80-20 Freelancing
You may have heard about the Pareto Principle, or the 80-20 rule, before. It holds that 20% of causes result in 80% of outputs, 20% of the work causes 80% of the results, 20% of the clients yield 80% of the profit, and so on. The percentages aren’t exact, of course, but the basic premise (that a small percentage of what we do yields most of the results) is an incredibly useful analytical tool for your business.
If you want to learn how to apply the 80-20 rule to client liaison, your choice of clients, your prices and the work you do, this article will explain how to do that. 80-20 freelancing could allow you to do less work while making the same amount of money. If you’re lucky (and savvy), you could end up increasing the profitability of your business by doing less and focusing only on what’s important.
Applying 80-20 to clients
Can you find the Pareto Principle in your client base? Let’s say you have three recurring clients each week (the 20%) who pay well. You need to do very little to maintain the relationship: send your work when it’s finished, and that’s it. These three recurring clients are probably worth 80% of your profits.
Consider the other 80% — the one-off clients who email you back and forth negotiating payment, laying out the terms of work, asking you to revise, and so on. Once you finish the job, they’re finished with you.
In this situation, the 80-20 thing to do would be to divert the energy you spend on searching for one-off clients into searching for another weekly, recurring client. Once you’ve done the initial negotiation work you’ll have cut down to 20% of your client base while keeping your profits at 100% of their previous rate.
The way you apply 80-20 to clients will, of course, be different, but the spirit remains the same. Sit down and analyze how you could benefit from applying the 80-20 rule to the clients you take on. What if you stopped searching for one-off, mediocre jobs and focused all your efforts on finding that one, high-paying client?
Applying 80-20 to liaison
The idea here is that 20% of correspondence causes 80% of the results. If you begin to notice a regular pattern to negotiations, short-circuit the process by providing a FAQ to all prospective clients. I.e. How much do you charge for different types of work? How do I pay you? How can I contact you? and so on.
For me, initial client liaison usually looks like this (abridged):
1st email from client: I’m thinking of hiring you for such and such. How much do you charge?
Response: I’d charge $100 for that.
2nd email from client: Would you do it for $80?
Response: Not really, no.
3rd email from client: Mmm… OK. How do I pay you?
Response: Here’s my PayPal address.
4th email from client: Alright, I’ve paid you. Let’s start.
OR, you can skip that part. When a client sends an expression of interest and the job they’ve described is something you’re interested in doing, you can attach a FAQ to your response rather than emailing back and forth a hundred times. A good FAQ could significantly reduce the time you spend on liaison.
Another strategy you can use to cut down liaison time is to post your rates wherever you advertise your availability. This will block off expressions of interest from anyone you wouldn’t seriously consider working for. If you’re like me, 50% of your liaison with prospects will end in “That’s more than I’m willing to pay.” If you’re upfront about your rates you’ll filter out mutually disappointing exchanges.
Applying 80-20 to the work day
The principle as it applies to the work day looks something like this: 20% of the work earns 80% of the money. As a freelance blogger, my 80-20 breakdown (pre-Pareto) looks like this. What’s yours?
80 = answering email, reading feeds, thinking up post ideas, writing up to-do lists, checking up on my freelance posts, tracking finances and sending invoices.
20 = writing and finishing articles.
If you’re trying to Pareto your work day, the question becomes: what part of the 80 can I eliminate without losing profits, or at least, without losing more profits than I’d gain by re-directing my time into a task in the ’20′ category?
Applying 80-20 to rates
If you doubled your rates, but your prospects dropped by 40%, you’d still be making more money than you were before. Less clients to manage also means more time.
The take-home point
The essence of the 80-20 rule is this: focus on what’s important and eliminate or minimize what isn’t. It’s a simple guiding principle with the potential to super-charge your freelancing business.
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Awesome tip!
Thanks! Keep Rocking!
Aloke Pillai
Great article!
A sort-of corollary: the last 20% of a project takes 80% of the time.
I’m with Andy on this one, at least from my experience. When I was in school and working on essays, editing the already-written essay often took just as long as the initial writing. And I’m not slouch when it comes to writing — these were papers for grad school, when I’d already gotten the whole “grammatically correct, coherent paragraphs” thing down. Editing for simple things like fact checking, flow, and readability could easily take as long as it took to write the essay in the first place!
As a further corollary: 20% of the facts take 80% of the fact-checking time.
Strangely enough, I saw a reference to this in a job posting yesterday. Go figure.
Anywho, great read. Very insightful info.
Great advice! Apply the 80-20 rule to qualifying your prospects in this same way and watch your profitability skyrocket.
