following 12 mistakes are the most common ones and they all have a simple solution.

Mistake #1: Thinking they know a better way
You reckon you know a better way to start a computer consultancy? Perhaps you do, but how can you be sure? I have over 10,000 hours of experience in this business. I’ve tried just about every angle you can think of and I know what works for me and what has worked for others.

You are different - you have a different set of skills. But there is a lot of common ground when trying to earn a living as a computer consultant.

Why make the mistake of trying to reinvent the wheel when I have done all the learning for you? Follow my system, take on board my advice and modify it to suit your particular circumstances.

Only deviate when you have considerable experience on your side. Otherwise, you could fail to make the successful start I hope you will make.

Mistake #2: Being intimidated
It is so easy to get intimidated when dealing with other businesses. The owners and buyers of these companies are often skilled at getting good prices for services like yours. They will complain about your price and tell you that they are shopping for the best price. However, a lot of the time this is complete bull.

I remember one case when the buyer for a large company told me I was under a lot of competition and he thought the project would cost “not much more than $900.” I quoted $2,900 and he snapped it up! He accepted my quote without hesitation, which is normally a bad sign. It means he thought the price was very good. I was actually trying to keep the price down because I thought I’m under competition and I might lose the work. While this is true, when it happens to you enough times, you start to realise you should just charge your normal rate. If they say your price is too high, then negotiate. If you give a rock bottom price, then you have nothing to negotiate with.

Mistake #3: Undercutting the competition
Having low prices is great for getting market share but when you get busy, you must raise them. Put them at the market rate as soon as possible.

A well-meaning friend once said to me “Why don’t you halve your prices and get twice as much business?” It seems logical at first – cutting prices will bring more customers. But in the end, you do twice as much work for the same pay!

My prices were too low for too long. Raising my prices would have had little effect on my eventual target market - business clients. Having prices too low make you look less of an expert and more of an amateur.

Mistake #4: Thinking their skills will sell themselves
Don’t believe this. If you have good computer skills to offer, shout from the rooftops. Let everyone know about them. Talk about the benefits you can bring to a company or home user.

Tell them “I can help you get the most from your machine, instead of the measly 5% most people end up using.”

Your business success will be directly proportional to your effectiveness in marketing. Don’t fall into this “sell themselves” trap.

Mistake #5: Not being selective on what work they take onboard
When you start, you will find you take on any project you can get your hands on. This applies even if you don’t have the skills in that area.

I remember telling clients “Yep, no problem, I can do that.” I would walk away hoping they wouldn’t ask me to do that work in the near future because I hadn’t quite got around to learning it yet – and in most cases never did.

This is a mistake.

You can’t be an expert in everything. If you know Microsoft Office back to front and someone wants training on Delphi, you just have to say no. You will stretch your resources too far if you don’t and you will earn less in the long run.

Yes, I know, when you are desperate to get in as much business as possible, the temptation is there. Despite this, turn down those projects where you don’t have the skill. If you took them on, you are likely to do a shoddy job and upset your client relationship.

Just say, “That’s not really my area” or pass the lead onto a contact who can do that work. Do it on the basis that you get 15% of the billable work (paid by the contact).

Mistake #6: Treating all customers the same
A “same for all” approach will not help your business. All customers are not the same. Some customers will give you so much repeat business you simply must give them preferential treatment. Respond to their enquiries faster to help cement your relationship with them.

I have clients who call me back every month or so, year after year. They are worth so much more than the company that gives you the occasional bit of work.

I suggest you grade you clients into A, B, C and D categories. This is what the customer services experts recommend.

“A” clients are your very best customers. They get top class treatment and even special offers.

“B” clients are reasonably good customers.

“C” clients are ones you want to eventually drop when you get busier. They may be those clients who are always quibbling about your price or give you small bits of business.

“D” clients are those who you want to drop as soon as possible. They always wait until your last collection letter before they pay, they quibble on price, they moan like hell and they try to get you to do as much work for free as possible.

