Freelancer web developer - my biggest customer is least profitable one

First, a little backstory. I’ve been working as a freelancer web developer for 7 years, specializing on layout conversion. In the end of 2008 I saw that I was at a point where the only way to grow would be to scale (I didn’t considered rising my prices at the time). So I decided to hire another developer to help me. He started well but after 6 months his performance and quality of work wasn’t what I expected and from the financial standpoint it wasn’t justified to have him, because his cost was almost what he work was bringing in. So I fired him.

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First, a little backstory. I’ve been working as a freelancer web developer for 7 years, specializing on layout conversion. In the end of 2008 I saw that I was at a point where the only way to grow would be to scale (I didn’t considered rising my prices at the time). So I decided to hire another developer to help me. He started well but after 6 months his performance and quality of work wasn’t what I expected and from the financial standpoint it wasn’t justified to have him, because his cost was almost what he work was bringing in. So I fired him.

Then I kept doing all the work by myself but it is more work than one is supposed to handle. I was constantly working 10 hours a day, even on the weekends. So I tried hiring someone again this year, around two months ago. I like his quality of work but I’m a little worried about this commitment, he says he’s fully committed but his actions make me doubt it. (For context: he work remotely) For this current task I showed him all the steps that he would have to make and let him tell me how much time he needed. His estimates was similar to what I was expecting so we set up the deadlines based on that. For the client I set the deadlines with extra 2 days. On the first step he did it after his deadline but before the client deadline. Then he had a problem one day and couldn’t work, missing the next deadline. He said he would make up for that time this weekend, having the next step done for today. The next step isn’t done and looking at the project time logs it doesn’t seems that he made up for all the missed time. Tomorrow is the next deadline with the client, I can get it extended for a few more days but it “burns good will” with the client, so I want it to be the last resort.

All that people management problems let me nervous, I can’t relax because my mind keeps worrying about it. And I keep questioning myself if I am manager material. I try to not be a douchbag boss but maybe I’m being too soft. This also makes me question if I can scale my business, because this is my second attempt on it and it is not doing so well.

Another situation that I’m facing is about my biggest and oldest client. This year I also started accurately tracking the time spent on each project and it confirmed my suspicion that my biggest client is also my less lucrative one. Most of this client work (template for ecommerces) has half the profit of my other clients work (template for business sites). I also do some templates for business sites for him but it’s rare. This client is responsible for 40% of my revenue (50% those last months because of COVID). He is still profitable, but it’s half below what I have as target. I mentioned for him that I may have to increase rates but he didn’t like the idea, saying that it isn’t worth more.

So I know that if I increase the price I’ll loose the client. If I do it and he stop working with us then I will have a reduction of workload and won’t have enough work to justify an employee. I could also keep the employee and use the time to look for new clients.

And when I look at those two problems, the people management and this client, and analyze my options I also see that I can give up on scaling in size and become a solopreneur and raise my rates or I could give up being an entepreneur and find a job with an American company (I would earn the same as I do right now but with less stress).

So, do you have any tips for my situation? Any angle that I may be missing? Any general advice.

Other points

Do you have standardized ways of doing things for your employees or any sort of onboarding or training process? I'm taking a wild guess off of your experiences with two employees, but I'm guessing you just kind of toss em in there and see how they do, which can be problematic for them meeting your expectations and doing the work efficiently. I can't speak much about your profitability but have a feeling some others can weigh in about that.
A couple of thoughts come to mind.

Scaling is hard work. As you grow you’ll hit new ceilings where your current structure won’t work. For example, in the last 4 years we’ve scaled from 2M in sales now to 4M and the structures that got us to 4 won’t get us to 10. A good book to read would be Traction. You can also get some free resources that come from that book. Look up ‘EOS business system’ or something like that. It has some good stuff for you as you start to add employees. Here’s an example of the 8 key questions you need to answer:

Scaling may or may not be right for you. If you scale, you will become a business leader, not a web developer. You’ll also be trading a lifestyle business (something you control as far as hours) to something that will take more time. If that’s what you want, go for it. If not, then don’t.

If you don’t want to scale, raise your prices, lose the big client who isn’t as profitable and stay with a niche market and make more margin for less time.

If you want to scale, plan at least one day a week to work on your business processes (both Traction and The E-Myth major on this). When you hire someone it will make it easier to train them. Think about franchises and how they’re able to recreate the same experience in multiple locations, it’s all about written systems and processes.

In everything, give yourself some grace. It’s a journey. We’re all on different mile markers on the road. None of us have arrived. Keep reading, asking questions, and working hard.

Edit to add another book: The Motive: Why So Many Leaders Abdicate Their Most Important Responsibilities Book by Patrick Lencioni

It’s a fable. Easy to read. Will challenge you and help you think through if you want to lead and why. Much more philosophical than tactical.

Do you provide an incentive for you employee to deliver on time? Even if you don't, you might want to consider delaying their next paycheck a few days (with no explanation) to remind them why they're working.

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July 6, 2020, 2:01:16 AM

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