As a freelance business owner there are certain numbers that play a key role in the success of your business. And keeping on top of these numbers is vital. Here’s a breakdown of some of the most important numbers for a freelancer.
Ratio of 3
The ratio of three is a standard billing rate to salary ratio that is used in most professional services companies. This standard is also known as the “rule of thirds”, as the billing rate includes one-third salary, one-third overhead and one-third profit. To work out your project fee simply multiply your billing rate by the number of hours a project will take to complete.
Number of prospective clients
Freelance businesses are known for being unstable, often experiencing periods of lots of work, followed by slow periods of no work. This is largely because of the fact that when you’re working really hard, your marketing efforts are overlooked. To avoid this you need to always keep an eye on your client pipeline and the number of prospects you have. If you always have this number at the back of your mind, it will help you keep focused on marketing, even when things get busy, so you can keep growing your business.
Capacity of hours
Knowing your capacity levels is key to running a successful business. This is because you don’t want to over extend yourself, leading to poor quality work. At the same time, you don’t want to be under extend yourself and be left with lots of time and only a little bit of work. That’s why figuring out and understanding your number of capacity of hours is vital if you want to be a successful freelancer.
When it comes to any business, the most important number is always the bottom line, to the profit, as this number tells you how your business is doing. It looks at how much money you have earned after expenses are paid out. You should refer to this number on an on going basis, and compare across periods to that you can see how you’re business is progressing. This is called the trend and can help you predict your future profit. What it really comes down to is the fact that if your business isn’t profitable, it’s not sustainable. As a business owner, you need to stay focused on the bottom line to make sure you’re earning the money you want.