Let’s talk money
Posted on 08 January 2009
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.
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)!
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.
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.
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