Pick your freelance goals wisely: money edition

I was sent what can only be described as an adult colouring book at the beginning of the year. It wasn’t the cool kind. I guess the assumption was I would be so taken with the idea of spending a lot of time filling it in I would book a course or hire a coach.

They wanted me to identify my goals and draw my vision board. Uhm....thank goodness it was free.

Me being me, I gave it away. I gave it to someone who was in envy of the other person who may have used it to inspire them. Or they could have picked the flesh from the bones and incorporated it into their own freelance offerings. Frankly, I didn’t care enough to find out, as long as it found another home.

All I could think of was how expensive it must be to print several hundred books and send them blindly to people. It felt as though the only qualifications I’d passed to receive the gift was being female and running my own business.

But the reason why I bring it up with you dear freelancer is because the casual read I did give it inspired this conversation.

And it is the conversation to choose your freelance goals wisely.

There will be a lot of people who try to tell you what you should aim for. There will also be a lot of freelancers who walk around without goals that get picked on by the more list orientated people.

The truth is goal setting doesn’t work for everyone. In fact, a lot of psychological data suspects some of the goal setting ideas we commonly see in productivity and self help literature is flawed.

But you do need to have a couple of things to hang your hat on. And hopefully this lesson will help you shape what they are without inviting the sensation of being overwhelmed when it comes to earning money, saving and how to spend it.

Have a financial goal

Fortunately, business, psychologists and all manner of teacher recognises having financial goals is healthy.

When we have a goal in terms of saving for a house or a trip overseas or whatever floats your freelance boat, it helps us reconsider purchases and money spent on fun stuff in a more sensible light.

Thinking about what we want to earn each quarter helps inspire us to get inventive in our approach in order to reach the target. And when we set aside money for boring stuff like saving for tax, giving ourselves a set marketing budget and general living expenses, it helps lower our stress quotient.

Unfortunately, if you are the least bit into social justice, working with ethical companies or commonly (I hate to say it but it has to be said...) female, there’s a giant allergy to money in play in freelance works. This isn’t unusual. A lot of the world’s humans have an unhealthy relationship with money, so freelancers aren’t going to be any different.

But it is something that needs to change.

Remember the adult colouring book from the opening of this lesson? It talked in words like permission and visualisation but it stayed the heck away from anything remotely sweaty and work related. That to me is the language of not only dodging a psychological hang up about cash, it also smacks of an entitled attitude. Money comes from hard work, not fluffy bunnies or navel gazing. Why should we be ashamed of that?

Money is a tool. Money is a lot like a hammer.

In the right hands, a hammer can build a home for homeless people and give self respect as well as the opportunity to take pride in the work.

A hammer can also be that thing that is in the back of the shed that you don’t often have to worry about, but can draw on when something breaks or goes wrong.

And with the wrong hands, a hammer can damage things it touches and drives people to do some pretty terrible things.

But it’s not the hammers fault if someone misuses it.

And it’s not the hammers fault if it gets lost in the distractions and can’t be found when it’s needed. And it’s not the hammers fault if it fails to build the foundation that is required.

It all comes down to the person using it. After all, it’s just a tool, right?

In short, you can choose to be hung up about money, or you can choose to have a healthy relationship with it. The choice is yours. It’s a tool that you use. So any weirdness comes only from you.

When you set a monetary target, you are not betraying anything.

It’s OK to make money. It’s OK to want to make more money. You don’t have to use words like “visualise” or “pin money” to justify having cash in your pocket. What you make is between you and XERO or you and your accountant, BAS statement or whatever.

Exercise 1:

• Look at what you earned last year or last month and pick an earning target for the next 3 months.

• Put together a separate excel of what you plan to invoice between now and then and count down to that total.

You’ll be surprised how excited you get (and inventive your ideas become) as the time arrives and the target grows.

Exercise 2:

• Set yourself some goals that will make your life a lot easier. These can be in % or raw dollar amount:

1. How much are you going to contribute to superannuation

2. Research and apply for income insurance

3. How much do you plan to spend on marketing

4. How much are you setting aside for tax

5. How much are you putting into a savings account

Depending on where you are in your freelance career will probably depend on how much you can afford to put aside. But the important thing is that you do. Super stops you from being on the pension in old age and income insurance means you and your family are covered if something goes wrong.

And you have to make sure you have rainy day and emergency money- freelancers don’t have sick days and paid holidays after all!

A lot of people also talk about personal indemnity insurance. This would need to be something you consider in certain fields only and would be something better discussed with a lawyer.

A word of warning on making money as a freelancer

You’ll probably meet some other freelancers that are obsessed with cash. I know I have. They’ll try and measure your potential in what you earn and they’ll talk about what they earn frequently. If you earn less than them, they’ll think they need to teach you how to earn more. If you earn more than them, they’ll get jealous and weird.

Money is a great big source of comparison in the freelance game. It’s none of their damn business. And it’s no measurement of success.

Actually, there are a lot of people who are hung up on money who don’t necessarily get the repeat business or the enjoyment a lot of others in freelance do. They make money by charging high amounts and scrambling through the project to get the next one.

In fact, a lot of the dollar chasers don’t even look at how much each client costs to acquire, what their lifetime value is, or have anything else to hang their hat on.

That’s a fairly short-sighted and scary position to be in. It’s as far away from a sustainable business as you can get.

Other financial goals that work to grow your business

Remember when we did the exercise where you worked out where your leads came from? Knowing how your projects connect is a great thing. You can see who shares you as a potential lead and you can replicate your strategy in getting more of the same. And now, you can see the lifetime value of a client.

When I worked in product development, we talked a lot about two metrics that make or break a business:

• Customer acquisition

• Customer retention

As a freelancer, instead of being able to shout “I made $200K last year, hand me the blue ribbon!” the far more intelligent number is “Every client I acquire costs me less than $10 and turns into an average of $30K”.

It means you have more control over your business because you know how to acquire customers efficiently and how to best maximise the money you make from each lead. It means you can scale your business better because you understand where the money actually comes from.

The aim should be to keep your marketing costs low and keep the value of each client high. Encourage repeat business and for your clients to refer you to other interested businesses. It helps keep your overall earnings up as you also have less gaps between jobs, the word of mouth marketing starts working for you, and the work is more stable. And it’s a fairly great indicator that the work you do is solid because people not only keep coming back for more, they recommend you to other people.

Exercise 3:

Identify how much your leads may have cost you.

• Add a process of asking leads where they came from so you can track what marketing activities are working

• Think about the raw costs (marketing, advertising, seminar tickets etc)

• Think about the intangible costs (time spent blogging, freebies you may have given) – and try to put a dollar amount to it

• Start a simple excel that shows how much a lead cost (raw + tangible)

• Add how much that client is worth in terms of invoices billed

• Add a column for any referrals they make for you and how much they were worth in invoiced amounts

This is a very simple way to work out how much your leads cost you to acquire them. It’ll also help you adjust any expensive processes, review any marketing spend in real terms and take noticeable steps towards providing customer care that encourages clients to stay and to talk about you in a positive manner.

Next, we’ll be talking about goals outside of money in preparation for your lesson 10 Skype chat.

Until then- happy goal setting.