You don’t need this last type of customer. When first starting you don’t have much choice but a few months down the line, get rid of these customers by raising your prices. If they stay with you then its not so bad because you are getting paid more! If you really can’t stand them then keep raising your prices. In the end you may be getting paid so much for the work that it’s worth it!

Don’t apply your grading just on the basis of how much work they give you. Factor in how much hassle they give you, your charge out rate to them and how far you have to travel. Only then come up with a grade.

Mistake #7: Not selling to existing customers
The cost of acquiring customers is high yet they are the easiest people to sell to. When I was in the financial services industry, I never used to sell much to my existing clients. Its not that I couldn’t, it’s just that I didn’t. I was always chasing new business.

One of my colleagues always kept in close contact with his existing clients. He built up good relationships with them and he developed trust and liking. Consequently, they ordered more and he made more money than I did for less work. He would ring them up “Just to stay in touch” and they would sometimes say “Oh, I’m glad you called because I was thinking about getting a…”

Play the smart game. Keep in regular contact with your customers, make them feel as though you care and your relationship with them will pay you dividends.

Things you can say when re-contacting a client:
• “Just touching base” or “Staying in touch to see if we can help”
• “We spoke about doing (a website/a database/some training) a few months ago and I was wondering if you had any further thoughts on it?”
• “We are offering our preferred clients a discount of 20% during August, because this is a quiet time of year for us…”
• “Last time we spoke I promised to call you in August…”

To encourage an ongoing relationship with your client, just before you leave an appointment, say “We like to stay in touch with our clients to build an ongoing relationship, so we call from time to time to see if we can help. How long should I leave it before I make a courtesy call?”

When you do call X months from now, you have a good reason. They are expecting it and may even be pleasantly surprise that you are doing what you promised to do. Getting good reliable suppliers is not always easy.

Mistake #8: Not creating basic company literature
Stupid though it sounds, I made this mistake too. Yes, I created some letterheads and business cards but that was about it.

I should have also had a standard…
• Company profile
• Services sheet
• Sales flyer for each area of my business
• Appointment confirmation letter
• Debt collection letter(s)

Instead, I ended up creating different literature for different clients. They were more tailored to the clients needs but they were also too time consuming to produce.

Generic literature was what I needed.

It was some 2 years into my business before I created a full range of company literature. This took some time but with hindsight it was worth it. I ensured that I could perform a quick mail merge to all letters so I didn’t have to keep typing my client’s name and address. This saved bundles of time and I ended up sending more literature to more clients – which can only be a good thing.

So, make sure you:
• create your company literature at outset
• ensure you can mail-merge your client data into that literature

Mistake #9: Failing to get larger contracts in writing
Dealing with projects is different than being called in to do, for example, a 3 hour training session. For a start, the client is likely to have completion dates in mind. They also have a budget to adhere to. These can become a problem if you fail to get a signed contract for the work to be done.

I used to do everything on trust. This was fine for the first year, but when I did more and more contracts, I got stitched up left, right and centre. I remember one year when I had disputes with 4 major contracts.

These clients argued over things such as:
• the project not being completed in time
• the estimated cost being way out
• the finished project not quite doing what they wanted

I lost out financially on some of these projects because I did not have a written contract and a verbal contract is difficult - if not impossible - to prove. Some of the other reasons proved troublesome also, because I created my contract and I have very little legal knowledge.

The wording on my Terms & Conditions had ambiguous clauses and I wasn’t sure it was legally binding anyway. This made me loose confidence in my ability to take successful legal action if we could not resolve the dispute out of court.

One interesting point though. Just having a written contract made my clients position much weaker and I got paid immediately by one of them just by threatening legal action. They probably knew as little as I did about creating Terms & Conditions and took the safe route of paying up.

When starting out, if you can’t afford for an attorney to create your own Terms & Conditions, do it yourself. Copy an existing one and put in your additional clauses to suit your particular business.

