As an aspiring open business, I’m reporting on my metrics for the first quarter.
A few weeks ago I shared an overview of what I expect the economics of my business to look like. I was aiming at ~13 clients at any given time, expecting to spend 5 hours of work to acquire a customer, and work with them for about 12 hours across 6 months each. This would amount to 60 work hours per month, 18 invested in acquisition, 42 in billed work. The data I had in early June pointed out that my client engagements tend to be more intense, reaching 3.2 hours per client per month. Let’s see what I went through in June, and what can I learn from the updated numbers.
Billable hours vs marketing time
Since April, I met with 60 potential leads to acquire these 14 clients. Not every lead was a potential client to begin with, but I consider all these meetings as ‘marketing time’. This gives a ratio of 4.3 leads per client, better than the ratio of 5 I saw based on April and May alone. This means that my marketing investment in June was much better than prior, and made quite a difference on the overall metric of the quarter.
Let’s look at the actual time spent. I marked down 25 hours in July working with my clients. These are my billable hours, and without exposing my hourly fee, this is basically my monthly revenue. In addition to this time, I also spent 16.5 hours in what I call ‘marketing meetings’, aimed at acquiring new clients. This immediately shows 60% efficiency (paid time divided by invested time), lower than the 70% of my original model. It contradicts the improvement of leads-to-clients ratio I saw, so I decide to take this metric as a better representation of reality. Time spent is more specific than number of leads, and I need to start tuning it in the right direction.
In June I met with 12 out of my total 14 clients. The average client spent just a bit over 2 hours with me. This is in line with my original model, and makes May’s 3.2 hours per average client look like an outlier.
Does this mean I should expect 28 billable hours in July? Or maybe some clients are beginning to fade out, while some new ones are engaging more intensely than an hour every other week? I now have enough data to see such patterns!
An average client engagement across time
I am now actively involved with 14 clients. With some the journey is just beginning, while others already begin to slow down their meeting frequency. Feels like I have enough data to see if patterns emerge.
Below you can see how fast or slow client accumulate billable time with me, from the moment we start the first session. When a line climbs up, it means we’ve met during that week. When a line stays flat, it means we kept our distance.
The shorter lines are the newer clients, who have been meeting with me for 6 weeks or less. The longer lines are the older clients, meeting with me for 9–11 weeks.
You could call this a basic cohort analysis, where clients are measured against the same metric of engagement.
I can see three groups of clients emerge in this graph — the fast, normal and slow ones.
- The fast clients are the longer blue and red lines (older clients), and the shorter orange and pink lines (newer clients). These folks would meet with me almost every week, and rarely take breaks. But once they do, those are long breaks. I’m actually assuming that I will be parting ways with the longer blue and red clients — our best time is behind us for now.
- The normal clients have a clear representative — the yellow line that is 9 weeks long, adding 1 hour to our balance every other week. This is a steady and reliable cadence, and knowing the client, I can bet we have a long way ahead of us still.
- The slow clients are the longer green and red lines at the bottom, and the teal and light-blue shorter lines. All have yet spent 4 hours total with me, and are taking their time adding to the balance sheet. Perhaps they have a stable but slower pace, and perhaps we’re not really hitting it off together.
I was genuinely excited to render this graph, expecting the visualization to reveal a pattern or two. The spreadsheet I use to keep track of billable time has all this data, but at the same time it hides it quite well!
- Now that the thrill of novelty is gone, I can honestly say that I intend to stick to this choice of career. The business is growing in number of clients and in revenue, and I’m enjoying working with such a diverse group of Engineering Leaders.
- I feel like I can manage more clients in parallel, seeing how significant the variance in engagement gets. Not planning on slowing down on acquisition any time soon!
- I need to validate my assumptions about the ‘fast’ clients. For example, it could be that ‘fast’ clients start with unreasonable expectations of my impact, only to be disillusioned. In this case, maybe I need to align on expectations early on, and ‘tame’ them towards the normal client behavior for both our sakes. Or perhaps I need to come up with a short-but-intense program, working with the need of such clients for external knowledge and experience
- The same goes for the ‘slow’ clients. Perhaps they have a different pace, but don’t lack commitment? I’d be better off identifying it early on, and figuring out the right value proposition for such clients.
- All of the above leads me to try and structure my offering a bit more. During the next quarter I want to figure out some ‘bulks of value’ I can offer to future clients, and help them orient themselves towards their needs. In a way, I want to be less flexible but more guiding in how I engage with my clients.
Thanks for reading so far! Please follow me on Twitter for tinier but timelier updates on my business endeavors.