As we begin the new year, I would encourage you to review your business and see what unexpected insights you might find. I’m not talking about another look at your products or services, but rather at your processes, finances, and customers.

Starting to work ON your business, not just IN it

It’s easy for me to spend the whole year thinking about code, forgetting that it’s just as important to work on the business as it is in the business (check out the terrific book, The E-Myth for more on this subject). For me, a major revelation came when I looked at my top customers as a percentage of sales a few months back:

Tail wagging the dog

Wowzers! While it felt like I had a bunch of customer jobs going, the reality was that 3 clients kept everything going. Worst of all, my top client of 2009 was my least profitable and most demanding (It’s worth noting that they had some very good qualities as well: very consistent work and they always paid on-time). Based on some thoughtful review of these stats, I made a few changes:

Putting long-term relationships first

I saw that too much of my work was provided by clients that needed the services I offered, but had little need for the “Tim-ness” I bring. Partially, that’s because I initially pursued the marketing and design agency niche. Unfortunately, their margins are very tight and for many of the players, web is an afterthought. There’s very little really innovative development going on locally. Clients aren’t asking for it yet.

More than anything else, my work needs to come from organizations that find me irreplaceable. Not in that lame, “I’m the only one who knows how it all works” sort of way. Rather, it’s about finding and working with people who really appreciate the unique talent, perspective, caring, and personality you bring to every project. It’s about brining so much enthusiasm and productivity that the client can’t believe their luck in finding you. Those are things that cannot easily be replaced by anyone else. My work with John King from Metta Audio has this feel. We both really appreciate what we bring to the relationship. He’s been kind enough to tell me that the chemistry we have as we work together is as much or more valuable than my coding. Plus, I’m always thrilled to work with him on something new!

Demoting the tough client

My favorite book for self-employed consultants, Book Yourself Solid, reminds us that we have to drop our worst clients. They sap our energy and we end up doing poorer work for everyone. I’m not one to fire a client unless there’s something drastically wrong, I’d rather have them fire me. If the work isn’t worth it, I may have to raise my rates significantly to maintain profitability. That way, the client can still get help and I don’t need to complain. If the rate becomes unreasonable for the work they need, the client can replace me. Along those lines…I’ve known for a while that I needed to change the relationship my top client. 90% of their work was supporting an existing environment, and that’s not really my strength. And because the work is support-related, it’s almost always urgent and interrupts scheduled projects for other clients. My frustration was a clear indication that my rate did not reflect the cost of doing business with this client.

As I mentioned in a previous blog post, I began the transition in October. I completed several open projects and started discussions about eliminating the retainer I was on and associated minimum hours. Since their budget had tightened, it turned out to be a natural move for them, shifting me over to a higher rate that allowed them to only call when I’m urgently needed. I work hard to protect my time on scheduled client projects, so we also agreed on a minimum billable time when they call. This ensures that I’m compensated for time lost to the interruptions and ensures that they don’t call frivolously. With over a month under our belt with the new agreement, I think it’s been a real success. I’m pleased to take their calls and help when they need it, and they’re spending less. Best of all, I’m freed up to do more of the work that I love.

Increasing the apps available

In addition to client work, I want to add to and continue growing the subscription services I’ve created:

• ShipperTools.com - USPS shipping labels
• AmIDownHQ.com - Downtime alerting for web sites

Focusing on larger projects

My business thrives on doing ongoing work for a small number of stellar clients. Part of that is due to my personality. I can really do effective work on one or two projects a day. If I’m pulled away to make calls and juggle 8 projects, trying to move each forward in the course of a day, it feels like a disaster. I enjoy the larger development projects more. They offer a more significant sense of accomplishment that designing lots of little marketing sites.

It looks like I’ll be able to transition over to just a few clients with ongoing needs in 2010. If everything goes as I suspect it will, I’m already completely booked through March, and likely into mid-year. That’s tremendously encouraging. I also had to start a waiting list for a couple potential clients that want some work done and were comfortable waiting for me to free up. It’s a pretty wonderful spot to be in.

Many of the relationships I worked hard to build in 2009 have resulted in requests for work. I’ve been pleased to refer many of these to other independent developers and designers in the area, helping them keep busy while taking care of my contacts. It’s always hard for me to turn down a project as I love to help people, but it’s what I have to do for my current clients.

It’s going to be a stellar 2010!