The Strategic Importance of Client Turnover: Rethinking Retention

#Freelance

For any business, client retention is crucially important.

It's just simple unit economics. Every customer has acquisition costs. No matter if it is an explicit marketing cost or simply your time. Retention is a way to prolong the customer's lifetime and increase its overall lifetime value.

Is It Applicable For Freelance?

Is it true for a freelance business? Well, yes and no. At least it's not that simple for all kinds of freelance activities.

If the freelancing kind of activity is typically a short-term commitment, let's say weeks, then a high retention rate is king. It makes a lot of sense for activities like design, illustration, consulting, etc.

For longer-term projects that take months or maybe years, like software development, retaining customers do not only bring you to work but also FOMO and is a bit of an extra burden.

Long-term Freelance is Different

For long-term projects client turnover can be a point of growth.

First of all, scaling freelance businesses by increasing rates with the same clients is hard. It's the same as with employment: it is harder to get a comparable raise than a new job with a higher salary. Similarly, the lowest friction is in the direction of going ahead with new clients and higher rates.

Secondly, solo-preneurship as a freelancer is not that scalable. In a sense that you are limited in resources. That's why retaining clients with new fancy projects while you are at capacity with your current work is probably not a perfect match. You would never drop your current work and they would never wait until you get free.

Balance Workload With Churn Rate

It has always been so embarrassing for me because it comes into a conflict with an eternal fear: getting out of clients.

For the first months and maybe years you are trying hard to find clients. Then you struggle with a churn rate. Afterward, you are doing the opposite.

You have you say "NO" too often if you want to maintain quality and avoid getting overwhelmed.