I think it’s a zero sum game

Most of the users here at IAC-EZ are freelancers, coaches, small business owners, and entrepreneurs. This is a hard-working group who believes that working for themselves provides a superior opportunity to working for others.

But this group also has a challenge that the 9-to-5 employee doesn’t have: The battle for the balance between time and money. That is: The person who is content to show up to work in the morning, spend the day at their desk, and leave work at 5 has the rest of the time to spend on themselves and their family. But the freelancer, coach, small business owner, and entrepreneur do not have that luxury. They may have to work 8 to 6, 8 to 8, or even be on call 24/7.

Most of the entrepreneurs (plus freelancers, coaches, etc.) that I know embrace the lifestyle, even if they know it’s not perfect. But ultimately, I think each one of us (I’m including myself in this group) would trade a little more money for a little more time.

It’s a zero sum game, or it’s about as near to one as you can get: I can make more money by spending more time or if I need some time to do something else, I will make less money.

It’s something I’ve spent some time thinking about, especially this month when a freelancing friend of mine got sick at the beginning of the month, worked hard to catch up on his work through the middle of the month, and then was delayed again at the end because of a death in the family. Neither “delaying” event was in his control but the lack of time equated to a lack of revenue. That’s the challenge of the self-employed.

The answer is not an easy one, nor does it happen overnight. Part of the solution, I believe, is to build up a few passive income streams (or work generated through employees) so even if you never fully replace your own personal, active income, that revenue can at least offer a cushion. Some savings, too, is important. And the minimization of debt. None of those will come as surprise to anyone, I think; I’m sure that most entrepreneurs would agree that those are useful ways to help.

There’s an interesting blog post over at TheSimpleDollar that gives an interesting perspective: The author talks about minimizing your reliance on money as much as possible while maximizing the amount of time you have. To summarize his post, he says that it’s all about time and it shouldn’t be all about money.

I think he has some interesting things to say but I’m not sure that I entirely agree. I do believe that money won’t buy happiness and time really is valuable when you can spend it with loved ones, but money is required not just to live but to build a business. If I wanted to maximize my time and minimize my reliance on money, I’d just get a regular job somewhere. Certainly the stress of annoying coworkers pales in comparison to the stresses that can come with building a business. But I, like many other freelancers, want to build something. So for a few years at least, that requires a lot of time to earn as much as possible to fund growth.

And just in case you’ve gotten to the bottom of this post and disagree or have more questions, let me clarify: This post isn’t my final word on the subject. I do think time with family is invaluable. I’d love to get to the point where I don’t work but have an income. But I’m not there yet and I don’t think you are either and until we are, we need to think about and talk about the balance between work and time. This blog post is just to continue the conversation.

Jessica Routier, IAC-EZ

How cash flow influences your business choices

I have a friend who is a freelance writer. He jumped into freelancing with both feet by quitting his job before he had any real clients. And in starting his work as a freelancer he realized he had two distinct choices:

1. He could do web writing, which tended not to pay so well (for people who were as new as he was)
2. He could write for magazines, which tended to pay considerably better.

The choice seemed easy, right? But consider this: Writing for the web meant getting paid the same week via Paypal while writing for magazines meant waiting up to 6 months before a check was mailed (because magazines pay after publishing and usually take a couple of months to publish an article).

That changed his thinking: A small amount of cash today versus a large amount of cash in the future. Given his circumstances – jumping right in with no safety net of alternate income – he started with web writing to pay the bills. Slowly he incorporated more and more magazine writing into his work but in the early days, he told me, it was nearly 100% web writing.

Although things might be different for whatever you do, the reality of cash flow opportunities is probably similar. You may have to accept smaller projects on an ongoing basis in order to keep the cash flow coming in, even if it’s not the gigantic windfall that you could have in months or years to come.

I’m a big believer in cash flow. Cash flow is huge and often under-appreciated by small business owners. In my opinion, cash flow with a little bit of profit margin is far superior to larger, slower, and irregular payments that have larger profit margins.

In thinking about increasing your cash flow, think of it like a hose. Let’s say you want to water your garden but when you turn on the hose, only a trickle comes out. You want to not only increase the amount of water coming out of the hose but also the pressure with which it comes out.

With your cash flow, it’s the same thing: You want to increase the amount of cash coming into your business but also the amount of times it comes into your business (the “pressure”). You can do this by increasing the number of clients you have, increasing your prices, getting paid in installments, creating passive income opportunities like ebooks, creating membership sites that accept regular payments, keeping on top of your receivables, and accepting advanced payment for discounted service.

Your business will be healthier when you turn up the faucet and increase the amount of cash and pressure which with it shoots out of your sales pipeline and into your business.

(And as an added tip, do what my freelancing friend did: While you may have to accept those smaller, faster-paying jobs early on, slowly try to increase the number of higher-paying, slower projects so that you’ll eventually replace your cash flow entirely with those higher payments).

Jessica Routier, IAC-EZ

How to price your services: The story of a freelancer

Recently, I posted a story about Swatch in our ongoing look at pricing products and services. In this blog, I want to talk about pricing services and use the example of a freelancer I know who recently went through this exercise.

Pricing services can be hard. The pricing metric (Daily? Hourly? Project-based?) is influenced by factors like what is actually delivered and how long it takes and what is acceptable in the industry.

One freelancer was trying to figure out how much to charge and this is what he did: He determined how much he wanted to earn in a year and then worked backwards to figure out how many days each week he wanted to work and then that gave him how much he needed to earn each day. Then he divided it further to determine how much he wanted to earn each hour.

Thus, he had an hourly, daily, weekly, monthly, and annual income goal.

However, most of his clients paid by the project – an accepted standard in his industry. So before he did this exercise, his rate was based on the arbitrary number of how much he thought the project should cost. (Yeah, that’s wide open!). But today, he has a goal and knows when to turn projects down because they don’t pay enough and when to take on a project because it is within his target.

Just recently, he told me some additional revelations and ideas:

• This model helped him to see one client as perennially under-paying for the service they were receiving. He explored the idea of readjusting their rate but decided to end the ongoing agreement.
• This model also helped him to identify an opportunity to grow revenue: as he takes on new projects, he strives to drive his price upwards. That wasn’t something he could do before.

This pricing method is not rocket science and there are other factors, too. For example, many freelancers will need to think about how much time they want to set aside each week to market their services.

Well, we’ve just touched on 3 aspects of pricing in recent blogs. Next month we’ll look at some more pricing considerations.

Jessica Routier, IAC-EZ