Elliot Jay Stocks is a designer, speaker, and author. He is the Creative Director of Adobe Typekit, the founder of typography magazine 8 Faces, one half of Viewport Industries, and an electronic musician.

Let’s talk money

Posted on 07 January 2009 28 comments

Article illustration for Let’s talk money

Do you remember when I announced that I was going freelance? I made it clear that I have very little interest in the ‘business’ side of things, and I think that will always remain true. I’m doing this because it’s what I love doing, not because I get paid to do it.

Of course, it does help to get paid.

And in the current financial climate with which we’ve seen in a new year, even I have come to realise that I need to watch the pennies. At the moment – thankfully – I’ve yet to be hit by the credit crunch (touch wood!) but I’ve decided to be a bit more sensible about my income anyway, especially if I plan to progress to the contract-with-the-devil world of home ownership by the end of the year.

10 days

The first thing my freelancing friends said to me when I started out on my own was, “only expect to work half the time.” This little piece of advice has turned out to be true on some occasions; I spend so much of the time with paperwork, admin stuff, project shuffling, and other distractions, that in actual work hours, it’s rare that I’ll ever work a whole week unless I put in hours of overtime… which I don’t like to do! So with that it mind, let’s be as pessimistic as possible and say that you can only ever hope to work for half of the time. In an average month of 20 working days, that’s 10 days. (EDIT: If you’re confused about this point, I’ve since offered some clarity in this comment.)

It just so happens that 10 is a nice round number to use now that we’re about to dive into some maths. I’m not going to reveal my daily rate or suggest one you should use, but if you work in multiples of 10, it’s easy to work out what to charge.

  • If you charge £250 per day, 10 days of that would equate to £2500 a month,
  • £500 a day would equate to £5000 per month,
  • and so on and so fourth.
  • The nice thing about this, of course, is that if you’re not interested in being super-rich but can charge a decent daily rate, you could happily choose to work less (e.g: if you’re happy earning £2500 a month but charge £500 a day, you only have to do 5 days’ work)!

    Keeping track

    However, all of the above is fairly obvious. You didn’t need me to tell you that. Where it gets interesting is how you start planning for how much money you’d like to be earning, or how much money you will be earning with the jobs you’ve already got booked in.

    I started trying to work out my projected earnings (ooh, I must be a grown-up now!) over the next few months, based on the projects I’ve got booked in between now and April. At first I just created a text document and made some notes, but that was pretty hard to read at a glance. I wanted something a bit more visual. I love Things and use it daily, but it’s harder to imagine earnings on anything but a project-by-project basis.

    Enter the humble calendar

    Using a calendar seems so obvious I’m really not sure why I hadn’t thought of it before. I have two main calendars in iCal: my Personal one in blue and my Work one in green. But now I’ve introduced another calendar called Earnings. Its sole purpose it to remind me how much I’m earning each day. You might think this is silly at first, because if I have a project booked for four days, then I must be earning four times my daily rate, right? Well, kind of…

    But what if I have a two projects booked for the same day, with half a day allocated to each, but my rates are different? I’ll often charge returning clients or friends a lot less, so in that respect it’d be important to note that I wouldn’t make a standard day’s wage on that particular day.

    And then there’s the speaking thing. If I speak at an event and get paid, I’m technically only getting paid for the day that I’m speaking, plus some preparation time. Therefore, if the fee is generous, it’ll allow me more days for prep; if it’s stingy, it won’t. Also then there’s the ‘lost’ days that disappear because of travel to and from the event. Are they completely lost or can I make up some time working on the train or plane? Can I afford to simply treat them as holiday days?

    Consider this other situation: some projects are charged on a ‘project’ fee (i.e: a fixed fee regardless of how long it will take), and some (in fact most, when I have my way) are charged on a ‘per-day’ fee (i.e: the total fee is your daily rate times ‘X’ amount of days). Laying these different charging patterns out like this on your calendar instantly puts things in perspective. Are you only getting paid £1000 for a project that will take 3 weeks? Time to rethink that timeline!

    In fact, when using this method to tentatively book in projects several months ahead, I’ve found that it’s a great way to get an idea of how much to quote, or how close your own estimations will be with your client’s budget.