However, once you are established, it would be wise to get a professionally drawn up Terms & Conditions. Otherwise, if you take a client to court, the whole case could be thrown out if you have made innocent mistakes in your contract. You could loose not only the money the client owes you, but also the cost of court fees, time lost and so on.

In short, get larger contracts in writing – always.

Mistake #10: Not staying on top of late payers
Wow! If there is anything that can cause you problems its late payers. They can cripple your cashflow so you can no longer afford to advertise or even put petrol in your car.

Some businesses will pay you late as a matter of company policy. They will leave it until the last minute, after they have received your letter threatening legal action if they don’t pay.

These clients may say “Oh, sorry. You just missed a check-run and our accountant is off sick at the moment.” This is bullshit. They come up with a whole host of reasons why payment couldn’t be made.

Your solution is to create an effective credit control policy. Have answers to the following questions:

• How many days will you give your clients to pay?
• When will you follow up with a phone call for payment?
• How long after a phone call will you leave it before sending your first debt collection letter?
• How long after your first debt collection letter will you leave it before sending a letter threatening legal action?

If your A clients take 2 months to pay, but they always pay, ignore it. They are too valuable to risk upsetting. However, if you have C or D clients who take 2 months or more, then chase them up.

My credit control policy runs as follows:
• Invoices state that clients get 30 days to pay
• After 45 days, I phone asking for payment – “Can you send a cheque today?” They may say no but they will send a check “soon”. Try to pin them down to a specific date – “What date will you be sending a cheque by?” Otherwise, it can drag on and on and your cashflow is affected.
• Your first debt collection letter should be a gentle reminder that payment is overdue by X days. I usually send this 30 days after payment was due.
• Your send debt collection letter should be a letter threatening legal action. I sent these 2 weeks after my first debt collection letter and gave 7 days to pay.
• A fax was sent 10 days after the final debt collection letter with a headline “Proceeding with Legal Action.” It states we have decided to instruct our attorney in 2 days time (state the date) and quote the history of correspondence e.g. work done, invoice, phone call, debt letter #1, debt letter #2. This fax nearly always brings an immediate response.

I remember one client sent me a nasty letter after receiving my second debt collection letter. He said he would not pay until he is ready. I sent my fax and I received a same-day response with a promise to pay in 5 days. The fax proved very effective.

Late payers are not your only problem. You may be the problem! Let me explain…

I’ve always had a tendency to send my invoices out late. When I’m busy and the money is coming in, I seem to think everything will be okay. Then, 1 month later, I’m out of cash and I end up spending many wasted hours juggling my finances. I have to borrow money from my credit cards as a short-term loan to survive. This comes with all sorts of fees and you pay a premium interest rate.

This is avoidable if you stay on top of collecting money. Set aside one morning per week where you always send out your invoices. If you can help it, don’t book appointments for this important time.

Mistake #11: Not costing in your travelling time and expense
When starting out, I remember making a 1.5 hour drive just to do 3 hours work at $24 per hour. I make that 6 hours of my time for $72. Take away my petrol cost of some $8 and I’m left with only $64 – in other words I was effectively getting paid $10.67 per hour. I might as well have taken up a local janitor’s job at that rate.

What I should have done is either charge a higher hourly rate for this particular client or charge a call-out fee. This way, I would have help keep my earnings to a more reasonable level.

In my example, I could have added a $32 call out charge. My total profit would then have been $96 for 6 hours, or $16 per hour – that’s a 67% increase in my hourly profit.

A call out charge doesn’t necessarily have to be a fixed fee. You can charge by the mile or by your travel expenses and a lower time charge. For example, if you are driving to an appointment you could charge $0.64 per mile. This would cover for petrol, car wear and tear, and a time charge. Choose your rate according to how much competition you face – otherwise they might just choose someone on your doorstep to save on paying these expenses.

