One big consulting client: The risks and the rewards

Chip Camden likes to keep no more than three regular heavy-hitters in his client base. See if it might be time for you to diversify your client base.

 When first starting out as a consultant, having business already lined up helps make the financial transition less jarring. Some consultants begin part-time while still employed; others may land one big client who will insure them of a steady revenue stream. I was fortunate to belong to the latter group.

My first client gave me enough work to keep me busy full-time. Nineteen years later, they're still my biggest client in terms of billable hours; but about six years into our engagement, I had to cut them down to half-time. Why? Because I needed time to develop other business.

Was I crazy? Actually, it was my wife's idea. She told me that I should avoid becoming a "one-hit wonder," and that I'd never be able to branch out as long as one client consumed all my time. I already had a few other clients, but I could only give them an hour here and there.

You may ask, "What's wrong with being a one-hit wonder? As long as one client is keeping you afloat, why rock the boat?" I can think of several good reasons.

Cannot build your business. As was my case, you can't focus on expanding your relationship with multiple clients if all your time is allocated to one. That limits your opportunities more than you might think, because you aren't just missing out on the business that's currently being offered, but also on anything that might develop out of that new client relationship. Too dependent. Independent consultants are much easier to fire than employees. Even though we usually land an annual contract, once that runs out, the client can cut us loose without any of the messiness involved in firing employees — that is, no severance pay, no paying unemployment benefits, no risk of being sued for discrimination or harassment or any of the other three million reasons why an ex-employee sues an ex-employer. Since consultants assume that additional risk, we need to compensate for it in various ways. Certainly we should charge more, but we should also mitigate the risk by diversifying our client base. Taken for granted. When you work full-time for one client, they may begin to think of you as an employee. They may expect you to be available at all times, ignoring your other clients. They can also leverage your dependence on their volume of work to squeeze you into a lower rate than you might get elsewhere. May be viewed as employee status. Especially in the technology industry, having just one big client raises a red flag for taxing authorities that you might be a statutory employee. That can result in costly penalties for your client, and can also force you into either accepting employee status or losing the relationship with your client. Reduced chances to broaden skills. Working for one client limits the technologies in which you can build deep practical experience. On the other hand, each additional client brings new challenges that expand your abilities. The art of taking on new engagements also requires business skills that you can only grow from that experience. Don't let yourself become narrowed into working only with one set of people on one set of problems in one set of technologies.

However, having lots of recurring business from a few clients does have its advantages.

Steady income stream. If you don't let it make you lazy, having a reliable pipeline-filler can actually help you build your business. Since you aren't desperate for work, you can keep an eye open for the projects that you'd like to work on, and use your spare time to develop skills in those areas. You don't have to accept every bit of work you can find, so your career doesn't get defined by chance. Focus on long-term solutions. An extended project or a series of projects in one technology can help you to become an expert in that niche. Don't waste that opportunity by skimming over the surface looking only for immediate solutions. Dig deep, with an eye towards how you could build this knowledge into a broader business than just for the one client. That also benefits your current client, because you will undoubtedly learn better ways of approaching their problem. Strong relationships. One of the great rewards of this industry is getting to know a variety of people, but many of those relationships can remain shallow unless you get to work with the same individuals over an extended period. Strong personal bonds also strengthen your business. People come to know what they can expect from you, and what you expect from them.

As with most areas of life, the answer is to maintain a balance. Becoming overly dependent on one or two clients can spell sudden disaster, but spreading yourself too thin can waste too much of your time switching context and beating the bushes for new business. I like to keep no more than three regular heavy-hitters in my client base; then I fill in the rest of my time with various smaller projects and self-education. Your mileage may vary.

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Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

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