The 80/20 Rule for Freelancers‍

Most of Your Money Comes from a Few Clients

As a freelancer, your clients are your greatest asset. Getting connected to good clients opens up more doors for your future and helps you earn a steady income.

Quality is way more important than quantity for most freelancers.

A handful of good clients with ongoing projects are likely to pay you more over the course of a year than a bunch of smaller, individual clients. You’ll also develop a good working relationship with these long-term clients that’s going to make it easier to work with them.

If you don’t already know, how can you determine who your best clients are, so that you can start to forge stronger relationships with them?

One good way to do this is to track your income on a per-client basis.

Tracking Income Per Client

The easiest way to find out how much you’re getting from different clients is to track all of your income with a budgeting tool. These tools can connect directly with your bank or payment service to track income without you having to manually log everything.

A good budgeting tool will break down your income per project, per client, or per type of service.

When you have it organized, it will be much easier to look at your whole income

Try one of these tools to get started:

• Wave
• FreshBooks
• QuickBooks
• Xero
• AND CO.

If you don’t want to use an income tracker, you can also use a spreadsheet (Excel or Google Sheets both work) to keep record of who pays you and how much they paid.

Both of these methods will give you a running tab on how much you’re getting from each client individually. After a full month, you should have a good idea of how much each is paying on a regular basis.

Income Is Generated from a Small Portion of Your Working Hours

Working hours are not all equal. Often only a few of your working hours are actually put towards your high-earning tasks because of the preparation that goes into your money-making activities. As a freelancer, there’s no way around some of this work.

For example, a writer needs to research a topic before writing a blog post. Even if it only takes 1-2 hours to write the post itself, there may have been 2+ hours of research that went into it.

Photographers and videographers spend a large portion of time setting up a shot and editing raw images/videos.

As you grow your business, you may be able to outsource some of the less lucrative tasks. Until then, try to remember how much total time goes into each project before you send time-based quotes, commit to new projects, or arrange your schedule.

Here are a few ways you can optimize this part of your workflow.

Calculating Your Hourly Earnings

Before you can make changes to your hourly fee structure, you need to know what you’re actually earning per hour vs. how much you’re charging per hour.

The easiest way to do this is going to be tracking your working hours for a set period of time, using that number to calculate your average annual working hours, and dividing your total yearly earnings by your average working hours.

Here’s how to do that.

Step 1: Use a time tracker

Before you can calculate anything, you need to know how long you’re working on average.

Download a simple time tracker or use the stopwatch on your phone.

Start tracking your time

Step 2: Calculate your average weekly working hours, then your annual working hours

Once you’ve tracked your working hours for a week, you can extrapolate that out to get a feel for your average working hours in a month and then a year.

Multiply your weekly work hours by 4 to get your average monthly work hours. Then multiply this number by 12 to get your average yearly working hours.

It’s not an exact number, but it should be close enough to get you started.

Step 3: Calculate your annual earnings

The fastest ways to get your annual income figures are:

• Checking your income tracking tool
• Looking at your latest tax paperwork
• Adding up a month’s income and multiplying by 12

The last method is the most imprecise if your income varies from month to month, but it’s still an option if you don’t have access to an income tracker or tax paperwork.

Step 4: Divide your earnings by your working hours

Take your income and divide it by your average working hours. Calculate the average for a month and for the full year.

This simple calculation is going to give you your average earnings per hour.

Example:

Income/Working Hours = Average earnings per hour

$20,000/1,920 = $10.42 average earnings per hour

If this doesn’t reflect the income you’d like to be earning, you need to either increase your rates or reduce the number of hours you work on each project.

Improving Hourly Earnings

Knowing your current hourly earnings can help you figure out a good strategy for improving your income.

Remember that these numbers aren’t locked in. Unless you’re charging an hourly rate (not recommended), you can increase your hourly earnings by focusing on increasing your productivity.

Improving productivity means working smarter, not harder. A few ways to reduce your unpaid hours include:

Outsourcing

Outsource everywhere you can. Focus on the areas of your work that take the longest without providing equal value.

Admin is a prime example. If you’re getting bogged down with talking to your clients, outreach to new clients, marketing, responding to emails, managing your website, etc. look to outsource anywhere you can.