When dealing with larger companies, I nearly always charge for my travelling and accommodation. They expect it and since its not their personal checkbook that covers the cost, they don’t mind so much. When dealing with a small business owner, they are more reluctant to pay your expenses.

Mistake #12: Giving away too much for free
You bill by your time and you only have so many hours in the day. Therefore, your earnings are restricted by the number of hours you can bill. When you give some time away for free, it is gone forever. You’ve lost potential billing time. I cannot stress how important it is to get a grip of your time.

I used to give so much time away for free. My reasoning was that it would create goodwill.

With hindsight, it just made me poorer. There are clients out there that will take and take when you offer your time for free. They are not necessarily bad people – it’s just that they rationalise why they keep taking. “I’ve done a lot of business with this consultant so I deserve some free help” may sound rational but it is complete rubbish. They are not entitled to any free time, no matter how much business they have done with you before. You have exchanged your time for your fee and that was the deal.

If you weren’t worth your fee then they wouldn’t have brought you in in the first place. This may sound harsh but it is a fact of business. Nothing for nothing.

Don’t get me wrong – I do give some help away for free. Take one of my top clients. A senior partner phones with a quick, 2 minute query. I help them out without fuss. Why? Because it would take me too long to jot down such a small amount of billable time. What about a 10 minute chat? Yes, I would bill for it. But before that I would have ensured the client knows phone support is billable.

When first visiting your client, say, “If you are looking for phone support, we charge by the minute, in 5 minute increments. Alternatively, we can set up a support contract for you. Do you think you would be looking for phone support in the future?”

After your appointment, send them some literature pointing out the costs of phone support. Then, when they call you, they have no reason to question your invoice when it lands on their desk. You have stated it verbally and in writing. They can’t then say, “I thought it was for free.” I don’t think I’ve ever had anyone question an invoice for phone support, except for an accountant asking which employee I was providing support for.

All said and done, use your judgement. Just err on the side of billing everything! After all, it is a business and you deserve to get paid for helping others. You’ll find clients bothering you less and less with trivial things. These eat up your day in no time.

7 ways to make your clients need you more than you need them

Sometimes your clients end up relying on you. You’ve done such a good job for them that they can’t afford to consider changing suppliers – its just too much effort. Here’s my top list for making them need you more than you need them.

Method #1: Make it easy for them by talking in layman’s terms
Forget the jargon. Companies don’t want to hear it, unless you are talking with an IT Manager. In these circumstances, you will be expected to know the jargon and buzzwords. But everyone else will glaze over if you baffle them with science.

Most people will not want to admit to you their ignorance on what you are saying. They will smile and nod at all the right moments. They may even throw in an intelligent sounding comment. Their egos are involved and I’ve noticed this the most with management. They don’t want to let on that they know less than the office junior.

You number one goal is not to impress your clients with your skill but to communicate with them as clearly as possible. What you think sounds impressive is more than likely to make them dream about what they will be doing after work.

There are enough propeller heads out there. Let them scare the potential buyers towards you.

Method #2: Establish specialist skills
Establish some specialist skills in a niche market. Your client will find it harder to get this kind of work done professionally. They may phone around local computer businesses, a limited number of whom offer the same skills, but who wants a generalist when you can get a specialist?

Once you have been involved with a project requiring your specialist skills, you have an intimate knowledge of all the details. You may have spent countless hours discussing their needs and sifting through each project area. Why would the client want to undo all that work by bringing in someone else?

They are likely to continue using you for the following reasons:
• They haven’t got the time to run through all the details with someone else.
• They couldn’t be bothered to run through all those nasty details again.
• It cheaper if they use you because they would avoid having to get up to speed describing the project to your competitor
• Its faster if they use you because you know the background.
• Its too much hassle.

Of course, a company wants a decent price from suppliers but money isn’t the only factor. Its just one of a mosaic of reasons. The hassle factor is one of the largest when you are already involved.

In a nutshell, getting specialist skills is like having your foot permanently in the door. Just offering skills that most computer consultancies offer will make your client relationship less secure.