    Article illustration for Let's talk money

    View the full screengrab on Flickr (the data is fake, though, as this is just an example).

    The visual approach

    What I’m describing above is nothing new and I won’t pretend that I’m saying anything profound; however, I really cannot enthuse enough how this visual approach to my earnings has helped me see where I need to make changes. Straight away, I can see (literally!) what I’m planning to earn, I know whether I need to book in more work, and I can see where I can afford to give myself time off. Importantly, I can see where I’m losing potential earnings because of my previously (sometimes) poor project planning.

    And the best thing of all? With ‘Earnings’ as a separate calendar, I can just turn it off with a checkbox at any moment.

    To summarise

    Is this the start of a spiral that will eventually turn me into a shallow, money-obsessed businessman and lead to me wearing pin-striped suits at every opportunity? Please feel free to punch me in the face if things ever go that way.

    If anything, I think this post has proved to me that when it comes to big scary adult money stuff, I just want to make it all look pretty. :p

28 comments

  1. Matthew Chambers

    Matthew Chambers

    07 January 2009 @ 11:34PM #

    Having very recently started work as a freelance web designer, these nuggets of wisdom are hugely useful. Like yourself, I hate the paperwork that comes with working for yourself and just want to get on with the creative stuff and/or coding without the distraction but, alas life is not like that!

    I will try this system and see if I can use it to project cashflow and such.

    Thanks for sharing :)

  2. Matt Brett

    Matt Brett

    08 January 2009 @ 12:40AM #

    I have a hard time understanding how you only end up working half the time. Must be due to having multiple projects on the go. Do you always work that way? I have a strict “one project at a time” rule and I end up putting in a solid 6-7.5 hours per day, 5 days a week.

    I guess this is how rates get inflated. After all, “working” or not, you need to be making money. I hate the idea of my clients paying for my “non-work” time, though. Which is why I work the way I do.

    Not only that, though – my turn-around time is amazing since I don’t have any distractions at all. I account for 30 minutes to an hour each day for my morning routine, which is similar to yours. Then I know I have the rest of the day to work on my current project. When I need to spend time on my own blog or other projects, I schedule days just like I would with a client project.

    Anyway, a bit of track here. But this is basically a non-issue for me since I know I’m working every day. :P

  3. Scott McClelland

    Scott McClelland

    08 January 2009 @ 01:10AM #

    Thank you for this. I am a visual person. All the paper work makes me cringe. I have learned a lot from your postings thus far, and hope to continue in the future.

  4. Brendan Falkowski

    Brendan Falkowski

    08 January 2009 @ 01:37AM #

    Your visual approach is more profound than you give it credit. I really like the idea of glancing at booked vs. free days and quick rates math. Better than (overkill) Gantt charts + accounting for every project.

    I was intrigued that you didn’t mention using any time-tracking apps. Some days I’m more productive and others not, so daily rates feel unfair to clients at times. Is tracking time with granularity in hours passé?

  5. Chris W.

    Chris W.

    08 January 2009 @ 04:10AM #

    Yeah, it sucks to do the admin stuff, but I don’t trust anyone else to do it, and I struggle with giving up control over anything that affects my personal brand and reputation. I know, personally, I’ve tried hiring a salesperson/project manager, someone that could take calls, close deals, handle administrative tasks, speak with clients. I could never find someone that I felt comfortable with.

    In the end, it’s a matter of what your time is worth. I don’t know the conversion, but if you bill out at $70/hr. and are spending literally HALF your time dealing with administrative work, you’re wasting your time and you really need to find someone you trust.

  6. Grant

    Grant

    08 January 2009 @ 04:12AM #

    Great idea. I like the visual representation—over time—of what you’re billing. That’s hard to get off a spreadsheet or invoice program.

  7. Francis Booth

    Francis Booth

    08 January 2009 @ 05:31AM #

    A fantastic principle, and whilst I agree that planning ahead is essential, I do find it hard to plan to be creative on cue.

    At both ends of the scale, i.e. conceiving my most visually original graphics, and also the most optimally minimal PHP, I find that I really get into the zone most easily in the evenings, without the constant distraction of things like, errm, sunlight.

    Seriously though, when it comes to creativity, at some moments you can be on a run and bursting with ideas (whatever the time of day!) whereas at other times the pixels just won’t play dice.

