AaronTurpen.com

Note: Sorry for missing last week’s posting. We had to go to the hospital over that weekend.  We had our baby girl, Heidi, and I was unable to finish this for posting beforehand.

This week, I want to talk more about the business end of writing and, specifically, the importance of keeping track of your finances.  There are three reasons why this is of paramount importance:

1. It keeps you on-target with your income goals and shows you where you stand with your business and career;
2. It will be a lifesaver (and time saver) come tax time;
3. To prove to your spouse, parents, or anyone else who doubts you that you are, in fact, making a living.

Keeping On-Target

This aspect of the ledger is in my #1 spot there for a reason: if you don’t know where your finances are or how well you’re doing, you will have no idea whether you need to change something to get back on track.  Knowing that you’ve made $2,000 so far this month is great, but knowing that your expenses were $380 of that tells you that you made $1,620 so far.  That can be crucial.

All businesses, even freelance writing, involve expenses.  This website, for instance, incurs a monthly hosting fee.  That’s an expense.  Advertising, mileage to go to interviews, office supplies, and more are all expenses you can expect to incur.

Keeping track of those expenses monthly can also give you a good handle on what your expected monthly outlay is.  That gives you a budget target.  For instance, I know that my expected expenses every month are around $200, so I must make a minimum of $200 monthly just to break even with my business.  That doesn’t include time, which many professionals also include in their bookkeeping.

Taxes

I won’t quote Benjamin Franklin, as I’m sure you’re all well-aware of death and taxes.  Tax time (when you’re self-employed) is the worst time of year.  I don’t care who you are.  If you keep an accurate ledger and have a good filing system for receipts, however, tax time can be much easier on you.

Having a ledger means that you’ve already, over time, kept track of your business expenses, income sources, and so forth.  So at worst, all you’ll have to do is total things up and be done with it.  A good ledger book (or software) will make you do this as you go.

This can make the difference between your tax preparation taking a few hours or a few days.  Literally. Since you aren’t paid to do your taxes (if you’re self-employed, be ready to pay, not get paid), that’s money lost in unproductive work.  Whether you pay quarterly or annually, a good ledger means a lot of time saved.

Proof You Aren’t Unemployed

For many, especially when first starting out, this is one of the hardest things to deal with.  Many people will assume that, because you’re at home all the time “fooling around on the Internet,” you are living off your spouse, parents, or are on welfare.  This, of course, isn’t true, but many people have a hard time understanding the idea of not getting up every morning and commuting to somewhere else, punching a time clock and going to work.

In my experience, it’s usually the older generation who don’t grasp the idea of self-employment without a “store” or a “shop” to work from.  It’s also true of spouses, especially when money gets tight.  Being able to show someone how you’re doing can go a long way towards convincing them that what you’re doing is actually viable and even worthwhile.

This can take a lot of stress out of your personal life.

Most aspiring writers–and even many professionals–look at how much each project will pay, how soon they’ll get paid, and how much effort will be required on their part to get the payment.  Writing, of course, is a business and businesses are all about income versus outlay (costs).  It has, however, been my experience that this focus is self-defeating.

Many new writers jump into the profession and put a lot of effort into honing their craft, finding new clients, and “getting themselves out there.”  This is great, but it misses the very foundation of good business practice.  Writing professionally is a business and so it should be treated as such.  So before diving head first into the marketing and money aspects, you would be well served to first set a foundation of solid business practice.

The Plan

There is one thing that all businesses have to have in order to succeed, no matter what their business is and no matter who is running them.  All businesses must have a solid business plan.

That doesn’t have to be a thick sheaf of papers with a lot of accounting and projection charts in it, of course, it just needs to be a clear plan of action.  In fact, unless you’re looking to impress a banker or venture capitalist, that long, drawn-out business plan with lots of impressive charts and graphs and illustrations is probably more of a detriment than a help.

