If you hate math and all things numbers, congratulations for reading this post to begin with! Accounting is often a barrier for new business owners, and freelancers are no exception. But it’s still an important part of your new mindset as a CEO! Taking time to figure out how freelancers manage finances means setting yourself up for some serious financial success.
1. Freelancers Manage Finances by Knowing the Right Numbers
In the financial world—in other words, your world as a savvy freelancer—here are the three numbers you absolutely must track:
How much money do you need to make to cover your bills? This includes things like your mortgage/rent, utilities, food, healthcare, etc.
If freelancing seems extra intimidating and scary, it’s probably because you don’t have a concrete idea of your monthly expenses. Which means you also don’t know how much income you need to bring in.
While we recommend charging by the project, your hourly rate gives you a foundation for pricing out projects. How much time do you think the project will take? Multiply that number by your hourly rate, and voila!
What’s reasonable rate for someone with your experience in your industry? This number is incredibly important to your freelance success.
How much time can you dedicate to your freelance business? Consider how many hours you can work, as well as how many you want to work any given day.
Successful freelancers plan their business activities each month. Together, your expenses, rate, and number of available hours will help you figure out what you need to focus on to move your business forward.
2. Set Your Financial Goals
You can’t meet a goal without setting one first!
But make sure your goal is yours and not based on what someone else’s. Your business goals should align with your personal, professional, and life goals. And they should certainly take into account where you are currently.
For example, if your ultimate goal is to earn six figures in a year and you’ve just started out, you’ll need to set some smaller goals to make sure you stay on course.
Your first goal might be to land your first client. And then earn $1,000 in a month. Increase these monthly goals as you go so that you know when you can reasonably expect to meet that ultimate, six-figure year goal.
The financial number you’re working toward should make sense for you and your business. There’s no need to compare your goal with anyone else’s.
3. Freelancers Manage Finances by Checking In Monthly
Your monthly meetings with your business’ numbers will help you make smart decisions. Calculate what money came in and what money went out. And then you can answer other questions:
- Did you meet your income goal? Why or why not?
- How many pitches did you send? Do you need to adjust that number to ensure you meet your goals?
- How many clients did you work with? Too many? Too few? Which clients should you re-pitch?
- Is most of your income generated from one client? Do you enjoy working with them? Do you need to replace them?
There may be other questions you want to answer. Once you have the numbers from last month, you can make an effective plan for the upcoming month.
And, of course, it’s much easier to course-correct if you catch on to an issue early on. For example, realizing that your pitches did not generate enough responses this month will help you identify the problem and ensure you don’t waste time making the same mistake next month.
Managing your numbers is an important role you play in your business. As you practice these habits, you’ll grow more confident. And your business will have even more potential for success!
Your turn! What other steps do you take to ensure your freelance business is set up for financial success?