    Not that all web design work is primarily creative of course, just that I wonder if there could be a modified approach that encompasses a bit more humanness, and I suppose by association flexibility, in the place of the creative.

  8. Nate Klaiber

    Nate Klaiber

    08 January 2009 @ 06:22AM #

    When I joined Clear Function we created an app to scratch this itch for our own company. While I had very little to do with the entire project, we launched Pulse to help us gauge and project income based on projects, and filter it by the percentage chance we had on winning some projects.

    So, not trying to link bait or anything – just thought I would share another tool and how we went about trying to capture the same information.

  9. Christoph

    Christoph

    08 January 2009 @ 01:16PM #

    First of all, this is nice and creative approach to expanding iCal!
    But I wonder if there isn’t a more flexible way of doing it. For big projects this may work, but if you have many small projects (each only taking a few hours) your calendar ist getting cluttered.
    And I miss a way to summarize your income at the end of the month, or to show it client based.

    Nevertheless, this is a good way to easily get in touch with your money stuff and to get a feeling of your working time compared to your income.

  10. Matt Carey

    Matt Carey

    08 January 2009 @ 03:23PM #

    +1 for Pulse from a cashflow point of view. It gives me a visual month-by-month view of where my earnings are, and where they are tailing off. I’m in a slightly different situation as I have 2 staff members to pay, but the principle is the same.

  11. Elliot Jay Stocks

    Elliot Jay Stocks

    08 January 2009 @ 03:56PM #

    @ Matthew Chambers, Scott McClelland, and Grant: Thanks for the comments, guys! I’m glad you found this post useful.

    @ Matt Brett: It sounds like you’ve got a great system going there, man – keep it up! I think I should clarify about the half time thing, though, as I wasn’t being clear: Firstly, it’s a pessimistic estimate that can come true, but most of the time doesn’t. Secondly, I don’t mean I only work half of the day; it’s more like half of the month: when I get down to a solid day of design, I stick to it, but it’s harder to quantify that when it comes to things like writing a book or speaking at events; hence the need for an ‘overview’ system like this. Design-wise, I try not to work on more than two projects at a time (max), but the boundaries blur so much more with writing and speaking!

    @ Brendan Falkowski: That’s an interesting point. I don’t mean to knock anyone who use them and finds them helpful, but personally I don’t use time-tracking apps. As I said in ‘Write off that first hour’…

    […] I think that time-tracking apps are – in general – a bad idea, because they undermine the value of time spent away from actual work. For instance, an app that tells me I spent most of the day in Safari when I should’ve been in Photoshop completely misses the fact that the successful design I came up with was only successful because of the extensive research I did on the web.

    @ Chris W: Again, I think I ought to clarify my point about only working for half the time. Admin stuff does sap up some of my work time, but only a tiny bit (the rest of the lost time is made up by various things besides admin). The point about estimating for only 50% productivity is that it’s much more sensible to be pessimistic. If you think that, because of the way you work, 75% is a more accurate guess at your productivity, then I’d say use that figure. My point is that it’s best to stay on the pessimistic side of your average! :)

    @ Francis Booth: You’re absolutely right: creativity can’t just happen in the timeframe you have scheduled for the work. The trouble is, for practicality purposes, we still need to plan things out for the sake of giving clients estimates and making sure we’re not overbooked (or underbooked) with work. The other thing is that while I – like you – often find that I’m at my most creative when I finally get ‘into the zone’ at the end of the day, this really isn’t practical when you’re living with a partner! It’s fine when you’re single and / or living on your own, but unfortunately it’s just not a fair option once you’re living with someone. Of course, that’s not to say I don’t occasionally work in the evenings – I will if it needs to be done, and did so frequently while writing the book – but it’s got to be the exception, not the rule. And in fact, even if you’re not living with someone, there’s something to be said for designating a number of hours to be away form the computer; I think that’s even more important as a freelancer, because the work / life balance can so easily be blurred.

    @ Nate Klaiber and Matt Carey: Ah, cool! I hadn’t heard of Pulse so I’ll check that out!

