graphicpush

Thoughts on branding, design, writing and life by Kevin Potts. Established 2003.

Freelancing Metrics

As visual thinkers and experts in design communication, freelance designers are not usually the first to jump into numbers and metrics, even those relating to their business health. But tracking just a few key business figures can reveal some very useful information.

In regards to day-to-day business operations, there is little difference between a freelance designer and a sole proprietor of any other business. We all have to watch our expenses, make sure customers are happy and rinse out the coffee pot to avoid those nasty brown rings.

One of the functions of any business — and this is usually delegated to the accounting department, the CFO or some equally number-nerdy individual — is to track metrics of the company’s performance. For the average freelancer, “tracking metrics” usually starts and ends with monthly invoices. That’s good, but we can go farther.

After a time, as numbers start to accumulate and you start to see trends, you get a higher and more objective vantage point of your operation. Think of crop circles. You’ll never see any rhyme or reason just walking through a field, but gain any type of elevated point of view, and suddenly large, surprising patterns are revealed.

What to Track

So what numbers should a freelancer pay attention to? As many as possible. The more figures you have, the more trends you can spot and the better you can plan for the future.

Start With Invoices

Of course you track every invoice. Every invoice should have a unique number, and a spreadsheet will show the amount, date sent and date due. Paying meticulous attention to these numbers will reveal several critical things, such as:

  • How much money you have coming in over the next 30 to 90 days
  • Who is paying on time, who is delinquent
  • How much you’re making over long periods of time

But Also Track General Income

Many businesses’ financial health is determined on a quarterly basis. This is especially true for public companies, whose well-being depends on earnings reports. While the idea of a quarterly statement sounds good in theory, I prefer to track by month and by year. Because I’m only one person, I can react quickly to a month with a low projection, or at least foresee it coming from previous years’ records.

Taking real advantage of the general income metric takes a couple years of data, but it’s worth the effort. I’ve found that July and August are slow for me, so I need to plan any promotions or marketing to drum up leads around that time. Likewise, fall and winter are very busy with client work, so I know not to get involved with personal projects around then.

Project Quantity, Not Quality

In another spreadsheet, I track the number of completed and active projects on a monthly basis. While these basic integers aren’t intrinsically useful, keeping track of the time spent on the same type of project can help gauge estimated completion dates. For instance, if I find that the average logo design takes about a month start to finish, I can confidently relay that number to the client.

That New Client Smell

Next to each project entry, I indicate whether the client is new, plus the vitals related to that: where they came from, if they were a referral, etc. At the end of the year I compile this data and I’m able to identify my best source of new work. In the case of 2005:

  1. Referrals from other clients (and I can break this down further by referral source, since some clients referred more than one)
  2. kevinpottsdesign.com (basically organic Google searches)
  3. Referrals from friends and co-workers

Proposals

Where I work during the day, we have a large RFP response team who constantly win work with higher education and government agencies because of the quality of their proposals. The team lead is a numbers junky and tracks just about everything possible related to their output, and I’ve taken a few hints and started generating interesting data related to my proposals:

  • Number of proposals sent out per month
  • Nature of the job (web design, identity, brochure, etc.)
  • The amount estimated
  • Which proposals were won and, if possible, a small note indicating the reason for losing the others

I’m still compiling usable data on this, but next year I should see some interesting trends, like percentage of wins vs total cost estimate, or percentage of wins vs type of design project.

Aggregation and Compilation

The easiest and most visceral place for your collective freelancing business numbers is graphs. When you compile monthly income by year, and lay each year over the previous, you instantly see some very interesting trends. The same goes for project metrics and proposal and client information. The more you have, the clearer the picture becomes.

At the end of the day, the data serves as a powerful tool to increase the efficiency of your business. It helps you better predict income trends, where you should be focusing your marketing efforts, and what you can be doing to improve the win-rate of your proposals.

, ,

commentary + criticism

Micah

wrote the following on Thursday September 28, 2006

This is some smart management. Thank you Kevin, for opening my eyes to the opportunities of metrics.