How do you know of you’re being successful in business?
Kaplan and Norton, in their seminal business book The Balanced Scorecard [Affiliate Link], said that:
…organisations are operating in complex environments so an accurate understanding of their goals and the methods for attaining those goals is vital.
In other words, in order to be successful you have to measure your current position, set goals and then track your performance against those goals. The trouble is that most journalists simply don’t have experience in writing a plan like this and managing our work to the plan. However, it’s not actually that difficult to write and work to.
Also, if you have a written plan and track your progress, when you need to go to the bank for a funding injection to expand your business, you’ll have documentary proof of your ability to successfully run a business.
Disclaimer: I’m not an accountant or financial planner. The views here are my opinions and you should consult with your own accountant or accredited financial specialist for specific advice.
As a journalist, it’s important to know what sorts of goals to set. The obvious place to start is money. You probably have a good idea of your annual or monthly income and you should know what your average monthly expenses are. If you don’t know those yet, grab your last few bank statements and make a list of income and expenses.
Once you’ve decided on those goals write them down. I suggest that you put them in two places. Firstly, in document where you detail all the elements of your business plan. There, you can document the detail of what you’re aiming for. Secondly, one the whiteboard or noticeboard you have on your office wall. When it’s in front of you all the time you’ll stay focussed on the goal. If you’re like me, you’ll even feel a little guilty when you don’t hit the target.
On the expenses side of the ledger, you should aim to minimise your spending – particularly when you first get started. It might be exciting to see some money rolling in when you start out but you need to make sure you keep money aside for operating expenses and taxes. In Australia, a rule of thumb is to put aside a third of all income for taxes.
Now, work out how much money you’d like to earn. I suggest that you work on monthly goals set three target levels.
- Level 1: What you need to get by with a little bit of headroom.
- Level 2: What you need plus a generous margin of around 30% so that you can build reserves for the quieter months.
- Level 3: The BHAG – big, hairy, audacious goal. Something like double the income level you need.
In order to make some money you need clients. Every freelancer knows that you’re only a phone call or email away from losing a client. When I started out, I managed to land a semi-regular gig writing for a major daily newspaper. However, after about three months the editor who was commissioning my work went freelance. All that work I’d been getting suddenly dried up. Fortunately, I had enough other work to keep me afloat.
Set a goal to increase the number of clients you have so that if any one client drops you it won’t mean financial ruin. In other words – don’t put all your earning eggs in one basket.
Look at how many active clients you have at the moment. Set a goal to add new clients regularly and try to diversify the sorts of clients you have so that if one sector of clients quietens down, another may increase to cover. For example, during the recent global financial crisis, many magazines and newspapers around the world, that paid flat rates for stories, closed their doors. However, that opened the door with online publications that paid writers based on the site traffic they generated.
Also, for good writers, there’s always some corporate writing around. These are great clients as they tend to pay for the value you add rather than the number of words you write. And they rarely shy away from rates publishers would never pay. Whenever I work for a corporate client I end up wishing I charged a little more as they’ve never flinched at rates like $120AUD per hour.
How much time do you put into developing your business and marketing yourself? How are you going to get those clients unless you dedicate time and energy. Set a goal to spend a specific part of every week to develop new skills and to market your business.
Writing the plan
A quick Google search for “how to write a business plan” will bring up thousands of different templates. All have a set of common elements.
- Executive Summary: This is the highlight package of the plan. If a reader hasn’t the time to review the detail of your plan, the Executive Summary will provide them with enough information to get a good overview of your business. Although this the first item in the document, it’s probably the last part you’ll write.
- Summary of your Business: This is simply a list of the products and services you’ll be selling. It should also document what it is that makes your business different to all the other ones like it. As a freelancer – what will you bring to your clients that your competition can;t or doesn’t?
- Start-up Financials: If you’re just starting out, making a list of your starting expenses is important. This might include the cost of setting up an office (furniture, computer, phones, etc), business establishment expenses (registration of your business name, professional services for getting you organised with the tax department) and whatever else you need.
- Projected cash flow: What is projected income? This should be mapped out month-by-month for a year and take into account seasonal slowdowns (it’s doubtful that your January income will be as great as December or February for example), clients that work quarterly rather than monthly publications and so forth.
- Projected expenses: What will you have to spend money on each month. This will allow you, with the projected cash flow to estimate your profit and loss (P and L in accountant-speak).
- Goals: Write down your business’s goals and set milestones to achieving those goals. For example, if you plan to gain six new clients for the year and increase your monthly profit by 25% by the end of the year, it’s unlikely that you’ll achieve all that in a week. Set some achievable milestones along the way like “Spend two hours per week contacting potential new clients” or “Reduce monthly expenses by using the train instead of driving”.
So, that’s a start. Once you’ve written down what you expect to achieve and set some milestones along the way you’ll be well on the way to knowing if you’re succeeding as a freelancer. And if you’re not – having a plan that you’re measuring yourself against will help you work out what you need to do to nail the BHAG!
Have you created a plan for your business? Is there something you think should be added to this plan? Share your thoughts in the comments.