Down to Business
By Ilise Benun
Controlling your pipeline, your pricing and your cash flow
Summer’s over. Everyone’s back to work and it’s time to get “down to business." Seems a perfect time to
introduce a new column with that title: Down to Business.
Whether you’re running your own firm or freelancing on your own, if you’re like most designers, you have little or no training in the business aspects of design. Hopefully you’ve had luck on your side and learned a few things by trial and error along the way. But I would bet money that business is not your favourite topic.
So in this new column, I will help you get “down to business” on the issues that will make or break your business. We’ll aim to clear away the financial fog, overcome the procrastination and focus on the practical techniques that will bring you the work you want.
Let’s focus first on the three essential elements you must control: your pipeline, your pricing and your cash flow.
1. Your pipeline of prospects. When you don’t control your pipeline, it’s the feast or famine syndrome. You take whatever projects come along because you don’t know when the next one will appear. You may not like the work but you do it anyway. You may not even have the right skills – in place or in-house – but you do the best you can because you need the work. Needless to say, this is not an ideal way to do things.
Controlling your pipeline means you choose the prospects you want to work with and you have a simple marketing campaign in place to pursue them. You also know exactly which of the prospects in your pipeline are almost ready to get started, so that, if necessary, you can make a round of phone calls to your primed prospects and convert them to client status to avoid any internal problems. Without a pipeline, you wouldn’t know who to call or what to say.
2. Your pricing. When you don’t control your pricing, you practice “desperation pricing,” often lowering your fees because the prospects that land in your lap can’t pay what you need to charge. You are forced to accept jobs you probably can’t afford to take and you may even be losing money on them. You don’t dare track your time, as you don’t really want to know how much time you’re actually spending for fear your hourly rate has plummeted to $10/hour.
Controlling your pricing means you practice “profitable pricing,” which is based on facts, such as how long things actually take and what you need to charge to make a profit. When estimating jobs, you use your “standard pricing memo,” essentially a spreadsheet that lists by category all the jobs you’ve done – the actual time spent and the fees billed – then averages them to give you a ballpark range for every type of job you do. For example, if you’ve done 50 websites, this document will provide a quick snapshot of your most and least expensive website projects, as well as the average. This tool alone can save you hours estimating jobs you’ll never get and talking to prospects who can’t afford your fees.
3. Your cash flow. When you don’t control your cash flow, you experience the financial version of “feast or famine.” You never know how much money is coming in or when it will arrive. Often, this is because you bill your clients late and you hate calling them when they don’t pay. The worst part, however, is the constant state of anxiety thanks to all the unknowns.
Controlling your cash flow means you send invoices out regularly and are therefore paid regularly. You always use a standard agreement that clearly states how much they will pay and when. You always get a deposit or advance payment, even with longtime clients. You don’t tolerate the abuse of perennially late payers. You don’t tie payments to project milestones in case something outside your control stalls the project and hamstrings your cash flow.
Because nothing in life is black and white, you are probably in control of some of these elements but not others. No matter what, you can always do better. This is a perfect time to focus on that. If you do, no matter the state of the economy, you will be well-positioned to run a healthy business for the long term.
Ilise Benun is an author, consultant and national speaker, and the founder of Marketing Mentor. Her books include The Designer’s Guide to Marketing and Pricing (HOW Books), Stop Pushing Me Around: A Workplace Guide for the Timid, Shy and Less Assertive (Career Press) and her latest, The Creative Professional’s Guide to Money (HOW Books 2011). Sign up for her Quick Tips or take advantage of her complimentary 30-minute session here.