Doing a financial health check is an essential part of running a successful writing business. In fact, it’s the only way to be sure that you are meeting your goals and targets. But how do you do this successfully? Here are some suggestions.
Set Your Goals
Before you can assess your writing business, you need to have something to measure it against, so set some goals for the business. These might be reaching a certain income target each month, or for the year as a whole, or working a certain number of hours each week, or attracting new clients paying a certain amount. If your goal is income, remember to consider taxation, sick days and holidays in your calculation. (In other words, don’t assume that you will work 365 days of the year when it might be as little as 200). Make your goals specific so they will be easy to measure.
Track Your Time
Knowing how much time you spend on writing is an essential part of assessing the health of your business because it’s the only way you will know:
- if you are spending too many hours working
- what rate you are getting for your work
- which jobs are really worth it.
There are so many time tracking applications out there that it’s difficult to pick on one that does the job. Lately I’ve been using online timer Toggl, though RescueTime is also a good way to see what’s happening on your computer. Don’t just track the time you spend on client work, but also make a note of the time spent on marketing your services, researching new writing gigs, bidding and working on your own projects. The more you track, the clearer the picture will be.
Most time trackers will allow you to print out handy reports of where your time has gone, but that’s not enough for your financial health check. You also need to track clients and income. You should already be doing this to keep on top of your workload, but just in case you’re not, now’s the time to start. I use a simple spreadsheet with the date, job/invoice number, client name, job name and income, with a notes column where I write info such as when I’ve invoiced, whether I’ve been part-paid, if a deposit has been received and so on. Remember to log any additional income from advertising or product sales too.
Crunch The Numbers
Once you have logged the time spent and the jobs done, then it’s time to crunch the numbers. Start by adding up how much you will make this month, and see how it compares with previous months. I also keep a running total of my annual income, where I see how much I am earning per month and per week, compared with the past four years. I like to see those numbers rise – not spectacularly, but steadily. That tells you where you are now and may also help with assessing whether you are on track with your goals. You can also see how much each client is bringing in and assess the hassle factor to see if it’s time to show your appreciation – or move on. Also, divide the pay you get for a client’s job by the number of hours you spent on the job to see if the hourly rate meets your target.
But it’s the last step that will give the final piece of the puzzle. Having a healthy writing business is not just about what’s just happened or is happening now, but what will happen in the future. I track projected income in two ways. First, I reserve a section of my income spreadsheet for jobs which are booked in. Since I quote for the jobs, I have an idea how much I will earn, so I always know what’s coming in and when it’s time to look for new work. Second, I look at what I’ve earned from regular clients in the past few months and uses those figures to predict my income over the next year. Then I can see at a glance where the peaks and troughs will be.
Although it can take a while to crunch the numbers initially, once you’ve done the financial health check the first time, it’s simple to keep it up to date and to make sure that your writing business remains healthy.