As a freelancer, it’s so easy to get so caught up in individual projects–especially the fun ones you love–that time just disappears.
But that can be a trap if you need to make a living. Projects can stretch to fill time you might need to allot to other work, in order to keep your cash flow healthy and your business profitable.
One simple way to avoid running short of funds when you have bills to pay is to set an income goal–or target range–for each month. Keeping it in the back of your mind will help you to make the right decisions about taking on new projects. If you’re a writer, for instance, maybe you’ll find that a low-paid but exciting blogging gig isn’t worth it because you really need to write more high-paying articles for big publications in the next few months. Or, maybe, as a web designer, you’ve just secured a 30-hour a week retainer contract that will provide most of your income this year, so you have a little bandwidth for cool creative projects for small clients you normally can’t afford to work for.
For instance, if you’ve been in business for a year or two, perhaps your income goal might be $8,000 to $10,000 a month in income. If you’re newer to freelancing–or are new to the work world altogether–it might be much less, maybe $4,000 to $5,000 or less. For a more seasoned professional, your goal might be $15,000 to $20,000 a month in revenue. Of course, you’ll want to take into account fixed expenses like your mortgage or rent and perhaps health insurance, as well as variable ones, like groceries and entertainment–as well as taxes.
Businesses–and lives–evolve, so it’s a good idea to review your income goal every quarter. For instance, say you’ve set an income goal of $15,000 a month–and hit it–but have found you’re miserable because you’re glued to your computer and have no time for fun. Maybe it will make sense to lower it to $13,000 a month and rethink your spending — or to shift the mix of work you do to balance out lower paying projects that you fit in because you enjoy them with more lucrative “bread and butter” ones. Or perhaps its summer and you want more time to enjoy the sunny weather with your kids. You might want to set lower income goals for the summer months and ramp up your target earnings during the winter. There’s no “correct” level of income that applies to all people. Consider what’s important to you, in the short term, and the long term.
Of course, you’ve got to keep good records of what you’re earning to make sure you’re staying on track–and also send out invoices promptly. It’s not just what you’re earning that counts. Good cash flow is essential to staying afloat.