    @ Christoph: If you want to look at how much you’re earning each month, it should be pretty easy to glance over the calendar and work it out, unless you’ve got lots of little projects going on. But I’d still recommend this system even if you have multiple projects per day; in fact, it may make it even more important to keep a daily track of your earnings.

  12. Shaun Butler

    Shaun Butler

    08 January 2009 @ 05:00PM #

    Hey dude,
    Thanks for pointing this out.
    Organisation is not my forte but this really will help!

    - Shaun

  13. THEODIN

    THEODIN

    08 January 2009 @ 05:45PM #

    I like your style. I Just started working freelance and there is a lot to be said for organization. Ive been using Google docs to keep track of income and expenses. But this is the first I have heard about Things. I will defiantly be giving it a go though! Thanks

  14. John Pitchers

    John Pitchers

    08 January 2009 @ 07:19PM #

    I completely understand the half time principle.

    I’m also intrigued that you don’t recommend the use of time tracking apps. There’s a few online apps where you can set up your individual projects and just “punch in” and punch out". Even if you are on Safari surfing the web for inspiration at 2am, you can still be punched in and billing for your time.

    After 2 years of full-time freelancing, probably the number one most important thing I have learned is to diligently and consistent track time and charge for it.

    Even if you are charging a fixed fee per project, it will help you to keep on track and identify your most productive and lucrative clients.

    Great post as usual.

  15. Chris W.

    Chris W.

    08 January 2009 @ 07:40PM #

    @Elliot I think the time of year can also be a factor with productivity. The holidays are always challenging due to the fact that people are out and schedules are harder to line up.

    BTW, I hope the next iteration of your blog contains some juicy threaded comments. :)

  16. gummisig

    gummisig

    09 January 2009 @ 03:39AM #

    spank you elliot, this was a good post.

    I also started freelancing a few weeks ago. I´ve mostly been rummaging through online job sites, and have been successfull in ringing in a few gigs.

    One thing I decided to have before all of this started was… an accountant!

  17. Lazer

    Lazer

    09 January 2009 @ 08:19AM #

    Lol I’m just like you when it comes to freelancing!

    I wake up, sit on the pc and think now I’m going to work for 8 hours non stop so that I can complete this project quickly and enjoy the rest of the week..
    Then I start with the emails, blogs, rss stuff like that and see 2 hours have already passed!
    Then its time for supper, while having that I watch some few years old episodes of Top Gear I have or so to keep myself entertained..

    Get back to work and then its time for some inspiration stuff and after going through some galleries and articles I see 1-2 more hours gone :P

    Finally start working and after an hour or 2 its time for lunch and 1 more hour gone..

    Then finally work for 2 hours more and that’s it I’m playing online COD4 haha!

    So I start my day by thinking I’ll work for 8 hours but end up “working” for 10+ hours but in the end the real billing hours are only 4-5…
    Its good that I mostly do projects based on fixed fee instead of hourly (right?)

    Ooo I just remembered I have to complete a project in few hours LOL!
    I better go and work haha!

    I guess this is called freelance freedom :D

  18. gummisig

    gummisig

    09 January 2009 @ 01:37PM #

    @Lazer, man I knew I had the tendency to do the stuff you are describing. Though I feel that you migt be exaggerating (had to look that work up:)

    What I´m doing now is trying to maintaine a routine in order to stay more focused. This envolves getting up at 6 or earlier and doing yoga and meditaion. This is the single most helpfull thing of all. And it doesnt just help with work, but the rest of life :)

    I´m still strugglig a bit with blogs, twitter, emai, facebook and all the other online distractions. They are a necisary part of this work. I have to market myself somehow right.

    I´m sure I´ll get a hang of this, maybe I´ll post something on my own site. Once I have time to finish that :)

  19. Lazer

    Lazer

    09 January 2009 @ 07:34PM #

    @gummisig:

    Hey the meditation and yoga sounds good, I’ve also started working out before I get to work very early in the morning.

    I really have to complete a project tonight (in about 5 hours) thankfully after making that comment I went to work and did good progress…

    Just 2 hours more worth of work and I’ll be done but man its soo hard to concentrate when you are in the final stages haha!

    I’ve also started using time tracking and tasks software so that I can better manage my time.

