Whether you're running your own firm or freelancing on your own, if you're like most designers, you have little or no training in the business aspects of design. Hopefully you've had luck on your side, gotten work through word of mouth and learned a few things along the way. But even if "business" is not your favorite aspect of your business, don't ignore the 3 essential elements you can (and must) control to be successful in business: your pipeline, your pricing and your cash flow.
1. Your pipeline of prospects. Without control of your pipeline, you get the Feast or Famine Syndrome. You take whatever projects come along because you don't know when the next one will appear. You may not like the work (or the client) but you do it anyway. You may not even have the right skills -- in place or in house -- but you do your best because you need the work. Needless to say, this is not ideal.
When you are in control of your pipeline, you choose the prospects you want to work with by putting a simple -- but consistent -- marketing campaign in place to pursue them. They funnel themselves into your pipeline and you stay connected to them so that you know exactly where each prospect is in terms of their "readiness" to work with you. That way, if necessary, you can make a round of phone calls to your primed prospects and convert them to client status to intercept any cash flow problems. Without your pipeline of prospects, you wouldn't know who to call or what to say.
2. Your pricing. When you don't control your pricing, you practice "desperation pricing," often lowering your fees because the prospects that land in your lap can't pay what you need to charge. You are forced to accept jobs you probably can't afford to do; you may even lose money on them. You don't dare track your time, as you don't really want to know how much time you're actually spending for fear your hourly rate has plummeted to $10/hour (or less).
On the other hand, controlling your pricing means you practice "profitable pricing" instead, which is based on facts, such as how long things actually take and what you need to charge to make a profit. When estimating jobs, you use your "standard pricing memo" of actual time spent and the fees billed, which is based on data you've gathered over time through a time-tracking system that shows you in hard numbers the reality of how you're working and presents the information in a way that is usable.
Your standard pricing memo shows you a ballpark range for every type of job you do so you're not pulling numbers out of the air - a very common practice. For example, if you've done 50 web sites, a time tracking system will provide a quick snapshot of your most and least expensive web site projects, as well as the average. This tool alone can save you hours estimating jobs you'll never get and talking to prospects who can't afford your fees.
3. Your cash flow. When you don't control your cash flow, "feast or famine" hits your bank account. You never know how much money is coming in or when it will arrive. Often, this is because you bill your clients late (or sometimes forget to bill them altogether) because you haven't tracked all the details. The worst part, however, is the constant state of anxiety thanks to all the unknowns.
Being in control of your cash flow means your bookkeeper (not you!) sends invoices out regularly so they are therefore paid regularly. You always use a standard agreement that clearly states how much they will pay and when. You always get a deposit or advance payment, even with longtime clients. You don't tie payments to project milestones in case something outside your control stalls the project and hamstrings your cash flow. And you fire clients who are perennial late payers.
When you are in control of your pipeline, you choose the prospects you want to work with by putting a simple -- but consistent -- marketing campaign in place to pursue them. They funnel themselves into your pipeline and you stay connected to them so that you know exactly where each prospect is in terms of their "readiness" to work with you. That way, if necessary, you can make a round of phone calls to your primed prospects and convert them to client status to intercept any cash flow problems. Without your pipeline of prospects, you wouldn't know who to call or what to say.
2. Your pricing. When you don't control your pricing, you practice "desperation pricing," often lowering your fees because the prospects that land in your lap can't pay what you need to charge. You are forced to accept jobs you probably can't afford to do; you may even lose money on them. You don't dare track your time, as you don't really want to know how much time you're actually spending for fear your hourly rate has plummeted to $10/hour (or less).
On the other hand, controlling your pricing means you practice "profitable pricing" instead, which is based on facts, such as how long things actually take and what you need to charge to make a profit. When estimating jobs, you use your "standard pricing memo" of actual time spent and the fees billed, which is based on data you've gathered over time through a time-tracking system that shows you in hard numbers the reality of how you're working and presents the information in a way that is usable.
Your standard pricing memo shows you a ballpark range for every type of job you do so you're not pulling numbers out of the air - a very common practice. For example, if you've done 50 web sites, a time tracking system will provide a quick snapshot of your most and least expensive web site projects, as well as the average. This tool alone can save you hours estimating jobs you'll never get and talking to prospects who can't afford your fees.
3. Your cash flow. When you don't control your cash flow, "feast or famine" hits your bank account. You never know how much money is coming in or when it will arrive. Often, this is because you bill your clients late (or sometimes forget to bill them altogether) because you haven't tracked all the details. The worst part, however, is the constant state of anxiety thanks to all the unknowns.
Being in control of your cash flow means your bookkeeper (not you!) sends invoices out regularly so they are therefore paid regularly. You always use a standard agreement that clearly states how much they will pay and when. You always get a deposit or advance payment, even with longtime clients. You don't tie payments to project milestones in case something outside your control stalls the project and hamstrings your cash flow. And you fire clients who are perennial late payers.
Because nothing in life is black and white, you are probably in control of some of these elements sometimes but not others at other times. No matter what, you can always do better. If you do, you will be well-positioned to run a healthy business for the long-term.
Ilise Benun is an author, consultant and national speaker, and the founder of Marketing Mentor.com and the Creative Freelancer Conference. Her books include "The Creative Professional's Guide to Money," "The Designer's Guide to Marketing and Pricing" and "Stop Pushing Me Around: A Workplace Guide for the Timid, Shy and Less Assertive." Sign up for her Quick Tips (www.marketing-mentortips.com) or take advantage of her complimentary 30 minute session here: http://www.marketing-mentor.com/html/contact.html
By Ilise Benun
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