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Friday, December 21, 2012

Smart Year-end Advice: Name Your Whales


          
You may have heard of the 80/20 rule in business, which says that 80 percent of your income (and your work) comes from 20 percent of your clients. In the gaming industry, they call the high-rollers “whales,” and casino staff do everything possible to encourage them to spend time, and money, at their casinos. 

Do you know who your whales are? The only way to be sure is to do (eek!) some math.

The end of the year is the perfect time to take a closer look at your income. Every quarter, I add up my gross income, but the last quarter of the year I take it a step further, and divide it by client. Then I categorize my income into categories--like money from original magazine articles; money from my own books; money from ghostwriting and coauthoring clients’ books; money from reprints; and money from teaching and speaking.

Totaling these figures tells me where my money is coming from, and what types of work have been the most lucrative for me. It also helps me set my goals for the coming year—such as increasing the percentage of income I receive from books, for example, or doubling the amount I make from reprints, which are a relatively easy way to make extra money.

You can do the same thing quite easily. At the end of the year (or any other time you want), list your clients, and add up what each has paid you this year. Then determine what types of work you’ve been paid for in the past year. The categories you use will depend on the nature of freelance work you perform. If you write for magazines, do PR work for nonprofits, and do copywriting for corporations, for example, then add up the income you've made for each type.

Adding up your income and where it came from is a critical first step. With this information, you can set more specific, realistic career goals for the coming year, focusing on what areas of your business are promising. You’ll also identify your whales--the clients who provide with you with the most work and money. Those are the ones you want to continue to work for. It’s much more efficient to do a lot of work for a small number of clients than it is to do a small amount of work for many clients. This seems obvious, but a lot of freelancers don’t take the time to determine who their most valuable clients are, and focus more time and energy on them. 

Your mileage, of course, may vary. If you write books or do ghostwriting, you may have more one-shots, or clients you only write for once. In this case, you may have different whales each year, but I still suggest you stay in touch with each--they’re a source of referrals and possibly more work in the future.
            
            Then go a step further and consider cutting ties with clients who aren’t worth the time and effort. If you’re writing for more than ten clients a year, chances are that there is some dead weight--let’s call them remoras--on your client list. Maybe you’ve been writing for a client for years but your hourly rate isn’t all that great--or the client’s PIA factor is so high, you’d like to cut him loose. Every client you work for involves opportunity cost, and if you never get rid of your remoras, you may be losing out on more lucrative ones.

            Make it an annual goal to determine not just your income, but where it comes from. When you know who your whales are, you can make sure they get the attention they deserve.

**This post comes from Secret 52: Name your whales, from my latest book on successful freelancing, Writer for Hire: 101 Secrets to Freelance Success. If you want to make more money from your freelancing in 2013, I suggest you pick it up! And happy holidays to my readers...I'll be back in 2013!