Method #3: Never be unreliable
I know many people who are incredibly unreliable in their private lives. They promise so many things yet never deliver. You may get away with it with friends but the business world is an altogether harsher environment.

Be unreliable here and you risk being dropped like a brick. Companies just can’t plan effectively if you are always late, or get timings wrong or fail to return calls. Being reliable won’t necessarily win you points because it’s expected of you. But it will help them stay with you because much of the competition is totally unreliable.

Method #4: Do more for your clients than they expect of you
We’ve all heard this expression – it’s almost worn out. But what does it actually mean? After all, we are billing for our time and if we give stuff away for free, won’t that cost us financially?

In my first 2 years, I did so much free work and I never got any thanks for it. Some companies will take what they get and be totally guilt free. I was charging one guy $24 per hour for work that involved over an hours drive to get there. After my petrol costs I was left with very little.

When I struggled on something, I would give him ½ - 1 hour free as I felt it must have been my fault. The truth of the matter was he intimidated me. He kept saying how tight things were and moaning about money all the time. I actually believed this and was a sucker for doing so. Looking back, he was getting his problems solved at less than ½ the market rate and then some free work thrown on top of that!

About 1 year later I ended up speaking with this client for one reason or another. I had a chat with him about pricing and told him my rates had gone up considerably. He said that he wanted to tell me at the time to up my rates but he couldn’t because it would have cost him more! Don’t get me wrong, he was a nice enough guy and we got on really well. However, in business, the owner has to protect his interests first and get the best deal they can from suppliers.

The point I’m making is be careful doing work for free because you will end up with the takers taking more and more for nothing. Charge for nearly everything. Then, when someone pays you for your billable work, go all out in doing the best job you possibly can. Work like a slave, take shorter rest breaks than others and try to get the job completed within the time allocated.

How can they choose someone else when you work this hard? They’ll always have to pay for your time but it will be well worth their while.

Also, report back in writing to the most senior contact on what you have done, even if this wasn’t asked for. It only takes 5 minutes and it makes you look good. They’ll appreciate your efforts to keep them informed and can help cement a trustworthy relationship.

Method #5: Make an effort to be friendly with all staff
Never underestimate the influence any staff member may have within a company. Treat them with respect and be friendly at all times. When I go into my favourite clients, it’s like going to visit a group of friends. They all know me and I know them. We catch up on what’s going on and we enjoy working together. When you have this number of people on your side, everyone is rooting for you. When choosing a supplier they may say, “Why not see if John Doe does that? He always does a good job.”

Treat the wrong person with a lack of respect and they can make sure your long-term chances with that company go down the hill.

Method #6: Tell them what they need, no more no less
When meeting with clients, go in with the attitude of an advisor. A very successful salesman taught this to me. He was about 5th in the sales-force out of 5,000 salespeople. He said most salespeople go in with the view to make a sale, regardless of the buyer’s needs and it ends up coming across that way. He goes in with a view to advising the client, even if it meant no sale for him. The prospect can tell the difference and will consider you to be the trustworthy candidate on future sales. His results spoke for themselves.

I know you are constantly selling your services but don’t overstate your case. Always tell the truth as to what their needs are and don’t peddle services that they don’t need just because you want more business. You can still “sell” your wares – just do it within the framework of ethically advising them of their requirements.

Method #7: Make yourself accessible
As already mentioned in previous chapters, let your clients get hold of you whenever possible. Have your mobile switched on at all times, with the possible exception of group training sessions.

When your phone rings when with a client, if they are lower down in the company just say “Can you bear with me for one moment, thanks” and answer your phone. Tell the caller “I can’t talk right now but I can get back to you later today. Can I take your number?” After the call, tell your client “I’m sorry about that, now where were we…”

If your phone goes off when with someone at the top of the company, you may want to just turn your phone off. Their time has a high financial value placed on it and they may not appreciate you answering calls during meetings with them. Common sense really.