    Lets get back to work :P

  20. Edmund Heaphy

    Edmund Heaphy

    10 January 2009 @ 06:01AM #

    As said by Deepak Chopra Elliot is that ‘money is the consequence of passion’.

    He believes that one shouldn’t go out to make money. And I think you’re a perfect example of this!

    Edmund.

  21. gummisig

    gummisig

    10 January 2009 @ 01:30PM #

    @lazer, congrads man. Hope it turns out good.

    Which project management software are you using? I´ve tried using Things like elliot but I just think it´s a fancy to do list. I prefer Anxiety to do that.

    I´ve also tried out action method online from the behance team. I think it´s good, plus it´s cheap. But there are some usability issues with it that are pretty bad. Basecamp is better to me but way out of my price range at the moment.

    @Edmund, it´s like the man said:) I´ve heard this so many times after this depression hit. “Money is the follow up to spiritual growth, never the other way around”.

  22. iamkeir

    iamkeir

    10 January 2009 @ 09:20PM #

    First time I’ve read your blog, I like this post!

    Love the idea of putting per-day earnings into iCal – I will definitely be trialing that. I use Slimtimer for time-tracking which gives me a feel for hours I’m working but it’d be good to match that with earnings too.

    It can be hard to get an at-a-glance feel for earnings over a month as a freelancer when your projects are back to back, leaving little time for
    review.

    Web app anyone?

  23. Christen Dybenko

    Christen Dybenko

    13 January 2009 @ 04:05AM #

    This is extremely helpful to me. I might just have to try iCal for some forcasting. I found that determining the hourly rate was difficult when I tried to put it in perspective of how much time I’d actually be working. The Hourly Rate calculator at Freelanceswitch.com was really helpful for that.

    I look forward to reading more about getting going with Freelancing – I’m in the same boat!

  24. Rory

    Rory

    13 January 2009 @ 06:23PM #

    Hi Elliot, can one of your future posts detail some info on contracts. I have been freelancing for about a year now and could really get some help with this.

    I think it would make my projects run smoother, haven’t a clue where to start though. Thanks.

  25. Jonathan

    Jonathan

    14 January 2009 @ 11:15PM #

    Hi Elliot (& any others!), I’m not sure that this is entirely on-topic, but Let’s talks money! I’m a 1st year uni of ulster graphic design student and want to put my skills to use to earn me a bit of income through my degree. I don’t expect you to reveal your own rates, as you’ve said above (& obviously you have somewhat more experience than me), but what sort of range of rates could a student with some skill typically expect to ask for, or where would one find out this sort of information? £10/hr? £20/hr? Surely more than the £5.52 nmw I would get working ing McDonald’s parttime!

  26. John Pitchers

    John Pitchers

    16 January 2009 @ 11:03AM #

    Hi Jonathon,

    We need to be very careful about discussing rates as it can be seen as collusion by some authorities – ie. it’s illegal.

    Use the rates calculator on Freelance Switch to work out the best rate for you.

    Charge what a job is worth and always resist the temptation to drop your rates just to win a job. It’s something we all did in our early days but it’s a curse. However, that’s a different topic.

  27. Jonathan

    Jonathan

    16 January 2009 @ 04:04PM #

    Hi John,

    I wasn’t really trying to find out anyone else’s specific rates. Elliot, yourself, and others will have a lot more experience than myself and therefore be able to charge somewhat more. I was just trying to get a ballpark average figure for what a student with a bit of skill and an eye, might be able to earn/ask of the average client… I’d already seen the rates calculator on Freelance Switch, and although it has its uses, it doesn’t really help me to ascertain how much I, as a student, might be able to charge clients, on average.

    My ‘gut’ feel is that it might be sensible to base my rates on around £10/15hr. My ‘feel’ is that that the average designer (graduated and/or with more experience than myself) would be able to use £25-£50/hr as a basis. But I could be completely wrong… Feel free to point me to the right source if this is not the appropriate forum!

  28. Chris W.

    Chris W.

    16 January 2009 @ 05:40PM #

    @Jonathan, without getting specific, I think you’re on the right track. As you build a quality portfolio and clients that keep coming back, you can slowly build up to the point of full capacity, then once you’re at full capacity, start charging more per hour. It’s simply a matter of Supply/Demand.

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