Most small enterprises, such as your burgeoning self-employment as a writer, can be served with a business plan that is only about a page long.  It will consist mainly of goals and bullet points.  No fancy projections or complicated bar graphs will be needed.

Your plan should have the following:

• Your ultimate goal with the business,
• Your expected achievements for the next 6 months,
• Your expected achievements for the next 1 year,
• Your expected achievements for the next 3 years,
• A cost breakdown of your major products/services.

Pretty simple, really, but I’ll show you an example from my own business plan.  This was created in 2007 when I was hoping to become a full-time writer.  I’ve removed some irrelevant things and spelled out a few things so they can be better understood.  Remember: your business plan is for you, not for others, so don’t worry if it’s not “neat enough” or doesn’t explain it all.  It’s mainly a reminder list of goals to look forward to and how you’re going to achieve them.

Aaron’s Writer of the Century Biz Plan O Doooooom

Mission Statement: To become a professional, full-time, work-at-home writer.  I will be working independently, writing about what I enjoy, and able to support my family doing so.  Plus, I want a Unimog.

6 Month Goals:

• Establish two regular clients at $100/week or better (each),
• Rebuild AaronTurpen.com to match my new writing focus,
• Find a writing gig that focuses on environmental stuff.

1 Year Goals:

• Have clients that pay a total of $1,000/month or better in income,
• Build a new website focused on environmental issues (so I can make fun of Al Gore),
• Have at least half my income based on regular clients/contracts vs. bidding.

3 Year Goals:

• Land a position (freelance) writing for a major environmental venue like Mother Earth News or NaturalNews,
• Have my income increasing by 25%/year with 1/3 of it coming from “residuals” rather than current work,
• Buy a Unimog.
• Own 10 acres of farmland and a mule.

Price breakdown – most work is billed by time, with $25/hour as the minimum target and $50/hour as the ultimate goal.

That was basically my entire business plan.  I still have it, though I update it regularly.  What you’re after is a list of achievable and realistic goals and a basic idea of how you’re going to get them done.  In that first year, for instance, I achieved all but one of the 1 year and 6 month goals.  I’ve also achieved the first 3 year goal (I write for NaturalNews), and about 2/3 of my current income comes from contracted/regular clients, without bidding, but I so far am not making 1/3 of it from residuals.  I also don’t own 10 acres or a Unimog.  I still have a year left, though.

Your business goals aren’t necessarily just business-related either.  Anyone who’s been self-employed will tell you that your business and your life are one and the same.  My career is what I spend almost all of my time working on.  My goals in and around my writing business are also my personal goals in almost everything or are the means by which I will achieve my personal goals.

I will not likely get everything I wanted out of Year 3 because my current Year 3 goals are not the same as those I wrote in 2007.  My current goals for the next year (Year 3 in the above, Year 1 in the current) revolve around family and a new baby we’re about to have.  It’s a new sub-project of my business which I’m calling “Homo Magnificus.”

Revising and Updating Your Plan

This brings us to the next part of business plan building: maintenance of the plan.

Your plan is not static, sitting on paper and waiting to be marked off like some checklist at the grocery store.  It’s a dynamic thing.  Your personal wishes, goals, and needs will change often and so should your business plan to match.

Every six months (at least), you should revisit your business plan and mark off those things you’ve achieved while adding or revising those things that might have changed.  The “6 Month”, “1 Year” and other goals should reflect the next six months and one year, not the past.

This continued revision and habit of always looking ahead will serve you well in your business endeavor.

The Goal is the Key

In the end, all of this is about goals.  You should have your plan laid out, your goals set, and your expectations written down.  Spelling out what you want to achieve (realistically) and how you expect to achieve it and then continually reminding yourself of those goals will keep you on track.  Plus, when you get to check off one of them, it feels pretty good.

All of this should be done well before you begin your endeavor in earnest.  Set goals first, then sit down with your business and figure out how it (and you) will achieve them.

Next, we’ll look at keeping track of your business’ finances and writing income.  Seems rudimentary, but it’s amazing how many people skip this.