Every hour you spend answering emails is one less hour you have to do your really income-generating work. Rather than neglecting your clients and leads, hire a virtual assistant (VA) to manage that side of your business.

VAs are affordable, especially if you hire someone part-time. Whatever you spend on a VA, you can make up by opening up more hours to focus on the work you’re getting paid for. You’ll be able to finish existing projects faster and maybe even slot in more clients in your freed up time.

VAs aren’t the only way to outsource, but they are the easiest and likely the most affordable.

You can outsource almost anything you’re doing to other freelancers. If you have a project with a lot of busywork, outsource as much of that as possible and spend your time on the more valuable work.

Time Tracking

Before you can figure out how to optimize your time, you have to understand how you’re using your time right now.

There’s many effective time management apps and time tracking apps out there, so find a time tracking app that works and install it on your laptop or work computer. Use it for a month, making sure to track what kind of activity you’re doing throughout your workday.

For example, differentiate between active work, breaks, admin work, etc. Whatever helps you understand your workflow.

At the end of a month, look back at your time usage. Ask yourself targeted questions about your work habits, such as:

Where is the majority of my working time going?

Am I working efficiently throughout the day?

When am I most productive, on average?

When am I most distracted, on average?

Answer honestly. Take a hard look at how you’re using your time, then you can rearrange your workday to accommodate better work habits.

If distraction is a problem, try working on a time-based schedule.

If you’re using too much time on unpaid work, such as admin work, look into outsourcing.

If you find you’re more productive at specific times of the day, try to arrange your schedule to put that productive time to good use.

Track your time so you can understand how you use it and plan for how to use it better.

Increase Your Rates

Although it sounds funny, you might be earning less than you want to because you’re charging too low for the service you’re providing.

Market rates aren’t always a good reflection of how much you should be earning. Focus on pricing based on results, not other people’s pricing.

If you calculate your average earnings per hour and it’s not reflective of how much work you’re doing for your clients, increase your rate.

Don’t allow yourself to get bogged down with projects that pay far too little for the amount of work they require.

This is a common problem when you’re starting out. It’s easy to race to the bottom, because clients aren’t always willing to pay a lot for newer freelancers, especially if you don’t have a large portfolio yet.

Every few months, you should reevaluate how much you’re charging your clients. The more work you do and the better results you’re getting for your clients, the more you’ll be able to justify a higher rate to future clients.

Don’t short sell yourself.

One or Two Services Will Be Your Big Earners

Often your services will be a tradeoff of quality (how much you earn) vs quantity (how many orders you get). Until you’ve grown a large client base and a good reputation in your industry, you’ll probably have to do work you don’t love in order to keep your earnings up.

Generalizing by offering a lot more basic services is usually a necessary evil when you first start you career as a freelancer.

How can you know what you want to specialize in if you don’t have experience in the industry, a good portfolio, or solid knowledge of your market?

Let’s see what this might look like practically.

Example: Graphic Designers

A new graphic designer without a strong portfolio may start out by working on any kind of graphic designer project. They may offer a wide range of services, including:

• Logo design
• Infographics
• Blog images
• Social media graphic
• Promotional fliers
• Visual ad content
• Business cards

As this designer gets more experience and works on a variety of projects, they can begin to narrow down a specialty. In this case, let’s say the designer’s specialty is creating awesome infographics.

The problem is, even if you have a specialty there’s no guarantee that you’ll get enough work to sustain yourself if you only take on those projects. Your specialty may be what you do best and what you prefer to do, but it’s not always enough to keep your business afloat.

With that in mind, the graphic designer in this example may also choose to continue offering logo design and business card designs as supplementary services.

Real life example: Amazon.com is best-known for their e-commerce platform, but their largest source of operating profits is actually Amazon Web Services (AWS).

Choosing Your Supplementary Services

An ideal supplementary service is anything you can do that’s highly in demand and offers an acceptable rate of pay. Every industry has some form of service that fits this description.

For content writers, it could be writing product roundups.

For lawyers, it could be offering basic contract services to online businesses.

For tax professionals, it might be helping prepare individual tax returns.

Find a service you can consistently provide in your industry to fill the gaps between your larger, more specialized projects.

These supplementary services also offer great opportunities to outsource later on when you grow your client base.