Day 6 – Diversify your agency income

There are a scary number of agencies and freelancers who have 40-50% or more of their income coming from one client. In fact, one recent post I saw in a Facebook group, was from someone who had just lost a client worth 80% of their yearly revenue.

When you have 1 or 2 “whale” clients, who are providing most of your revenue, you’re playing a dangerous game. Everything feels fine and rosey while you’re enjoying the good times, but if that relationship sours… you’re one cancellation from disaster.

Let me share a story with you from my friend “Nick” (name changed to protect his identity). I’ve previously shared this in a newsletter to our customers, but it’s very much worth sharing again. This is a story that happened to his agency last year…

Nick had a very good client that was paying his business a little over 6 figures per year on a monthly marketing retainer. His client ran an E-Commerce business, selling expensive furniture to customers with deep pockets.

Nick’s client was very happy with the work that his agency was doing for them. They were well into 7 figures of revenue and consistently improving month on month.

I saw first hand just how well the work was going, as Nick asked me to help out with some email copywriting and setting up some email funnels.

Everything sounds great right?

Nick had a problem last year at the end of summer in 2019. His client was a couple of weeks behind on a payment and had become unresponsive. As they’d built up a good relationship over the previous 2 years, Nick and his team continued working, but the anxiety over the missing payment was growing.

The client ran his company as a middleman between furniture manufacturers and consumers. They didn’t need a large team to handle their orders. It was just the client and his partner.

Nick called and emailed. He left many messages. The client wasn’t responding. Yet… orders still seemed to be processed on the website.

At this point, there are a few choices that you can make as an agency owner. You can keep trying to contact your client, down tools, or you can start the legal approach.

Nick chose the latter, sent a formal letter and then 30 days later, after no response, began legal proceedings.

The case never made it to court. The client was back in touch within a few weeks.

Some personal issues had happened between him and his partner and they were going through a difficult divorce, which was the reason Nick hadn’t heard back. The orders were still being processed as a family friend had stepped in to forward orders to the furniture manufacturer and spent 60 minutes a day on admin tasks.

The client was angry that Nick had taken legal action. The outstanding amount was paid, but the contract was severed. Nothing Nick could do would change the client’s mind.

Not only this, but the client had referred three other businesses run by close friends to Nick’s agency. All three of these businesses also cancelled their contracts.

In total, Nick’s agency lost just under $300,000 in yearly revenue through this one course of action. This has unfortunately led to two of his team no longer having jobs.

At the time, the lost revenue amounted to around 65% of the income that Nick’s agency generated. Losing two of his valuable team had a massive impact on their ongoing work, not to mention issues with outstanding bills.

The human impact was tough too. Two families were now without considerable incomes, more stress and undoubtedly an increase in mental health struggles.

You could certainly argue in this case that Nick could’ve been more patient. Since we never know exactly what someone is going through at any time. Our clients are human and we all will go through some difficult moments in our lives.

That’s the thing though, clients are human. As humans, we’re prone to occasionally making irrational decisions.

What if this situation was different and the client had just randomly cancelled on Nick? Perhaps he had his head turned by another agency. It’s not hard to imagine the client leaving and encouraging his friends to do the same.

You don’t even need to be a large agency either. Back when I was running a solo business, I lost a client worth 60% of my income. It was 2010, and I got waaaay too comfortable with a great SEO contract.

It’s imperative that you make sure your income from clients is diversified. No client should be responsible for huge chunks of your income. Spreading the risk keeps you, your business and your family safe.

Of course, we don’t just have to focus on income from projects and marketing retainers. So let’s take a look at a few ways we can diversify your income…

Monthly Recurring Revenue (MRR)

Recurring revenue is the lifeblood of your business. The more of this you have, the easier your life will be.

Your first basic goal with recurring revenue is to get your MRR to at least match your monthly outgoing costs. When you do this, you’re ensuring that even if you have the worst possible month and don’t generate any new business, your payroll and business expenses are covered.

Here are three options to generate more recurring revenue for your agency:

  • WordPress Care Plans – This is the most common type of recurring revenue for the vast majority of agencies and freelancers. Care Plans operate on a monthly basis, providing website maintenance in return for an on-going payment from your clients.
  • Website as a Service (WaaS) / Subscription Websites – The subscription model for websites has been blowing up over the last year or two. With the current global situation, this trend is continuing. A number of agency owners are starting to look for ways they can service the clients that they would usually turn away due to budget constraints. There are a lot of opportunities here with the upcoming digital revolution.
  • Outsourced Services – Adding a new service to your business can bring a great line of additional income. Typically this is ideal for services that you either aren’t able to work on in-house, or you’re too busy to do yourself. One example of this would be offer SEO services. Our friends Pete and Jeffrey recently launched SEOHive, so if SEO is something you’re interested in… check them out!

For more ideas to generate monthly recurring revenue, check out this great blog post from Clifford Almeida over at MyWebAudit. He and his team have put together the “ultimate guide”, just for you.

Share your knowledge

It’s funny when people tell you that you’ve got a wealth of knowledge inside you, isn’t it? One of the first reactions is often to deny or not to believe. It’s true though – we all have something that we’re passionate about and that we can share with others.

Again, there are a number of directions you could take here. I’ve got four suggestions for you:

  • Digital product – Creating a digital product gives you an opportunity to have a scalable income stream. Your product will solve a problem for your customers and deliver them great results. It’s something you’re going to create once and sell many times. Make sure you read to the bottom of the page, as there’s something you really don’t want to miss on this topic from Mike Killen.
  • Course – Online courses is another industry that is undergoing huge growth. We’ve seen courses pop up on all sorts of topics in the agency space over the last few years, including web design, branding, typography, colour theory, accessibility and more. What are you passionate about that you could create a course on?
  • Workshop / Webinar – As a single live event, you have an opportunity to present on a topic, answer questions and charge for access or even just for the recordings. This is quite easy to set up and delivery can be via Zoom or any decent webinar platform. After the event, you have recordings to sell and you can repurpose the content in many ways.
  • Training library – Going back to really simple roots, you can setup a series of training videos for your clients. These could be included with larger projects such as new website builds, or even with your higher level Care Plans as a value added bonus. You can also make them available on a subscription basis as a standalone product.

These are just the tip of the iceberg when it comes to looking at ways to share your knowledge. If you’re in this for the long-haul, then a YouTube channel or a podcast will also present many opportunities to you.

All you need to remember is that each piece of content or product is created once, but you’re utilising the power of scale to sell it many times. There will be products that you can create today, that you’ll still be selling in 2-3 years or more.

Create a new digital product right now

For anyone who wants to create a brand new digital product right now, Mike Killen has just released a brand new product that is (in my humble opinion) an absolute no brainer of a purchase.

Mike has provided what he calls his 7x7x5 Product Framework, to help you to create 35 products for your business. Sounds crazy doesn’t it? 35 products… how would you even put those all together?

The beauty of this is that it is simple and Mike will take you through the process step-by-step. If you follow the process, you will come up with a list of product ideas AND get started on your first one today. I went through Mike’s workshop at the weekend, and I’ve already got 20 brand new product ideas that are viable and ready for me to implement.

My absolute favourite thing about Mike’s Product Creation Workshop is that he made it using the exact methods that he teaches. It’s like productception!

Seriously, this is a $47 product. It’s the cost of having two or three pizzas delivered for a family dinner.

Would you rather have pizza for dinner and increase the size of your waistline? Or would you like to set up a brand new product for your business that will bring you scalable income? Your choice…

Check out Mike’s video for his Product Creation Workshop

Check out the Product Creation Workshop sales page

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