Identify the traits that are common in the 20% of your clients that make up most of your profits. Then develop a script of questions to ask your prospects that quickly determine if the prospect has most of those same traits. If they don’t have the right answers, have options to direct them toward that are as “self-serve” as possible…. or have a colleague you can refer them to.
The concept is this – don’t let yourself be tempted to dance with prospects that can’t fit into your 20%.
So should 20% of your projects be taking 80% of your time?
Hey great stuff. Streamlining project management between myself and clients will definitely allow for more of that “20%” time… now to find more of those clients…
I agree with the idea to create a FAQ. I teach an e-course, and I kept getting the same questions: What if I get sick and need more time to complete the assignments? How does your course compare to X’s course? Do I need to be in front of my computer at a certain time? I created a FAQ in PDF format that answers these and other questions and posted it on my site. I get as many students as ever, but I get virtually no questions about how I run the course anymore.
Great post,
However I believe it depends on the kind of project. For example if its a web design project I prefer to meet in-person with the client… reason being:
Most of the time a client will say something like: “…quote me on a simple 5-8 paged site…” and that doesn’t help a bit… plus what they want to achieve from their site might require a totally different website (size + features) that they request a quote for.
I believe designs should always be custom-made not fitted. One size sometimes doesn’t fit all!
If you don’t use the 80/20 rule in your freelancing activities, you will get in the biggest mess ever. You are a freelancer. You are alone. You have to be efficient and to outsource as many activities as you can.
I totally agree with the article – applying the Pareto principle could be one of the most important things you can do for your business.
Good luck!
William
Thanks for the comments everyone — it was cool to bring this idea to you.
@ Tarique Sani: I think that’s a description of the way things are — 20% of your projects are probably taking 80% of your time. The Pareto idea is that you eliminate those and and focus on the 20% who are most profitable
.
@ Linda Formichelli: Very cool to hear from someone who has used the FAQ idea to great effect. I might have to write on FAQ-creation in more detail, actually…
It seems like the last 20% of the project *does* take 80% of the time. In fact, sometimes that last little bit never gets completed at all!
very nice article and this is the first time I heard of this principle which is a good practice to my upcoming work.
Simple analytics and highly effective.
“Focus on what’s important and eliminate or minimize what isn’t”
This is important, however, when starting out as a freelancer, you don’t have much choice of eliminating – mostly, any project you can get your hands on, you should take (again, when starting out).
However, as you’re freelance career advances, I believe the 80-20 can come into more play.
Thanks!
Bryan A. McCarty
Thank you.
Very useful article!!
Again I hate numbers, but this doesn’t seem too bad………. LOL.
ZM
Hehehehe…. I just wish I had read this yesterday before replying to a prospective client. Skellie, you are a total life savor mate (a bit late in this case, but for future reference).
I had a prospective client e-mail me asking for the cost of designing a simple website. What defines a simple website guys? I had no clue on what to charge him since simple is relative especially in the world of web design. So I ended up writing a lengthy e-mail trying to explain to him that it is not possible to give him a quotation until I know what he really wanted.
I now realise that this was not the best approach. I should have just given him an estimate of the cost for a ‘simple’ website then wait for his response.
I am not regretting my approach, but glad that we have an invaluable resource like this. Every mistake made is a lesson learnt.
Cheers Guys.
There is a saying here: “The better is the enemy of the good.” For some projects its ok to finish the 80% (in 20% of the time). To make things better and better would take 80% of the time.
yeah, really good stuff to chew on. I’m definitely getting closer to that equation.
… 80% of time prospecting clients, 20% actually doing something. 80% thinking, 20% executing ( reduces cycles and unnecessary revisions ).
Here’s an 80/20 project: a group of orphans needs to buy food sources that will keep producing food all year long (chickens, plants, fish, etc.). But what funds come in at such a slow rate, spread out over time, that they’re forced to eat them in them in the form of rice (only rice) as the funds trickle in. If they could get funded all at once, it would change their ability to feed themselves.
How much do they need? $1000. Yep, a thousand dollars for the whole project. So, if 20 people sat down and figured out the cost of one night out: dinner/movie/coffee/dessert, and gave that amount this week, the project would be funded immediately, and these kids would be able to learn with full bellies, and keep on producing their own food. We’ll never get 100 people to give $10 each. But if we can get 20% of those people (20 people) to give $50 each, they’re funded.
Here’s the project. I know it well, and have given to it before. Care to join me? http://www.givemeaning.org/project/newfutures
or http://www.givemeaning.org/project/newfutures
Oh, and pssst. Pass it on.
Great article. Thanks! I like the FAQ idea.
Some years ago now, I realized that big ad agencies were my 20%, so I dropped the other 80% of my clients that were causing me stress and headaches.
Now I get to enjoy a lot more free time to pursue other hobbies, while making even more than I used to make working full time…go figure
Elliott